World of Super Collides With World of Credit Crunch

Meanwhile, mischief is still afoot in the world of superannuation. Australian super assets under management exceed $1.2 trillion. That’s the fourth largest pool of investable savings in the Western world. It’s no wonder there are so many pigs feeding at the trough.

But here is where the world of super collides with the world of the credit crunch. Aussie corporate bond issuance has increased as access to foreign bank loans tightened up in the last two years. Domestic savings (in the banks) may be inadequate to fund the country’s credit requirements. But if borrowers could siphon off a bit of the super money…that would be the ticket.

It’s this whole issue of Australia still being a net importer of capital. It’s a major economic vulnerability. And there are some bankers who are already looking for a way around it. In today’s Age we read that, “Commonwealth Bank of Australia Ltd (CBA) group treasurer Lyn Cobley said there was a place for the government to mandate more superannuation savings to stay in Australia to fund some of the lending that was now funded from offshore.”

Let us deconstruct. Super is compulsory. Now CBA (or one of its officers) has broached the idea that compulsory super money be compelled to invest in corporate bonds.” Not much choice there for you, is there? Your money being taken away and being made to invest in assets not of your choosing.

All of that as a solution to the worst two years of super performance in memory? In today’s essay, Kris Sayce shows why now is not the time to be complacent about super. Even if this year’s rally has erased some of the sting from the last two years, there are a lot of good reasons to fundamentally reconsider your relationship to super.

Or you could take up Texas Hold ‘Em poker. Joe Cada, a 21-year old college dropout from Detroit won the World Series of Poker (and $8.5 million) yesterday…with a pair of nines! A pair of nines?!

Cada’s story is a great American vignette. News reports say he is the son of an out of work auto-parts design engineer. His mother deals black jack at the Motor City Casino in Detroit. Cada is the youngest winner in the history of the tournament, and beat a logger from Maryland and a Frenchman in a fourteen and a half hour final session. He went all in on the last hand.

It’s great for Cada. It sounds like he’s a pretty good poker player. But it may not be so great for America that the only way a young man from Detroit can make it big in the United States is to win a poker tournament in Las Vegas.

Dan Denning
for Markets and Money

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.

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2 Comments on "World of Super Collides With World of Credit Crunch"

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tar and feathers

Compulsory super = compulsory greed……..the platitude control by govt is always a superficial remedy, Aus super draws in and attracts the capitalist blowflies, Aus public super will be absorbed.

Chris Y

compulsory super, compulsory health fund membership… the reason these ‘benefits’ have been made compulsory is that the options are unattractive.
We will soon be enjoined to obtain part of our energy needs from renewable sources – but on terms amounting to government coercion.

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