than changing jobs.^23 Recent surveys show almost a third of Australians
would rather be given $200 in cash than receive $2,000 in superannuation.
Meanwhile, almost $20 billion in superannuation monies are ‘lost’, and
almost a third of Australians had two or more superannuation accounts,
according to Westpac’s 2013 and 2014‘Lost Super’surveys.
Reflecting mainstream economic theory, there has been little evidence that
funds charging higher fees have outperformed the market by a sufficient
margin over a long period.^24 Yet around 80 per cent of Australian superannu-
ation assets are managed actively, around double the share in other advanced
countries.‘Asset consultants and funds managers vehemently oppose the use
of passive management of equity’, note Drew and Stanford (2003).
Concerned about the impact of fees, the government required, from 2013,
contributions from employees who did not choose a fund to be paid into a
new class of‘My Super’funds. These were meant to be‘no frills’funds making
greater use of indexing to keep costs down. Since establishment, their expense
ratios have fallen to 80 basis points, with projections showing further modest
falls in coming years.
What has clearly been a boon for thefinancial services industry has also
been a significant distortion of the economy. Morris (forthcoming) laments
‘rent extraction by private sector managers on a massive scale’in Australia,
pointing out that the share of the workforce involved infinancial services has
swelled to 3.7 per cent of Australia’s workforce, more than Britain’s 3.5 per
cent, even though the latter is a globalfinance hub.‘The greatest gift Paul
Keating ever gave was to thefinance sector, which has made consistently
super normal profits, in part on the back of ordinary people’s savings’,a
former Liberal Party leader in the early 1990s toldThe Australian(10 May
2014).
10.4.3Insufficient Saving
Next tofiscal probity, a wish to boost saving both at the individual and
national level has become the main argument to justify superannuation.
Here the policy has had more success, if still mixed. In common with other
Anglophone countries, household saving ratios trended sharply downwards
from the 1970s, falling in Australia from a peak of around 20 per cent in 1975
to zero in 2003, before jumping and levelling out around 10 per cent since the
onset of the globalfinancial crisis (Kirchner 2012). At the same time, Australian
(^23) Around afifth of workers still cannot choose their own superannuation fund because of
industrial agreements. 24
Economists such as William Sharpe and Eugene Fama have demonstrated the problems with
so-called active fund management.
Adam Creighton