Industry Super Network

Economic outlook by ISN Chief Economist, Dr Sacha Vidler

Bear traps for young players

Just one month ago a panel of economists, including myself, presented a unanimous and quite cheerful view of the local and global economy and financial markets.  We pronounced dollar parity was the new norm and predicted that by year’s end interest rates would be level and the ASX would hit 5500 with higher percentage gains likely overseas. Thoughtful audience members were seen to be texting “SELL – NOW!” to the outside world. The ASX is down 7% so far.

Like the others, I had an analyst’s report in hand that showed forward price-earnings held reasonable value in Australia and very good value overseas.  Like the others, I had read the Reserve Bank Governor’s view that ‘We are ahead of the game!’ implying Australian monetary policy (last adjusted in November) was just about perfect.  And, like the others, I had seen the IMF’s bullish view of global growth, with China and India continuing to grow strongly despite some inflationary pressure – dragging resource rich nations like ours along with them – combined with strengthening underlying growth (and plenty of spare capacity) in the major developed economies. 

And none of that has changed.  So what is going on?

Looking at the ASX 200 price index over two years, you can’t help but notice that since August 2009, Australian investors have been running to stand still.  The 5000 point ceiling has held despite earnings and cyclical momentum building first here and now overseas.

It seems that short-term events combined with a number of deep structural concerns are keeping any enthusiasm around cyclical drivers and the industrialisation of China and India in check. 

The place to start any survey must be the US, because it reflects the extremes of the Jekyll and Hyde financial landscape.  On the one hand, earnings are extremely strong and the S&P500, unlike our benchmark index, has steamed ahead to nearly double its March 2009 lows.  On the other hand, monetary policy is still loose, the labour market shows few signs of life, the housing market is still comatose – with an expensive and slow reform plan for the Government-owned securitisers only just formed, public finances seem permanently broken – a 12 year projection based on Obama’s turn-around plan doesn’t get back to the black, and the nation still has to borrow from China to buy from China, day after day, month after month.

The UK is looking like an episode of ‘Life on Mars’ with entrenched stagflation – 1970s-style.  Japan was looking forward to export lead recovery before it copped an almighty kick in the guts from Mother Nature.

Germany is going exceptionally well but for bears that only provides contrast for the issues in Southern Europe, with high unemployment and precarious finances, and the consequent pressure to break-up the Euro.  Will Germany cop the bailouts necessary due to mismanagement in order to keep its currency artificially low?  It’s a good question, to which nobody knows the answer – which simply adds to uncertainty.

Finally, the dramatic events unfolding in Libya and Japan are not only significant in themselves, but in different ways highlight the deepest of concerns: the sustainability and climate change impact of current energy policies.

All of this worry and investors are still on a level for the last two years?  It goes to show just how strong those cyclical factors and the growth of China and India are.  And what does it mean for the future?  Over the two year period covered by the chart the market has fallen 3% or more in one in every six weeks.  The only certainty is volatility and the only solution is diversification.

Well…not quite.  Climate change and other major structural challenges require policy solutions – and long term investors like Industry Super Funds can…and must…make a positive and evidence-based contribution to the debate.

For more information, contact Dr Sacha Vidler svidler@industrysuper.com

Tribute to industry super pioneer

One of the architects of Australia’s industry superannuation funds and the system that supports them is finally slowing down a little and leaving the industry that she has devoted much of her life to. Mavis Robertson AM retired at the end of January and plans to enjoy her own retirement after so many years dedication to ensuring Australian workers enjoy theirs.

Mavis is well-known in the super industry, having been a key figure in its early development during the 1980s. She worked with her union, now part of the Construction, Forestry, Mining and Energy Union (CFMEU), and the ACTU to secure for workers a retirement benefit paid by employers into the industry’s retirement funds. Mavis was a founding Trustee of the Allied Union Superannuation Trust (AUST), and later led the merger of the Building Union Superannuation Scheme (BUSS) and AUST, now Cbus. Mavis received a life membership of the CFMEU.

Mavis has been a leading figure in the industry super movement and has served on several fund boards, most notably Cbus. At various times she acted as trustee, fund secretary, CEO and chair of the fund.

Mavis has also played a key role in a range of initiatives designed to establish structures for industry superannuation funds and the all profits to members sectors, as well as being a strong advocate for the representative trustee system. Mavis was:

- One of the founders of several industry bodies including the Conference of Major Superannuation Funds, Australian Institute of Superannuation Trustees, Australian Council of Superannuation Investors and the Women in Super network

- A founding Director of Industry Fund Services and Superpartners

- Vice-President and later a Life Member of the Association of Superannuation Funds of Australia.

In recent times, Mavis has been an office holder of several committees of these organisations and a Patron of the Australian Super Cadets Program. Her expertise and knowledge of the super industry is internationally recognised. Mavis served on the board of the Center for Working Capital in the United States and she is currently Chair of the Membership Committee of the International Corporate Governance Network.

Mavis’s concern for the welfare of others also extends to charitable activities. As national spokesperson for Women in Super she proposed and helped initiate the Women in Super Mother’s Day Classic walk and fun run. For more than 10 years she was a Trustee of the National Breast Cancer Foundation. The fun run has gone on to become the largest fundraising event for breast cancer research in Australia, raising $7.8 million to date.

In her retirement Mavis plans to identify and document family photographs spanning 140 years of family history and enjoy life enhanced by an industry super fund pension.

ISN congratulates Mavis on her achievements and wishes her well in her retirement.

3 steps to joining an Industry SuperFund

Joining an Industry SuperFund just got a whole lot easier with a new video outlining the three simple steps members need to take when it comes to selecting a fund and moving their super.

The link to the new Steps to Join video is featured on the front page of the Industry SuperFunds website  and is designed to make the process of selecting and moving to an Industry SuperFund as easy as possible.

Online videos are an increasingly mainstream and popular tool for super funds seeking to interact with their members and business partners.

The two-minute video simplifies what can often be a confusing process by walking users through the steps involved in moving their super account.

These three steps – Choose, Notify and Rollover – highlight important tasks such as comparing funds, rolling over an existing super balance and checking exit fees and insurance benefits.

The video also points users to the fund information page and Fund Comparator Tool available on the website to help them choose the right Industry SuperFund for them.

At the conclusion of the video, the logos of the 16 Industry SuperFunds are shown and users can select the fund they are interested in joining.

Click here to see the new Industry SuperFunds’ Steps to Join video.

AustralianSuper goes from strength to strength

Announcement of the proposed merger between Westscheme and AustralianSuper highlights the significant role Industry SuperFunds are playing in the finance industry. The $40 billion combined fund will have 1.7 million members and 150,000 employers, with one in four WA workers being members of the fund.

The proposed merger will take place on 30 June 2011 after completion of the due diligence process, with Westscheme becoming a new, separate division within AustralianSuper. The division will be responsible for servicing both Westscheme members and most AustralianSuper members in WA.  

According to Westscheme CEO, Howard Rosario, the merger arrangement is about securing the retirement futures of Westscheme’s members through the size and scale of the new combined entity. He said the fund’s ‘member first’ focus led it to view the merger as a way to secure the best possible long-term outcomes for its members.

‘AustralianSuper is a fund that has shown the potential to deliver our members strong, long-term investment performance and low costs. Members will also benefit from the enhanced services and products that AustralianSuper provides, including a market-leading insurance offering,’ Rosario said.

The decision to merge reflects the increasing challenges facing super funds and the need for Industry SuperFunds to be proactive in dealing with these challenges.

This means expanding to deliver the best prospects for a secure retirement to the greatest possible number of Australian workers, according to AustralianSuper CEO, Ian Silk.

‘AustralianSuper has a very strong vision about the future of superannuation in this country and we are determined to play a leading role in shaping that future in the interests of our members,’ he said.

‘The merger brings size, scale and capability to lead the industry on performance, low fees, better value and advocacy for members.’

Click here to read more about details of the merger. 

Stronger Super consultative group announced

Detailed work involved in implementing the Stronger Super package of reforms flowing from the Cooper Review into superannuation is about to start, with membership of the key consultative panel announced.

Membership of the new Stronger Super Peak Consultative Group was announced by Assistant Treasurer and Minister for Financial Services and Superannuation, the Hon. Bill Shorten. This group is tasked with providing advice to the Gillard Government on how best to implement the various elements of the Stronger Super reform package to ensure a consistent, integrated approach.

Detailed consultations began late this month and the panel’s work is being supported by several working groups covering the MySuper, governance, self-managed superannuation funds and SuperStream initiatives.

Membership of the group covers the key stakeholders in the superannuation sector and includes representatives from employer and employee bodies, industry service providers and consumer advocates.

The consultative panel is being chaired by well-known super industry figure, Paul Costello, the former General Manager of the Future Fund. The not-for-profit super sector is being represented by ISN’s Chief Executive, David Whiteley, and Australian Institute of Superannuation Trustees (AIST) CEO Fiona Reynolds.

Although membership of the working groups is limited, interested stakeholders will be able to provide input into the design and implementation of the reforms via the Stronger Super website.

For more information about the Stronger Super package of reforms and the Consultation Panel, click here.