Loading ...In Oz, everything related to retirement funds is called Super(annuation). And starting in 1990 the Govt. decreed that employees must contribute 10% (the SGL, Superannuation Guarantee Levy) to employees’ super funds. This is clearly an effort by government to reduce the burden on the state at retirement, and let’s face it is a mostly sensible thing. The SGL contributions are held by Super companies in specific accounts, so what your employer put in is yours, plus investment income less taxes and Super company charges. There are tax concessions for you to add to your super from your own savings. It is supposed to be a tax advantageous investment option. The super funds offer many options for investment; hi-growth, conservative, cash, foreign stocks, Australian stocks, green stocks …. the permutations are endless.
35 years on and the amounts invested in super have naturally grown. To the extent that the major super funds now consider that, as funds own ~40% of Australian equities, they can’t justify investing any more in our home grown markets, and have to look to overseas equities, which already comprise 33% of AUM, for more opportunities. Setting aside the fact that they presumably think that blindly continuing to invest in the Aussie markets for patriotic reasons would be inflationary to stock prices – to what extent has the compulsory injection of AU$3.84tn into the markets distorted asset prices already? And now more money that has to be invested is looking for homes in overseas stock markets. Because nearly everyone has super, then nearly everyone is affected by SM crashes, compounded by the fact that if you have a falling AUD then you’re losing more money on the exchange rate on your overseas stocks or bonds. I bet next to none understand the exchange rate risk of investing overseas.
Anyway, I reckon your observations are spot on. For all sorts of reasons asset prices are inflated, and the pain of unwinding will be immense for many people. The biggest cause of asset inflation is debt, and we know how much unwinding has to take place there.
Abolish debt.