funds can fix the big issues

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Funds 'can fix the big issues'

By Tim Blue

May 24, 2007 12:00am
Article from: The Australian

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PRESSING issues such as water shortages and the needs of an ageing population could easily be addressed using superannuation funds and energetic political leadership, according to Garry Weaven, one of the architects of the superannuation system.
Mr Weaven, chairman of Industry Funds Management, told the National Press Club yesterday that super funds were keen to invest in infrastructure, but were thwarted by government inactivity at all levels.

He cited the "massive potential" for geothermal power based on huge reserves in the north of South Australia, and the possibility of cutting evaporation losses in Victorian irrigation centres.

The biggest obstacle to exploiting the heat reserves in South Australia was the cost of transmission lines to population centres, he said.

"The potential exists for providing perhaps 25 per cent of the eastern seaboard's base-load power requirements into the future on a completely renewable zero-emissions basis. Such a nation-building project could be feasible provided our leaders have sufficiently visionary timelines."

If such an example were thought to be too theoretical, water provision in Victoria. provided a more immediate example of market failure and lack of leadership.

"About 70 per cent of Victorian average water usage is in agricultural irrigation and about 30 per cent of this is wasted, mainly due to archaic infrastructure," Mr Weaven said.

"Close to twice Melbourne's total annual water usage could be saved in perpetuity by a comprehensive overhaul of irrigation infrastructure. This could be achieved very economically by focusing on the areas of largest loss, for example in channel leakage (it appears that something like 80 per cent of leakage comes from 20 per cent of the channels), outfalls, spillage and oversupply.

"For about $1.5 billion, water could be saved at a cost of less than $2000 per megalitre, which compares favourably even with our currently underpriced water.

"On this analysis it might be that no Government funding at all is required."

The Treasurer's Intergenerational Report pointed to a funding gap on future aged care and health costs, which were also largely a function of age, Mr Weaven said.

"We have an ideal opportunity to build for a great and world-leading future and we should seize it. If our political leaders wish to lead, I'm sure they will find willing and creative partners in the industry superannuation movement."

Mr Weaven said any failure to link our superannuation system to national infrastructure needs was not due to super funds and their managers being unwilling to meet the challenge.

"The large-scale and rapidly growing industry funds, in particular, have a strong appetite for such investment. The growth of these funds ensures they are not liquidity-constrained. They can take a long-term view and they need to accumulate investments across the full range of risk and return profiles," he said.