In a statement released on Friday, ISA chief executive David Whiteley said the upcoming Financial System Inquiry should focus on “maximising the potential of the super system to assist in transforming the economy”.
He pointed to ISA research released last week that found the financial sector has become much less efficient at capital formation since 1990.
“This inquiry should be looking into how we can reconnect finance to the real economy,” said Mr Whiteley.
The pool of savings within superannuation could act as a second pillar of funding within the Australian economy, separate from banking, he said.
“A second pillar would create needed diversity in the sources of funding. It is important not to let superannuation get absorbed by or commingled with banks
“Commingling super with banking commingles risk, increases institutional complexity and reduces the diversity of funding sources,” said Mr Whiteley.
Whereas the government guaranteed bank deposits and bank bonds during the global financial crisis, super funds “didn’t need these guarantees and in fact acted as a macroeconomic stabiliser, investing into the market especially while share prices were falling,” he said.
“It is important that in bringing the second pillar into reality, the inquiry thinks about how Australia can be the leader of global financial services,” said Mr Whiteley.
“This will create opportunities for super funds to engage in direct investment in firms and projects through primary markets using a buy and invest approach, with limited intermediation and secondary markets,” he said.
