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Australians invest more than $4.5 trillion in superannuation each year, yet many are unaware that they are funding military violence. This includes tertiary education workers whose default fund, UniSuper, invests heavily in companies responsible for the suffering of millions of people, including in Palestine.
Australia’s welding industry has accused the Reserve Bank of making it harder for manufacturers to lift productivity, arguing higher interest rates are strangling investment in the technology and training needed to improve it.
Australia has one of the world’s largest pools of retirement savings. Yet the country still struggles to finance the clean energy, storage, transmission and resilient infrastructure needed to reduce exposure to fossil-fuel shocks and climate damage.
Australia does not lack funds. The problem is how we measure investment performance, allocate risk and decide who receives the gains when public policy makes an investment viable.
The costs of delay are not confined to future emissions targets. They increasingly appear in household bills, insurance premiums, disrupted supply chains, public disaster recovery and an economy exposed to volatile international fuel prices.
Australia needs a better way to fund the future.
Australia’s superannuation pool is measured in trillions of dollars, and funds already invest substantially in long-lived unlisted assets such as property, infrastructure and private equity. But much of this capital flows offshore or into established assets, while domestic investments essential to the transition struggle to secure finance.
This is particularly apparent in renewable energy. Wind and solar are among the lowest-cost sources of new electricity generation, but a project can be technically sound and economically worthwhile while still being difficult to finance.
The reason is risk.
A new wind or solar project faces uncertain wholesale prices, curtailment, construction-cost pressure, transmission constraints and changing market rules. Investors require higher returns to compensate. Those financing costs can be as consequential as the cost of solar panels or wind turbines – and ultimately affect the prices projects need to charge.
For super funds, the distinction matters. Superannuation is well suited to holding mature assets that provide stable, long-term and often inflation-linked returns. That is why funds own airports, ports, toll roads, property and regulated infrastructure.
Before construction is complete, however, a renewable project can look more like a development venture. It requires years of expenditure before it earns revenue. Its cashflow can follow a “J-curve”: negative early on, then stronger and more predictable once operating.
That profile can clash with performance-test settings built around listed-market benchmarks.
Treasury recently consulted on whether the annual superannuation performance test should better accommodate “emerging and alternative” assets whose returns are not well represented by conventional public-market indices. One option would introduce an emerging-assets category assessed against a CPI-plus benchmark rather than listed-equity indices. The consultation makes clear these proposals are not yet government policy.
The debate recognises a genuine tension. A test designed to protect members from persistent underperformance may also favour readily benchmarked, liquid and familiar assets over long-term domestic investments with different return patterns.
Super funds should not be mandated to put members’ money into politically favoured projects. Trustees must act in members’ best financial interests, and no project should qualify merely because it is labelled “green”. APRA’s performance-test framework is intended to help members identify persistently underperforming products, with products that fail two consecutive tests unable to accept new beneficiaries until they pass a subsequent test.
But the rules should allow trustees to assess a sound 25-year infrastructure investment on its actual risks and returns, rather than as if it were a listed share expected to track an index from year to year.
Government also has a role beyond changing superannuation rules. Projects with predictable long-term revenue can generally be financed more cheaply than projects relying entirely on volatile spot markets. Long-term contracts, coordinated transmission, and credible market arrangements can reduce unnecessary uncertainty, lower required returns and, if designed well, lower costs for consumers.
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This is not subsidy for its own sake. It recognises that electricity, like transport, water and telecommunications, is essential infrastructure. AEMO’s Integrated System Plan describes the scale of coordinated investment required across generation, storage, transmission and consumer energy resources as coal-fired generation retires.
There is a further question Australia has not adequately answered: when government makes such assets investible, who should own the value created?
Public action often does the hard work. Governments enable transmission, planning frameworks and renewable-energy zones. They may provide grants, concessional finance, guarantees or long-term contracts. Taxpayers and electricity consumers can consequently carry some of the risk that makes projects financeable.
Private investors – including Australian superannuation members – should receive a return for supplying capital and bearing commercial risk. But it does not follow that all the upside should accrue to project developers or external investors.
Where public support is material, it can be structured to give the public a stake in success as well as exposure to failure. This might include public co-investment, a share of revenues or returns, and public stakes in enabling infrastructure. The Future Fund could participate alongside super funds and other investors in nationally significant transition and resilience assets that meet clear commercial, governance and public-interest tests.
That would not mean making the Future Fund a political project developer. It would mean treating public risk-bearing as something that should generate public value.
The climate dimension makes the task more urgent.
Inflation is increasingly shaped by forces that higher interest rates cannot fix: floods, fires, heatwaves, crop losses, damaged infrastructure, disrupted freight, insurance withdrawal and international fossil-fuel shocks. These are supply-side pressures, often magnified by climate change and dependence on global oil and gas markets.
Investment in clean electricity, electrification and resilience is therefore not only climate policy. It is part of an anti-inflation strategy.
Every year of delay leaves households and businesses exposed longer to volatile fuel costs, ageing coal assets, avoidable system failures and escalating climate damage. It can also make capital more expensive, as investors price uncertainty into projects that should have been treated as planned national infrastructure.
Australia does not need to choose between prudent investment and a rapid transition. Prudence means recognising the higher costs of an unmanaged transition: higher bills, greater climate damage, lost industrial capability and public money repeatedly spent repairing avoidable harm.
Australia’s superannuation system, government balance sheet and Future Fund are substantial national assets. Used intelligently, they can help finance cleaner, more resilient infrastructure—and ensure its rewards are not captured solely by those best placed to benefit from public risk-taking.
Professor Ray Wills, Managing Director, Future Smart Strategies; Adjunct Professor, The University of Western Australia
Howard Buckley, Chief Executive Officer, Future Smart Strategies
Professor Peter Newman AO, John Curtin Distinguished Professor of Sustainability, Curtin University; advisor-at-large, Future Smart Strategies
Together, Wills, Buckley and Newman bring complementary expertise in sustainability, regional and urban planning, climate change, project development, community stewardship and long-term policy implementation.
