...Australia has $4.2T in our super funds, your money my money included.
...and we know that part of Australia's increasing engagement with the US is to offer greater super fund investment into the US-estimates suggest that investment could double from US$400B to over $1T in the next decade.
...unknowingly to us, some of our largest super balance funds have allocations to private equity and infrastructure as well as US equities....so when we invest in Australian funds, we actually have a foot in the US as well, for better and for worse of course.
...there are indications that Australia is trying to leverage significant investments of Australian super funds in the US to improve and strengthen relations between the two countries, which Kevin Rudd suggested as 'soft power' implications of super industry overseas investment.
...you didn't necessarily sign up to it by passively investing in your Australian Balanced Fund believing it is all Australian or with some US equity exposure, but you never know where it gets parked with decisions made by super bosses making trips to the US. In late 2024, it was reported that Australian Super faced a A$1.1B write-down due to its investment in US software company Pluralsight, through an investment in Vista Equity Partners. They are not just US stocks traded on US stock exchanges. It may well include seed capital investment.
...it ironic that we could have used more super fund allocated to providing seed capital investment for Australian projects, maybe that too will come if the recent British proposal is setting a precedent. That may be good but may also be bad if those projects are not deemed to be financially viable or that can provide decent returns for the risk offered. So it does look like our super funds are more confident in US investments than they are on domestic, and hence their preparedness to flock to the US to be used as leverage for improve US-Australia relations.
...this is my concern over anything 'pooled' which you inadvertently sign over control to third parties making decisions on your behalf. How Trump sparked fresh fears about America’s debt crisis
The US president’s China peace deal is good news for markets, but it means he’s further away from solving America’s biggest problem.
Updated May 17, 2025 – 12.15pm,first published at May 16, 2025 – 2.30pm
Peter Berezin, global investment strategist at BCA said last week that investors who believe this week has calmed the waters of financial markets should be careful.
“My guess is that 2025 will unfold like the first Jaws movie, where the inhabitants of Amity Island sigh in relief after they catch a great white shark, only to realise that a much bigger one is still stalking beachgoers.
“Tariffs are the small shark; a fiscal crisis is the bigger one.”
Moody’s said the move to AA1 “reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns”.
“Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs. We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration.”
It’s a reminder, if it was needed, that the seismic shifts in the global order, which started a long time before Donald Trump returned to the White House, are far from over, despite the trade war peace deal struck between China and the US.
This is a story playing out all around the globe. Take London, for example; on Tuesday, as the world celebrated the deal between the US and China, the British government announced it had signed something called the Mansion House Accord with the nation’s pension funds.
The idea sounds innocent enough: the government wants to unlock up to £50 billion ($104 billion) of investment for British businesses and major infrastructure projects. It’s all voluntary for now, but reports suggest the government could introduce reserve powers to force the funds to commit to British projects.
In a stinging editorial, The Times of London raised the obvious question: how could funds justify investing in lower-returning investments at home if there were better options abroad? It urged Chancellor Rachel Reeves not to bully pension funds into breaching their fiduciary duties.
“She spies an ocean of unrealised potential, a reservoir of wealth to drive the growth her cash-strapped government cannot finance,” the paper thundered. “There is just one problem: it’s not hers.”
Reeves’ move goes much further than the various attempts by various Australian governments (of both persuasions) to tap into the nation’s superannuation honeypot. But this is more than just a warning for Australian savings on the dangers of hard-up governments getting their hands on our cash.
It’s no coincidence that the Mansion House Accord was struck during a time of upheaval, when globalisation is in reverse, nationalism, populism and inequality are rising, and heavily indebted governments are scrambling to provide solutions.
For the past months, we’ve been laser-focused on the interruptions these forces are causing for global trade. But Britain’s pension deal, which follows similar agreements in Canada, Norway and the European Union, is a further reminder that capital flows are being fractured, as global pools of savings and investments are diverted to local causes, rather than to finding the best returns.
After the euphoria of a week in which the trade war between America and China was averted, and markets surged back to close to their record highs, it’s tempting to believe that the worst is behind us.
But as JPMorgan chief executive Jamie Dimon said on Thursday night, the temporary peace deal does not reduce the uncertainties that pre-dated Trump’s return to the White House, and that are symptomatic of a fracturing and realigning world.
“War in Ukraine. Terrorism in the Middle East. Iran. Huge deficits. The tariffs. The reactions of countries to tariffs,” Dimon listed in an interview with Bloomberg.
“Those are uncertainties. You can’t eliminate them because you want to.”
With luck, Westpac chief economist Luci Ellis will be right in saying that this week’s tariff peace deal will mean that US tariffs on China will settle close to, or even below, the new 30 per cent rate that will hold for the next three months.
But she’s also right that the coming months are likely to be extremely volatile as trade deals are hammered out. Trump’s love of decidedly non-diplomatic negotiating tactics – the ambit claim, the promises of mercy, the tough love, the sudden reversals and the big backdown – means the potential for markets to whipsaw, and even retest the lows of early April, should not be disregarded.
Nor, Dimon said, should the possibility of recession. A hit to inflation and economic growth from the trade drama remains likely, he says.
But the threats of increased market volatility and some sort of US economic slowdown are short-term issues. The longer-term and more important question is whether the seismic shifts that pre-date Trump’s return to the White House, and led to initiatives such as the Mansion House Accord, have really been healed by Trump’s trade, or whether these issues now have a new context – a loss of trust in the US that could have big ramifications for the global order and financial markets.
Dimon never thought America was quite as exceptional as the rest of the world seemed to believe. The power of “the most prosperous economy the world’s ever seen” remains huge, but Dimon says “the goal of America should be to help the military alliances of the Western world and to help the economic alliances of the Western world to walk side by side”.
Dimon doesn’t say it, but Trump’s actions – particularly in relation to security in Europe and the imposition of tariffs – appear to chip away at those alliances. The JPMorgan boss concedes America can “irritate a lot of people”.
“Even at this level, you’re going to see people holding back on investment and thinking through what they want to do, thinking about how much you’re going to put in the United States,” Dimon said. “I mean, we’re going to be OK, but it is causing that uncertainty.”
But could an irritation become something far more serious? If you believe equity markets, the narrative of US exceptionalism has been restored and money is rushing back into American assets. But bond markets have been telling a different story:
yields, which usually fall when uncertainty drops, ticked higher this week. Why? Because bond investors are telling Trump he hasn’t solved America’s big problem.
Let’s zoom out. What was the tariff war all about? According to Trump and Treasury Secretary Scott Bessent it’s about reducing America’s account deficit by rebalancing trade and reducing its budget deficit by raising revenue from tariffs (which are taxes).
George Saravelos, global head of FX research at Deutsche Bank, says that made sense – the US cannot close its very large account deficit unless it closes its fiscal deficit too. But now there’s a problem.
“Over the last few days we are learning something very important: the US appears unwilling to do that,” Saravelos says.
Not only is the revenue generated by tariffs going to be much lower than Trump’s original tariff agenda suggested, but the “big, beautiful bill” Trump is trying to get through Congress to deliver on his promised tax cuts suggest America’s budget deficit is going to stay above 6 per cent, not retreat to the 3 per cent level Trump and Bessent were aiming for.
“We have been arguing over the last few months that the market is reducing its willingness to fund US twin deficits,” Saravelos says. “This is arguably entirely reasonable given the expressed US desire to reduce them. But actions speak louder than words: the news flow over the last few days aligns with the opposite outcome. We worry this is brewing a major problem for the dollar and potentially the US bond market too.”
As Saravelos says, America’s problem is that “the greater the amount of money a country owes to the rest of the world, the more difficult it is to borrow more money”. He argues foreign bondholders need the non-US dollar price of American debt to fall by two ways: a weaker US dollar, or higher bond yields. The latter would only make America’s debt position more unsustainable, so a weaker dollar becomes the solution.
BCA Research’s Marko Papic says the bond market will force prudence on America, and this fiscal prudence will force the US dollar lower, creating an “exodus from US assets” that is under way and will continue.
“This will not just occur with the currency, but also with equities, especially as many institutional investors cannot liquidate private US assets.”
Saravelos broadly agrees. But where Papic sees a process that will take years, Saravelos is concerned that this process could get very messy, quickly.
“The US cannot be asking the rest of the world to reduce its imbalance with America if the US is not willing to reduce its own. The risk is the rest of the world forces the correction upon the US in a disorderly way.”
