Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Hansard source

Firstly, if I could correct the figure in the question, the last total balance, as I am advised, for Australia’s superannuation funds is $1.1 trillion not $1.3 trillion—that is, unless APRA in the last day has issued some further data to show that the figure has gone from $1.1 trillion to $1.3 trillion. If it has I would frankly be surprised if the superannuation savings of Australians have gone up in current market circumstances.

As all senators are aware and, indeed, most Australians in the general community are aware, there is a global financial crisis. I have spoken on this matter on a number of occasions. What has occurred in the United States is known as the subprime housing financial crisis. What has occurred in the United States is the mis-selling of mortgage products to millions of Americans who, on any reasonable reading, could not afford those mortgages. In turn those mortgages were securitised and underwritten by a range of financial institutions and given AAA ratings.

As the emerging turmoil, the collapse, the takeover and the effective nationalisation of a number of financial institutions has occurred in the United States, as the debts have been exposed, that in turn has had an impact on the share markets. Australia has not been immune from this. There has been a worldwide impact on all advanced economy share markets including Australia’s. In turn, when share markets fall, given that the predominant investment product in Australian superannuation funds is in equities in the share markets, then the rate of return at any single point in time within superannuation funds will decline if the markets fall.

What we have seen in the last financial year as a result of this turmoil is an average reduction of 6.4 per cent negative rate of return in respect of Australian superannuation funds. This is not the first occasion that we have seen negative rates of return in superannuation fund assets. I am sure Senator Coonan would recall when, I think, she was Assistant Treasurer there was a negative rate of return—not as significant and not as widespread—in the period 2000-01. I am sure Senator Coonan recalls that period.

What is important to emphasise is that the real long-term rate of return in superannuation is an average of five per cent. It is very important to emphasise in these market circumstances, with their impact on superannuation funds, that it is the medium- to long-term rate of return which is relevant in making a judgement on superannuation funds returns. If APRA have not published the latest data on the value of Australian superannuation funds as at the last quarter then I will contact APRA to see what the latest position is as of today. (Time expired)