Australia’s Great Financial Weapon

Australia’s Great Financial Weapon

First it was about the labour.

Then it morphed to about the conditions they laboured in.

Now, the ‘power of the people’ has found another tool to wield their power.

There’s over a trillion dollars in collective wealth up for grabs…

…and you can bet every retirement dollar on it, they plan on using it.

Unintended consequences of government policies

There are many unintended consequences of government policies. What starts off as a genuinely good idea…often snowballs into outright disaster.

Take subsidies for example. Whenever the government agrees to cover the cost of something, they almost always put a ‘floor’ under the price of goods.

Our child care subsidies system is a good example of this.

And superannuation is another one.

What started as a well-intended way for the government to force people to save for their own retirement, has instead created a power play for our collective wealth.

To date, our total superannuation pool sits around $2.7 trillion dollars.

Let me put it this way.

Australia’s gross domestic product (GDP) is roughly $1.9 trillion dollars.

The Australian Securities Exchange is worth around the same amount.

That means, our retirement is bigger than our national income and the ASX.

In fact, our super system is so big, it technically owns half of our stock market from an investment point of view. Meaning half of the Australian stock market is backed with money held in super funds.

The rest of Australia’s collective retirement wealth is held in property, cash, infrastructure projects and international shares.

Now that the pile of cash is so big, it’s running out of places to hide.

Although according to one trade union boss, the last thing our super money should do is hide away for our retirements.

Instead, Australians should get ready for our retirement money to do battle…

All that money just sitting there

The superannuation system started out simply enough.

Aussie’s had a portion of their wages hidden away from themselves. That way — at least according to the government — we couldn’t do anything stupid like spend our own money.

The theory was, if the government forced us to look after ourselves in retirement, we wouldn’t be a drain on the pension system.

And the super funds set up to look after this money?

Well their job was simple too.

Their only legal obligation was to act in the best interests of members.

Create a place where the funds were secure and the money would slowly grow. Of course the Royal Banking Commission showed us that superfunds haven’t exactly been acting in our best interests either…but that’s a topic for another day.

Well…by the end of this year, the super pot will be worth about $3 trillion dollars.

That’s a stupid amount of money.

To put that figure in perspective, our retirement savings are worth as much as Google, Apple, Amazon and Microsoft combined.

Our retirement pot is 1.4 the size of our GDP.

It’s enormous…and it’s no wonder that someone is trying to get their hands on it.

Enter stage right, Michele O’Neil, president of the Australian Council of Trade Unions…

Sharpen those bills

Just last week union top brass O’Neil told an 800-person strong superannuation conference that Australia’s business elite were ‘afraid’ of the power working people have.

More specifically, she noted the power of their super funds…although she dressed it up as power of the people.

O’Neil pointed out that super funds should treat poor employment conditions as an ‘investment risk’.

Saying that we should view companies that treat staff badly with the same disdain for investment for tobacco and gambling companies.

Basically, O’Neil is standing in front of a room, asking trustee fund managers to use their funds for a political benefit.

What O’Neil isn’t just proposing financial activism, but turning the $1.4 trillion dollars held in industry retirement funds into a weapon.

Something that goes against the core of what superfunds are meant to do.

They aren’t meant to engage in political activism. No. Super funds are solely there to manage and grow retirement funds.

That’s it.

They simply don’t — and shouldn’t — have the right to throw other people’s retirement savings behind a cause the fund director supports.

If people want to use their money for financial activism, that’s fine. But that should be an individual choice.

The problem here, is that O’Neil is suggesting that fund managers use that trillion or so to push for the trade unions agenda.

Gross abuse of power

What the union boss is suggesting, is that striking staff isn’t as effective as holding back the dollars.

Years gone by, labourers could picket a company to get the conditions they wanted.

Perhaps staff strikes aren’t as effective any more.

Of course, what is effective…is a trillion dollars.

A trillion, easy dollars I might add. Easy because our retirement savings are so full, the money has to flow somewhere.

What O’Neil is suggesting is a gross abuse of her power. Using trillions of dollars for sway with corporate firms…regardless of the outcomes for retirees.

We have just discovered Australia’s greatest financial weapon.

Sure the unions only have $1.4 trillion to throw around…

…but I wonder just how much power and influence three trillion dollars buys you.

Best Wishes,

Shae Russell Signature

Shae Russell,
Editor, The Daily Reckoning Australia