We are living in strange times. All the rhythms of daily life, professional and domestic, have been upended and everyone is affected. The impact of the coronavirus on people’s health is devastating but its economic impact is also severe. The crisis and government response, both here and overseas, will reverberate through the world economy for a long time to come.
Superannuation has of course also been affected but unlike previous crises where the impact was largely about dealing with negative returns and members’ behaviour in response, this time we have been called on to provide financial support for members in the present. There is no doubt that superannuation funds can meet these new requirements but there are challenges in making a sudden shift from a long-term investment model to one where a sizeable portion of funds needs to be readily available.
To help smooth out these challenges we have been working with Government and the regulators over the last few weeks and we have made significant progress. Unlike the original model, the ATO will now provide banking details and payment approval directly to the member’s nominated fund and the ATO approval will also cover any client identification requirements. These changes will greatly simplify the administrative requirements and reduce the administrative cost and resource burden for funds.
The crystallisation of losses which a member who makes a withdrawal will suffer remains an issue and will have to be addressed through warnings and explanatory material for fund members. This will be challenging in these nervous and information-laden times.
While it is not clear in what shape our society will be at the end of the crisis, there is no question that at some point we will prevail over it, as we have over previous crises. But there is no guarantee that we will return to what we might have thought of as normal only a month or two ago. Crises always leave a mark and we need to look ahead and be prepared to adapt to the changes that this one may leave.
Looking back over the last 100 years, we have faced a number of crises – some military, some financial and some like this one caused by a pandemic. All of them had an economic impact, and not always negative. It has been argued that the long shadow of the Great Depression, clearly a financial crisis, was only dispelled by the economic stimulus created by the Second World War.
I do not presume to forecast the long-term effects of this crisis, but given the impacts it has already had—on ways of working, on our natural gregariousness, on the role of the government in supporting the economy to name a few—I suspect its legacy will be significant and long-lasting.
In the short term we need to respond to the immediate challenges confronting us. In particular, how superannuation can play a role in supporting Australians during the crisis that is efficient and will not impair superannuation’s fundamental role. Once the crisis is over we will need to look at what has been taken and at what abides, and be ready to deal with the challenges that new world will present and determine how superannuation can best contribute to its repair and improvement.