Anthony Pratt calls on super funds to lend more

Entrepreneur Anthony Pratt says super funds should help to build the export capability of the nation’s manufacturing sector.

Visy chairman Anthony Pratt Picture: Aaron Francis

The nation’s richest man, Anthony Pratt, says super funds should be more involved in helping build the export capability of the country’s manufacturing sector and has warned against a return to protectionist policies and “Fortress Australia” in response to the coronavirus pandemic.

In a wide-ranging interview with The Australian, the paper, packaging and recycling magnate backed Scott Morrison’s calls for the $700m industry super funds movement to become more involved in responding to the economic challenges created by the virus, saying recent sharemarket volatility highlighted the opportunity for super funds to generate more stable returns by lending to Australian companies rather than just investing in equities.

He said a key focus should be the food manufacturing sector, which makes up 30 per cent of all manufacturing employment in Australia.

“Like the Prime Minister, I ­believe the super funds can play a more active role to deal with the issues we are facing to support Australian manufacturing,” Mr Pratt said.

“I am not saying the super funds are doing anything wrong … (But) over the long period there is a role for super funds to lend to private companies more.

“Investing more in Australia for Australian investment and Australian jobs.”

Mr Pratt claimed that on a risk-adjusted basis since 2014, if superannuation funds had loaned a proportion of their funds to Australian companies, “they would have got roughly the same returns as equities”.

“And we would have a lot to show for it in terms of new company investment,” he said.

Former prime minister Paul Keating had also called on super funds and banks to work together to lend to small and medium-sized enterprises to create a sizeable corporate bond market and provide an alternative investment destination for retirees.

Australia’s largest superannuation fund, AustralianSuper, and the industry fund-backed IFM ­Investors have already been involved in corporate lending to Mr Pratt’s Australasian packaging company Visy.

Mr Pratt on Monday declined to comment on Mr Morrison’s calls for industry funds to consider supporting collapsed domestic carrier Virgin Australia, noting that superannuation funds needed to be left to do their own assessments of the viability of prospective investments.

In response to Mr Morrison’s rallying call, AustralianSuper stressed on Friday that it was already a major investor in the Australian economy, with more than $40bn in companies and significant infrastructure assets such as airports, ports and the NSW electricity ­network.

Greg Combet, the chairman of IFM Investors and lobby arm Industry Super Australia, also said it was “important to understand that superannuation fund trustees have a duty to invest wisely and consider the appropriate returns for the risks involved”.

Mr Combet said the trustees of the industry super funds had a legal obligation to invest in the long-term interests of members.

Mr Pratt’s comments came after former Fortescue Metals chief executive Nev Power, who chairs Mr Morrison’s new COVID-19 Co-ordination Commission, said the virus pandemic provided an opportunity for the rebirth of a commercially viable, globally competitive domestic manufacturing sector. Mr Power said the low dollar, a strong local labour force flowing from the number of people out of short-term work, and disrupted supply chains provided the environment to create a local manufacturing industry that could grow to be “a very significant portion of our GDP” compared to the current level of only 6 per cent.

Mr Pratt said the food sector could underpin the resurgence of a local manufacturing sector ­focused on exports and using Australia’s extensive range of free trade deals.

“The one thing that comes to mind from this pandemic is our recommitment as a country to more manufacturing. We need to be building on our free trade agreements in order to further manufacture in Australia,” Mr Pratt said.

“I don’t mean subsidising uncompetitive or unstrategic industries. We should not succumb to knee-jerk reactions and retreat back to the old world of regressive tariffs and Fortress Australia. We should double down on what we do the best.”

Since 2013, The Australian and Visy have worked together to stage the annual Global Food Forum event, a dialogue that Mr Pratt said had helped spawn the construction of 600 new food factories in Australia over the past seven years.

“In the past people said Australia’s population was too small to support Australian manufacturing, but what the trade agreements have given us is a huge population up the hill,” he said, noting the power of Australia’s safe, clean brand of food.

“That safe, clean brand has done nothing but rise because of the government’s great response to the coronavirus crisis.

“To enable that future growth, we also need to double down on building new water infrastructure to make our Australian farmscapes bloom.

“There is a great need to continue the constancy of focus on water.”