Securing Australia's Future

9 August 2010

The Financial Services Council, in partnership with PricewaterhouseCoopers, today released the findings of a CEO survey on the key economic, regulatory and investment policy issues facing Australia.

The survey canvassed the views of leaders from the financial services industry on issues such as national savings, infrastructure and Australia's role in Asia.

John Brogden, CEO of the Financial Services Council, said these were critical public policy issues the financial services industry must take a more active role in addressing.

"As the largest sector in the Australian economy, responsible for managing the savings of all working Australians and facilitating investment in all industries, the financial services industry has an obligation to lead broader economic policy discussion and development," he said.

National savings

The Financial Services Council/PricewaterhouseCoopers CEO Survey 2010 found that less than half (44 per cent) of CEOs have confidence with Australia's approach to addressing the needs of tomorrow's ageing population.

Andrew Wilson, Wealth Management Leader, PricewaterhouseCoopers said: "By 2050, one in five Australians will be over 65 and begin drawing down on their retirement savings. This may have far-reaching implications on the economy as the amount of money flowing out of super funds begins to exceed the amount of money flowing into them.

"This 'de-accumulation' may significantly impact equity markets and economic growth as investors move from higher risk, longer-term investments to more conservative ones.

"It is acknowledged that Australia's savings pool, particularly investments in equity markets, helped support companies seeking to recapitalise during the global financial crisis. Such support may not be readily available once we move into this 'de-accumulation' phase."

Mr Brogden said: "Australia is facing not only an ageing population but also a critical shortfall in retirement savings to the tune of $695 billion. The financial services industry is ideally placed to help Australia respond to this challenge."

CEOs acknowledged the industry's responsibility in helping Australians secure a comfortable lifestyle in retirement. They identified improving consumer engagement with superannuation, expanding service and product offerings to cater for an ageing population and broadening the availability and breadth of advice as the chief strategies towards achieving this.

Infrastructure standoff

Nearly all (95 per cent) the CEOs surveyed were not confident that Australia's approach to infrastructure would meet the nation's future needs.

"It is clear that if Australia continues with its current approach to funding we will fall well short of meeting our infrastructure needs both now and into the future. There is a significant opportunity for the financial services industry to work with government in this area for the benefit of all Australians," Mr Brogden said.

CEOs identified daily unit pricing requirements; the scale and complexity of transactions; and a lack of confidence as key barriers to greater investment in infrastructure projects.

"Securing channels of funding from super funds is about providing the industry with confidence that infrastructure will deliver a reasonable return commensurate with an acceptable level of risk," Mr Wilson said.

"Instruments such as municipal bonds have been used in the United States and in parts of Asia. A similar mechanism could be set-up in Australia to provide government with access to new funding. "Furthermore, the government could also build confidence by providing funding during a project's 'start-up' phase before selling assets onto investment-funds."

Australia's role in Asia

Most CEOs considered Australia should be positioned as a regional financial services hub, exporting financial services and skills throughout the Asia Pacific region. However there were differing views on how best to achieve this.

"There is no doubt that Australia is very well placed to capitalise on the strong economic growth in the region. At the same time, if we are to maximise this opportunity it is clear that further tax and regulatory reform is required, as outlined in the Johnson report," Mr Brogden said.

According to the survey, the provision of asset management services is where Australian investment managers could realise immediate growth opportunities in Asia. Other sectors such as custodial services, platforms and insurance offerings often require a well-established, local physical presence and distribution capabilities, which can take many years to establish.

Survey respondents highlighted that Australia's wealth management footprint in Asia was relatively immature compared with other nations.

"We are 10 years behind more established entrants from Europe. There are already more than 5,000 European-domiciled Undertakings for Collective Investments in Transferrable Securities (UCITS) offered throughout Asia," Mr Wilson said.

"There has been much discussion for Australia to develop an Asia Region Funds Passport. However, we should not limit ourselves to Asia. UCITS are a global passport for the European industry and we should be just as ambitious. Australia has an opportunity to export its financial expertise on a much greater scale."

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