When we travel overseas, we regularly find ourselves taking note and appreciating those subtle reminders of home.
Strolling past an RM Williams store in London, coming across our renowned surf or health brands in retail outlets, a famous Australian on the world sporting stage, or familiar brands of food and wine products in supermarkets.
Yet, there’s one major Australian export that is increasingly everywhere, but goes almost unnoticed, and that’s your super savings.
But make no mistake, as your super fund scours the world looking for opportunities to grow your retirement savings: it’s also strengthening not only Australia’s economic and diplomatic ties, but shoring up our growing influence on the international financial landscape as well.
While much of this flows into financial markets with investment in companies, it’s also being invested into ‘real’ assets.
So next time you find yourself in an airport in Vienna or Manchester, driving on a toll road in Italy, the USA or France, using the high-speed internet in regional Germany or spellbound by the magic of AI in the US, home might be closer than first thought. Indeed, there’s a pretty good chance you might even own a piece of these assets yourselves.
That’s the power of super – it gives working people a chance to gain exposure to multi-billion-dollar infrastructure investments that would otherwise not be possible. It lets hardworking Australians invest and own assets as though they’re the wealthiest people in the world.
This is a trend that will only continue as the Australian superannuation system expands – so much so, that capital itself will, in fact, become one of Australia’s most important exports. For a country renowned for its exports, that’s no mean feat.
The numbers speak for themselves – and they’re getting bigger and bigger. As of September, this year, the total pool of Aussies’ retirement savings is $4.1 trillion, or around 149 per cent of GDP – one of the largest pools of retirement capital in the world as a percentage of GDP.
By 2040, this pool of capital is expected to reach around $11 trillion or 193 per cent. Of this, the ‘institutional’ funds (industry, retail and government) account for $2.8 trillion currently, and this is expected to get to just over $8 trillion.
This capital is truly going global.
Institutional funds currently have around $1.2 trillion in offshore investments – or around 46 per cent of their invested assets.
If this proportion holds, the current quantum will need to treble to around $3.6 trillion invested overseas by 2040.
It is likely that this asset allocation will edge upwards somewhat as the Australian economy and the investment opportunities it presents simply won’t grow fast enough to absorb this. To put this task in context, the additional $2.4 trillion that will flow offshore is around 63 per cent of the just under $4 trillion Australia invests in total in overseas assets currently.
Where will it all go? Australian capital will clearly go to all corners of the globe, diversifying across global financial markets and real assets.
Alex Joiner AFR 22-Jan-25