Tony Abbott a 'pre-Copernican obscurantist,' former prime minister Paul Keating says.
FORMER prime minister Paul Keating has called on Australia's $1.4 trillion of superannuation savings to be used for home loans - as superannuation funds had their worst month in more than two years.
Speaking at an investment conference in Melbourne, Mr Keating said one way to reduce banks' reliance on skittish international funding markets - which they have blamed for not passing on all the Reserve Bank's interest rate cuts - was for super funds to fund the housing mortgages of Australian banks.
''Our banks should be doing less touting on the international markets and fulfilling their funding at home by having the superannuation assets, some of them, directed towards the books of the Australian major four banks,'' Mr Keating said. ''I would prefer that than having the banks out there funding half their books in these soggy international markets.''
He said that although between 55 to 58 per cent of the big four banks' funding now came from deposits, this would likely fall to about 50 per cent once Australia's current savings boom comes to an end. If that happened it would leave the big four more exposed if credit markets seized up again during another crisis.
In the depths of the financial crisis in 2008, Australian banks were able to use the Commonwealth's AAA rating for a fee.
The Australian Bankers' Association chief Steve Munchenberg said ''super funds should look more carefully at fixed interest products, particularly as we've got more people approaching retirement'', but should not be directed to do so.
The comments come as super funds posted their worst monthly return in two years last month after the European debt crisis pummelled sharemarkets, including a 7.3 per cent fall on the ASX200 benchmark index.
The median balanced growth fund sank 2.3 per cent in May, following a 0.4 per cent increase in April, according to super fund tracking group Chant West, which defines growth funds, the most common allocation in Australia, as those with 61 to 80 per cent of their investments held in growth assets.
In other comments, Mr Keating described Opposition Leader Tony Abbott as a ''pre-Copernican obscurantist'' for his relentless opposition to the carbon tax, but said Labor had failed to create a compelling narrative for its time in office.
Now working with advisory and private equity firm Lazard, Mr Keating also labelled German Chancellor Angela Merkel as ''intellectually limited'' and the US Republican Party as ''completely mad''.
In a typically spirited question and answer session, he said the US had lost its mojo due to an ''unconscionable distribution'' of wealth over the past decade, in which corporate profits had soared at the expense of wages.
He said China was ''very frightened by their circumstances'' and were now focused on infrastructure and green energy rather than domestic consumption or exports to developed countries.
He added that the European ''elites'' had failed to recognise that Europeans preferred nationalism to a fiscal union, and would be better off waving the Mediterranean nations goodbye.
Frequently Asked Questions about this Article…
What did Paul Keating propose about super funds funding home loans?
Paul Keating suggested that Australia’s roughly $1.4 trillion in superannuation savings could be used to fund home loans, with some super assets directed onto the books of the Australian major four banks to reduce those banks’ reliance on skittish international funding markets.
Why would using superannuation to fund mortgages reduce bank funding risk?
Keating argued that if more funding came from domestic superannuation rather than international credit markets, banks would be less exposed when global funding markets tighten. He noted deposits currently account for about 55–58% of the big four banks’ funding but could fall to around 50% after the current savings boom ends, increasing vulnerability in a future crisis.
How did super funds perform recently and what does that mean for everyday investors?
Super funds recorded their worst monthly return in more than two years after the European debt crisis hit share markets. The ASX200 fell about 7.3%, and the median balanced growth super fund sank 2.3% in May (after a 0.4% rise in April), according to Chant West. For everyday investors this highlights short-term volatility in growth-oriented super options and the importance of checking long-term asset allocation.
What did Chant West report about balanced growth super funds?
Chant West reported the median balanced growth fund fell 2.3% in May. Chant West defines growth funds—the most common allocation in Australia—as funds holding 61–80% of their investments in growth assets.
What was the Australian Bankers’ Association’s view on super funds moving into bank funding or fixed interest?
Australian Bankers’ Association chief Steve Munchenberg said super funds should consider fixed interest products more carefully, especially as more members approach retirement, but he emphasised that super funds should not be directed to invest in particular products or to bankroll banks.
If super funds started funding home loans, how might that affect everyday super members?
The article outlines the idea as a potential way to stabilise bank funding, but it does not detail how returns, liquidity or risk for individual super members would change. Any shift toward fixed-interest or mortgage exposures could alter return profiles and risk characteristics, so members would need to watch fund communications and consider how such changes match their retirement timeframes and risk tolerance.
Is the proposal for super funds to fund mortgages a government policy or an expert opinion?
The proposal described in the article is an opinion put forward by former prime minister Paul Keating at an investment conference. The Australian Bankers’ Association commented on the concept but said funds should not be directed to invest in particular products. The article does not indicate any government policy change.
What broader market context did Keating cite when calling for super funds to back home loans?
Keating made the suggestion against a backdrop of recent volatility: super funds had a poor month due to the European debt crisis that pummeled share markets, including a 7.3% fall in the ASX200. He argued that reducing reliance on international funding markets would be preferable to banks funding large portions of their books offshore during uncertain times.
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