RBA warns 2.5 million retirements will turn super fund inflows into outflows
Australia's A$4.8 trillion pension industry is about to lose the feature that made it useful in a crisis. Reserve Bank of Australia Assistant Governor Brad Jones told the AFR Super and Wealth Summit in Melbourne that the sector's weekly net inflows of A$1 billion to A$2 billion have historically let it absorb market stress, including during the Covid-19 pandemic. With about 2.5 million people expected to retire over the next decade, more funds will move into net cash-outflow positions as members draw down savings.
"When we look at all of that, what have been some very powerful tailwinds are going to start to become headwinds and just require more astute management," Jones said. The shift matters beyond Australia's borders: the superannuation sector has become a large owner of domestic assets and has acted as a "countercyclical stabilising force" in times of stress, a role Jones suggested may become less dependable.
Jones also flagged concentration among some service providers in the industry, including in funds' administration. He declined to answer a question on whether the RBA will raise interest rates again at its meeting next week.
Executives from two of the country's largest super funds said they had already moved to protect themselves. Aware Super chief executive Deanne Stewart told the same panel that the fund had deliberately created a head of liquidity role to focus on issues tied to both retirement savings and market stresses. Australian Retirement Trust executives also said they had prioritised liquidity management in anticipation of more members retiring and potential market shocks.
