Canberra consensus: will Australia’s Reform Roundtable meet investor expectations?
Over the next three days, investors will expect the Albanese government to revamp its climate ambitions
The Australian capital of Canberra will be a busy town this week. The Albanese government is convening its Economic Reform Roundtable, a three-day gathering led by the Treasurer aimed at informing the government’s reform agenda. Amongst the stakeholders involved are Australian superannuation funds, who have high expectations of policy change – not only in the trajectory of Australia’s transition but also in the rules that govern its financers.
Heading into Canberra’s policy gala, investors will expect the following to be on the agenda.
Your Future Your Super
Back in 2020, concerns regarding superannuation fund performance and fees led the government to introduce a performance test. To its critics, which includes asset owners, the test seems ‘short-term and benchmark hugging’.
The way things stand, it risks disincentivising long-term climate solutions allocations.
“Right now, the Your Future, Your Super performance test is a quiet but powerful handbrake on climate-aligned investment”, says Cassandra Williams, head of enterprise programs and strategy at Climateworks, a research organisation.
Investors will hope that reforming the test is part of the Albanese 2.0 action plan.
“If the performance test doesn’t evolve, it won’t just lag behind, it will stand in the way of capital flowing to the productive, resilient, climate-aligned economy Australia is ready to build”, Williams notes.
Vision 2035
This year, the government is expected to update its NDC under the Paris Agreement. In updating its NDC, the Albanese government will set out a new 2035 emissions reduction target.
An updated vision of Australia’s climate trajectory will be an announcement investor will look out for.
“On current climate trajectories, super funds will struggle to fund Australian’s retirements, and the government will be looking at huge hits to productivity, hits to our credit rating, higher costs, and lower tax receipt”, says Rebecca Mikula-Wright, chief executive officer of the Investor Group on Climate Change (IGCC).
Mikula-Wright, who will participate in the Roundtable, says a strong climate target will be a powerful signal to investors. “Australia also has opportunities if we get this right; we’re already seeing Australian skills and resources building sustainable industry, clean energy, and the next generation of high value exports”, she adds.
Policy momentum
Beyond the 2035 target, investors will expect the government to maintain climate policy momentum on multiple fronts.
The IGCC will be advocating for net zero sector plans, fast tracking renewable infrastructure approvals, legislating the national adaptation plan and updating mandates of investment vehicles such as the National Reconstruction Fund.
Investors also expect long-term policy certainty for schemes such as the Safeguard Mechanism and the Capacity Investment Scheme.
Over the next three days, Australian asset owners and their representatives in Canberra will have a lot to say. Come Thursday evening, investors will hope that their concerns will feed into the Canberra consensus.
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