Australia’s superannuation system is treated as an unquestioned national success. It is not. It is a vast, compulsory, tax-privileged machine that recycles existing claims on assets, sends an enormous share of national savings offshore, and systematically starves entrepreneurs – the people who create jobs and products and increase wealth and living standards.
By June 2026, total superannuation assets had reached about $4.8 trillion. APRA-regulated funds alone held more than $3.4 trillion.
That is not a side account. It is one of the largest concentrated pools of capital in the country. Where it goes, and what it does when it gets there, matters far more than the comforting story that “super builds Australia.”
Half the pool leaves the country
Around half of institutional superannuation is now invested outside Australia. International shares alone have become the largest single allocation in many funds.
That money does not fund an Australian factory, warehouse, software team or mine. It does not lower the cost of capital for Australian companies, listed or unlisted. It does not create Australian jobs. What it does do is send Australian savings into foreign equity and bond markets.
And that’s not the least of it. Persistent capital outflow puts downward pressure on the Australian dollar. A weaker dollar makes imports more expensive. Higher import prices feed into the cost of almost everything households and businesses buy. When prices rise, the Reserve Bank’s typical response is a higher cash rate. Higher cash rates then raise borrowing costs for households and businesses. Families are forced out of their homes. Marginal businesses close. Survivors face a higher cost of capital. Projects that would have been viable are shelved. That is not an accounting curiosity. It is a real loss of economic activity and a real loss of jobs.
Most of the domestic money just changes hands
The remainder (about $1.5 trillion) invested in Australia is not mainly new capital. It is overwhelmingly used to buy existing assets from existing owners: ASX shares from other funds, pension schemes and managed funds; bonds already on issue; office towers and shopping centres from other landlords.
A trade between two super funds in say BHP, CSL or a CBD tower creates no new employee, no new supplier contract, and no new product. Liquidity is useful but pretending secondary-market turnover is the same as capital formation is not.
Companies can, in theory, use a higher share price to raise fresh equity more cheaply. In practice, follow-on raisings — rights issues, placements, share purchase plans, dividend reinvestment — are a thin slice of what actually happens on the exchange. Most trading is existing paper changing hands. It is not for funding growth or new ventures.
Large companies are not, as a class, job creators. They cut costs, squeeze suppliers, and buy proven businesses. The people who create employment — inside the firm and in the supply chain — are founders who build something customers value more than its price.
Look at the companies that now dominate global market value: Nvidia, Apple, Alphabet, Microsoft, Amazon, TSMC, SpaceX, Broadcom, Meta, Tesla. Almost all were built in living memory by a small number of founders. Direct employment at those firms already runs into the millions. The upstream and downstream ecosystems they created are larger still. Those founders, and the wealth they generated, then recycle capital into the next generation of startups and early-stage businesses.
Australia’s compulsory super system does the opposite. It concentrates savings in large, risk-constrained institutions that prefer liquid listed stocks, bonds and trophy property. Early-stage and growth companies that need patient, competitive capital are last in the queue. That presents a significant opportunity cost to the Australian economy and to living standards.
The tax concession is a bad use of other people’s money
Government does not merely compel the contribution. It subsidizes it. Concessional contributions and concessional tax inside the fund are a transfer from other taxpayers to people who are, in the main, already able to save.
Middle-income households with secure jobs do not need a tax break to put money aside for retirement. Most would do so anyway. Using scarce fiscal capacity to reward them for buying existing listed securities from other investors is especially hard to justify. That transaction does not create a job, does not produce a product people want to buy and does not increase living standards.
If the same money were left with, or directed toward, households under real pressure, it would be spent on food, housing repairs and holidays in Australia. That spending supports local businesses immediately.
If any incentive is to exist at all, it should attach to new capital — issues by listed and unlisted companies that are actually raising money to stay in business or grow.
The real cost is what never gets built
The opportunity cost of superannuation is enormous yet generally ignored. It is the point. It is the reason the superannuation industry needs major reform.
Compulsory super and its tax settings divert a large, continuous flow of national savings away from the entrepreneurs, the people who create job and business opportunities and increase a country’s living standards. These people are generally deprived of capital in Australia or pay an arm and leg for it. As a result, many business ventures never start, and some that would have exported never scale. Exporting firms strengthen the currency over time, reducing the price of goods, giving Australians more value for their money.
A country that wants higher living standards needs more founders, not a larger industry dedicated to allocating other people’s locked-up wages into the same global indices and the same office buildings.
In conclusion
Superannuation has become a multi-trillion-dollar industry defended as nation-building. Measured by new enterprises, new jobs and a stronger domestic capital base, it is closer to the opposite. The system is very good at managing existing wealth but dreadful for both the Australian economy and Australian living standards.
What to do?
Classic Liberals will abolish compulsory superannuation and remove the special tax incentives that attach superannuation. The remaining reason to use a superannuation structure would be creditor protection, not a government-engineered yield. The fiscal capacity now absorbed by concessions could be used where it actually changes daily life – to give a tax break to those on struggle street.
Classic Liberals’ economic policies are aimed at making Australia the most attractive place in the world to start and scale a company.