Industry superannuation funds the kingmakers at jobs summit

In the growing hysteria about unions hijacking the Prime Minister’s jobs and skills summit this week, one critical factor is overlooked.

If there’s an elephant in the room, it is industry super, backed by $1 trillion of influence.

The question everyone should be asking is: will this elephant turn Pink or blue when it comes to rapidly polarising debate around industry-wide or sector-wide bargaining?

Why is this important? Because industry super funds have a dilemma. Collectively they have over $1 trillion in funds, much of it invested in the Australian economy and Aussie businesses. And their 11.4 million members want high returns on their investments.

The union roots of these funds, which grew and grew after compulsory super was introduced, might suggest that industry funds would back the loud union calls for a return to sector-wide ­bargaining.

But as many have pointed out, industry-wide bargaining experiment damaged the economy and businesses in the 1970s and 1980s. It allowed unions to reach agreement on higher pay and conditions with one employer group and then force the same terms across a sector. It led to a wage-price spiral.

After a stellar run before and even during the pandemic, returns for the major industry funds have been consistently strong.

However, as the cycle turns and the investment climate becomes far more uncertain, maintaining those returns for expectant members – ordinary Australians – has become harder.

Much of default super has been under water. And of July 31, returns for the top 10 super funds in the country over 12 months range from 2.32 per cent to -0.15 per cent, according to SuperRatings.

This makes the productivity question highly relevant. Yet where is this productivity to come from, if not from reform?

Through his many businesses Seven Group CEO Ryan Stokes has eyes on mining and equipment, energy, media and the construction sector. Earlier this year he called the end of the era of cost-led profit growth. Business can no longer cut its way to higher profit.

The challenge is how to make a return on capital above a benchmark level to allow reinvestment.

Increased productivity is going to have to come from areas like increasing flexibility in the workforce.

Yet industry-wide bargaining threatens management desires for greater flexibility.

On Friday Rob Scott, CEO of the Wesfarmers, which employs over 200,000 Australians across retail, energy and mining, told The Australian that industry-wide bargaining would be a material step backwards that was likely to lead to much worse outcomes for workers.

“If I look across our businesses, a business like Bunnings is fundamentally different to a business like Kmart, which is fundamentally different to a business like Catch.

“They are all subject to the same award,” Rob Scott said.

Just how industry fund managers are thinking about empowering the unions when supply chain security is under huge strain is a very interesting question.

Industry super fund presence and influence on listed company registers is significant, ranging from ESG issues to in some cases taking the company off the ASX listed board altogether.

Either way, as owners of these businesses, industry super knows that their assets must remain competitive if they are to continue to see strong returns.

Take Sydney Airport, for example: it’s owned 33 per cent by IFM, 15 per cent by UniSuper and 7.5 per cent each by AussieSuper and QSuper.

Even if ACTU Secretary Sally McManus gets part of her ambitious proposals through, like an agreement for employer bargaining across small business – revealed on Monday in The Australian – a major decision on sector-wide bargaining is highly unlikely this week.

Indeed, there would be an outcry from big business.

It is what occurs after this summit, in the meetings between the industry super leaders and the unions and the government, that may well shape the industrial landscape.

Unions see the new Albanese government, the jobs summit, the skills crisis, a supply chain crisis and national security push for on-shoring as the stars aligning to re-empower the movement which has been run down in recent ­decades.

There is a demand for default membership of a union under any new migrant arrangement.

The big banks are not at the summit. Their spokesman Anna Bligh, CEO of peak bank lobby group the ABA, has done a good job of bringing Treasurer Jim Chalmers and the big four bank chiefs together in the lead up to the election. But even as chair of the ABA, Westpac CEO Peter King was not invited.

This is telling. This is not just the predictable fault lines of Labor lining up with industry super and the Coalition with the big banks: it is a follow-the-money story.

The money, the highly influential weight of Australian savings, has shifted to industry funds as the new kingmakers.

And money talks, particularly when it sits on the share register of Australia’s top businesses. Industry super has a big decision to make.

When contacted, neither Australia’s largest industry super fund, Australian Super, nor IFM Australia, which is the high-performing global fund manager owned jointly by a number of industry super funds, would comment on their position.