AustralianSuper chair Heather Ridout has urged state governments not to be afraid of going into debt if the money is used to fund infrastructure projects.
Speaking at the Australian Centre for Financial Studies' 'Funding Australia's Future' forum in Sydney, Ridout said that state governments are well-placed to begin infrastructure projects, which can later be privatised with institutional investment from industry super funds.
"If it means state governments have to run a different balance sheet, run a bit of debt on a revolving basis, it's not that frightening, it's not really that scary, and I think we do really need to open our minds to it."
Ridout pointed to the New South Wales Government's model of 'recycling' infrastructure (i.e. selling off existing operations) in order to fund new projects as an example to other state governments.
Ridout's comments are part of a wider push from the industry super sector to encourage governments to put more resources into infrastructure. Governments have a vital role to play, the argument goes, as they are best positioned to bare the risks associated with new projects.
"It's not the business of AustralianSuper to get into taking on construction risk, and that's why the Port Botany one was a very good one," Ridout said. The tender for Port Botany was won by Industry Funds Management (IFM), a consortium of industry funds including AustralianSuper.
The Industry Super Network (ISN) has said industry funds have $15 billion ready to invest over the next five years. Other super investors, however, are not so ready to invest in infrastructure.
Also speaking at the Funding Australia's Future forum, former MLC head Steve Tucker said, "The constraints around liquidity are one serious issue, particularly for the retail sector. You've got members coming and going all the time, you've got people having pensions paid out at the flick of a switch these days."
However, he said that while self-managed super funds (SMSFs) do not currently invest much in infrastructure, this is due to a lack of opportunity rather than a lack of will.
"So you will see technology innovation coming really fast - as you already are - whereby the markets will be created that allow the execution at the desktop for the self-managed investor to get into these types of assets," Tucker said.
Ridout agreed. "Self-managed super funds are the biggest sector and they don't invest much in infrastructure because they can't invest easily enough.
"So rather than invest in infrastructure, they have to invest in the company, so it's very hard for them to get into the deal. So we have a real structural issue here in the super industry around them. And that's a product opportunity which I suspect a few people are having a very good lack at."
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