Super funds clawing back $213.7b deficit

Your superannuation fund may be playing a big part in the nation’s COVID recovery.

That is, if you have an industry super fund.

Industry super funds are helping the national economy get back to black, clawing back the national deficit of $213.7 billion by investing in capital projects which, in turn, create higher tax receipts, lower pension payments and lower interest costs.

Projects such as infrastructure and property construction – such as social housing, new airports, public transport and energy networks – all of which generate more tax revenue for the government.

These projects will create jobs which, in turn, will reduce government income support payouts and the increase in economic growth means interest rates stay low.

Industry Super Australia (ISA) estimates that spending by industry super funds should boost the budget’s bottom line by almost $2.5 billion and create around 200,000 new jobs.

Reduced reliance on government income support payments could save the nation around $45 million each year.

Should the government stay the course and increase compulsory contributions to 12 per cent by 2025, more Australians will see bigger nest eggs and fewer Australians will rely on the Age Pension, says ISA.

And while your super may fuel a faster economic recovery from the pandemic, it seems super funds themselves are also on the road to recovery.

After a rough year, funds are riding good sentiment created by opening borders and lifted restrictions, with the median balanced option returning 0.5 per cent in October.

Positive market movements in November point to continued momentum, says superannuation research house SuperRatings.

While members haven’t yet recouped losses incurred in early 2020, funds have bounced back in the second half of 2020, although SuperRatings warns members should expect further market volatility as the pandemic is brought under control.

“The super recovery is ongoing but has been faster and stronger than expected to date,” said SuperRatings executive director Kirby Rappell.

“There are clearly still significant risks and uncertainties, and we expect more market volatility heading into 2021, but overall members have reason to be reassured by the performance and resilience of funds’ portfolios this year.”

Australian shares posted a 1.9 per cent return in October as restrictions eased, COVID-19 case counts lowered and the federal budget bolstered sentiment.

“Australia’s success comes down to three things: our response to containing the virus, the extraordinary scale of the budget measures, and our superannuation system, which serves as an additional stabiliser to the economy,” said Mr Rappell.

“Looking ahead, it really depends on what a ‘COVID-normal’ world looks like. Developments on the vaccine front are very promising, but things are still uncertain in terms of how we reopen safely and how long this will take. There will still be ups and downs heading into 2021.”

Do you feel positive about 2021?

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