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In retirement, Australia can’t turn the tap off

Awash with cash that far exceeds domestic investment opportunities, Australia’s pension funds are continuing to expand their holdings in global and alternative assets, developing an expertise paralleled by that of the country’s banks. Chris Wright reports.

The Aussie dollar and the overseas investment drive

Debt markets tighter but holding up


CHRIS CONDON REMEMBERS Australia’s then prime minister, Paul Keating, kicking off the compulsory retirement savings regime in the early 1990s. "He was saying one day we’d reach A$600 billion under management," recalls Condon, the chief investment officer at National Australia Bank’s fund management arm, MLC. "We were all thinking: we’ll never get to that."

In fact, savings have almost doubled Keating’s target. According to the Investment and Financial Services Association, the Australian superannuation industry (which is what Australia calls pension funds) was worth A$1.19 trillion ($1.12 trillion) by the September quarter of 2007, with the overall investment management industry bigger still. Actuary Rice Warner projects that the industry should reach $3.2 trillion, in 2007 dollar terms, over the next 15 years.

This, more than any other element of economic life bar commodities (it’s a very handy time to be a quarry and a breadbasket), is where Australia punches dramatically above its weight. Depending on definitions, it is either the third- or fourth-largest asset management industry in the world, in a country of just 21 million people, and is growing faster than any nation above it.

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