Superannuation has become one of the largest sources of long-term funding for Australian business, with new research from the Association of Superannuation Funds of Australia (ASFA) showing the sector is now close behind banks in supporting domestic investment and productivity growth.
In a new paper examining how Australia’s business sector is funded, ASFA said the nation’s “home-grown private pension system” was doing “some heavy lifting” in supporting critical infrastructure and business growth, particularly compared with other developed economies overseas.
According to the paper, total accumulated domestic funding for Australia’s business sector stands at about $3.1 trillion, with banks still the largest single domestic source at around 44 per cent.
Institutional super funds account for about 28 per cent, while self-managed super funds make up a further 11 per cent, taking super’s combined share to roughly 39 per cent.
Over the past two decades, that combined super share has risen from about 23 per cent to about 39 per cent, underscoring the growing role retirement savings now play in financing the real economy, according to the report.
ASFA said super had already overtaken banks as a funder of incorporated businesses, with banks contributing about 36 per cent of domestic funding compared with around 44 per cent from super funds and SMSFs combined.
However, it noted unincorporated businesses such as smaller firms and sole traders were still expected to rely predominantly on bank lending.
The paper argued that business investment which increases capital per worker – including machinery, tools, technology and infrastructure – is central to productivity growth and higher living standards.
It said capital deepening, facilitated through Australia’s financial system and increasingly through super, remains a key driver of long-term economic performance.
ASFA also contrasted Australia’s retirement system with other OECD countries, where institutional capital is more concentrated in insurers, investment funds and public pension structures.
In Australia, it said, private retirement savings have created a much larger share of national investment through individuals’ super balances, giving “everyday Australians” an increasing ownership stake in the economy and its growth.
The paper said superannuation had created a large pool of domestic capital, estimating national savings are around $1 trillion higher than they otherwise would have been without the compulsory system.
However, ASFA cautioned that super’s growing importance does not mean the system can simply be redirected to meet broader economic needs and stressed that asset allocation decisions are made by trustees at the product or investment-option level and must remain in members’ best financial interests.
“As asset allocation decisions are made by trustees at the product or investment-option level and must be in members’ best financial interest, the paper explores some of the impediments to more efficient allocation of funding and the impact on future capital investment,” the release said.
ASFA said institutional super would remain a vital funding source for decades, but argued Australia’s business sector would benefit from a broader mix of financing options to better support new fixed capital investment.
It pointed to constraints including performance tests and other regulatory gaps that may be limiting wider deployment of super capital.
The group also flagged government-backed specialist investment vehicles as a possible policy lever, particularly to support the energy transition and emerging industries, while calling for greater visibility and centralisation of funding mechanisms.
“If [the] government wants to unlock super investment, it must make more opportunities investable on commercial terms so that they are clearly in members’ best financial interests.”
