Super savings savaged

And returns on Australia's 30 million super accounts may not improve in the first months of the financial year, with shares taking another dive amid warnings of billion-dollar losses at two of Australia's biggest banks.

In the latest bad news bulletin from the banking sector, ANZ said yesterday it would set aside $1.2 billion to cover expected losses stemming from worsening economic conditions in Australia and New Zealand, and its exposure to failed companies such as Centro Properties Group, Bill Express and Opes Prime.

The news came three days after NAB revealed it expected to lose more than $1 billion on investments linked to the troubled US mortgage market.

The ANZ announcement sparked another day of heavy selling on the sharemarket, with sagging bank shares leading the S&P/ASX200 down another 1% to finish at 4922.1 points.

The latest sell-off will worsen an already dismal set of numbers emerging from super funds.

According to industry rating group SuperRatings, which tracks the performance of big funds, the median balanced fund lost 6.39% over the 12 months to June 30 - abruptly ending a run of solid returns in recent years.

And June was the worst month since compulsory super began in 1992, with the median balanced fund losing 3.9%.

The reversal in fund performance will be of particular concern to people nearing retirement, and could force some to reassess plans for a life financed by superannuation.

Those in industry funds tended to fare better than the rest, with an average one-year negative return of 5.78%, compared with retail funds at -9.84%, according to Industry Super.

The best performing super fund, Vision Super - Balanced Growth, lost 1.7% for the year to June 30, while Legg Mason Corporate MasterTrust fell 15.9% over the same period.

Another six months of negative returns could not be ruled out, said Angus Gluskie of White Funds Management. "I don't think we've seen the bottom of the market," he said, noting higher inflation could dampen profits further.

ANZ chief executive Mike Smith also said yesterday the economy would continue to slow over the next 18 months.

The reversal in shares and super adds to a litany of financial pressures on Australians, with inflation running at 4.5%, mortgage rates at the highest level in more than a decade, and petrol prices and rents at record levels.

The banks' woes prompted a warning from Treasurer Wayne Swan yesterday that Australia was "not immune" to events in global financial markets.

Mr Swan revealed that he and Prime Minister Kevin Rudd had at the weekend sought reassurance from regulators, including the Reserve Bank, that Australia's major financial institutions were in sound health.

Asked whether poor performances should be reflected in remuneration packages of executives and boards, Mr Swan said it was important that senior bank figures "are held accountable for the decisions that they take".

But Australian Shareholders Association chief executive Stuart Wilson said it would be some time before shareholders could demand accountability from bank chiefs, with ANZ's annual meeting in December and NAB's in February.