What do your retirement savings have to do with run-down public transport or roads? On face value, not much at all.
But lately, the superannuation industry has been lobbying for stronger links between these two seemingly unrelated things - through greater infrastructure investment by super funds. With super assets worth about $1.7 trillion and growing fast, it's tempting to view this as a pile of money for financing new infrastructure, such as transport projects or toll roads.
Some estimates have put Australia's infrastructure ''backlog'' at $300 billion. In the past, many of these projects were bankrolled by governments or bank loans. But budgets are more cash-strapped these days, and banks prefer less risky forms of lending. So, the argument goes, let's put the super pool to more productive use.
According to Industry Super Australia, infrastructure and super funds are a ''natural fit''. After all, these are typically projects that require ''patient'' investors, which can wait for their money to be repaid as the projects are designed, approved and built. Finished projects typically pay a steady income stream over many years, which also suits super members.
But super funds complain that it's still too difficult to invest in infrastructure. The Association of Superannuation Funds of Australia is urging the government to remove ''roadblocks'' to encourage more super money to flow into these types of investments.
It has the ring of common sense - why not upgrade the country's infrastructure while also providing members with solid returns? And, to be fair, infrastructure has performed well. The Reserve Bank has cited figures showing unlisted infrastructure investments have returned almost 12 per cent a year during the decade to 2013, compared with 9 per cent for shares and 5.75 per cent for cash.
However, some of Australia's top economic thinkers say we should be hesitant about channelling our retirement savings into infrastructure. The Reserve's submission to the government's financial system inquiry argues against rules forcing more super money to flow into these projects.
For one, it says super funds already allocate more to infrastructure than their peers overseas, as shown in this week's graph. Australians also have an unusually high allocation to riskier ''growth'' assets such as shares. More infrastructure investment would accentuate this trend.
Moreover, the Reserve points out that there are pitfalls of investing in complex assets such as toll roads. For one, it's expensive. Because infrastructure projects are complicated, investors typically have to pay consultants hefty fees to advise them. These costs are passed on to members. Infrastructure assets are also illiquid - they cannot be easily sold at a good price, and it can be hard to measure and crystallise their value in a timely manner.
And there's no guarantee infrastructure assets will perform better than other options. Sydney's Cross City Tunnel has been placed in receivership twice since it opened in 2005 because traffic flows were a fraction of initial projections. It may give motorists a handy short-cut across town, but it's been a poor investment.
Ploughing more super money into infrastructure may sound appealing, but the risks need to be balanced with the benefits. It is, after all, the country's retirement savings.
