Lack of projects deter super billions

The report, by Ernst & Young and commissioned by the Financial Services Council, confirms that Australian super funds are willing to channel a greater share of the nation's $1300 billion super nest egg into infrastructure projects such as roads, rail and power stations.

But a host of barriers stands in the way, the report says, including a lack of government-backed projects of a suitable size and structure.

Underperformance by a series of toll roads has also dented the sector's confidence in infrastructure investment, especially in new or "greenfields" projects, Ernst & Young finds.

When potential projects did emerge, super funds were often turned off by lengthy, costly and complex tender processes, uncertain timetables and poor co-ordination between state and federal governments, which led to "unacceptable risk" with some projects.

Uncertainty surrounding government policies - such as carbon pricing and renewable energy initiatives - was cited, as was the reluctance of governments to borrow money to pay for infrastructure.

The council, which represents for-profit, or retail, super funds that manage about 28 per cent of the nation's super pool, commissioned the report amid long-running - and growing - calls for more super savings to be used to fund new infrastructure, including from the lobby group Infrastructure Partnerships Australia.

It also follows a call from the government's infrastructure adviser, Infrastructure Australia, for an "urgent" rethink of how infrastructure projects are financed, calling for a more "mature" and "challenging" debate on the issue.

It warned last week that Australia would need $300 billion in infrastructure spending in the next decade, some of which would need to come from the private sector.

Australian super funds are estimated to have between 5 per cent and 10 per cent of their assets invested in infrastructure - typically higher for industry funds - working out to between $40 billion and $80 billion, excluding self-managed super funds.

About $6 billion of this class of holdings is estimated to be invested in airports in Australia.

But a significant proportion has also been channelled into office buildings rather than into more widely used transport, energy or water infrastructure.

The super industry has repeatedly warned of a series of impediments to further large-scale investment in infrastructure, including the illiquid nature of infrastructure assets.

The Financial Services Council chief executive, John Brogden, said superannuation should not be seen as a "cash cow" to solve Australia's infrastructure needs.

Fund trustees were required to invest in projects that offered members a commercial return, Mr Brogden said.