Super should contain corporate bonds

Press/Media: Research

Description

and Low, an associate professor at Queensland's Bond University, and having worked on Wall Street with Merrill Lynch and BlackRock, says a vast majority of Australian superannuation accounts are all in equities.

He believes this is extremely risky because a large bulk of the ASX is made up of mining firms and the big four banks.

So if the economy impacts mining or banking, pension portfolios suffer.

"We need to encourage people to rebalance their portfolios from equities onto bonds," Dr Low said.

There is also a taxation issue when considering investing in corporate bonds.

Equities have the incentive of franking credits, while property has negative gearing.

"You have nothing for corporate bonds," Dr Low said, suggesting a capital gains tax concession.

In February, Treasurer Josh Frydenberg called on the Standing Committee on Tax and Revenue to investigate the potential development of Australia's corporate bond market.

In the terms of reference, it says that over the past decade Australian governments have made amendments to the regulatory regime for corporate debt to facilitate a deeper and more active retail corporate bond market.

"However the Australian retail bond market remains small in comparison to similar countries and, in terms of amount of debt raised, Australian-based businesses make greater use of offshore bond markets," it says.

Period6 Nov 2020

Media contributions

1

Media contributions

  • TitleSuper should contain corporate bonds
    Degree of recognitionInternational
    Media name/outlet7News
    Media typeWeb
    CountryAustralia
    Date6/11/20
    DescriptionRand Low, an associate professor at Queensland's Bond University, and having worked on Wall Street with Merrill Lynch and BlackRock, says a vast majority of Australian superannuation accounts are all in equities.

    He believes this is extremely risky because a large bulk of the ASX is made up of mining firms and the big four banks.

    So if the economy impacts mining or banking, pension portfolios suffer.

    "We need to encourage people to rebalance their portfolios from equities onto bonds," Dr Low said.

    There is also a taxation issue when considering investing in corporate bonds.

    Equities have the incentive of franking credits, while property has negative gearing.

    "You have nothing for corporate bonds," Dr Low said, suggesting a capital gains tax concession.

    In February, Treasurer Josh Frydenberg called on the Standing Committee on Tax and Revenue to investigate the potential development of Australia's corporate bond market.

    In the terms of reference, it says that over the past decade Australian governments have made amendments to the regulatory regime for corporate debt to facilitate a deeper and more active retail corporate bond market.

    "However the Australian retail bond market remains small in comparison to similar countries and, in terms of amount of debt raised, Australian-based businesses make greater use of offshore bond markets," it says.
    Producer/AuthorColin Brinsden
    PersonsRand Low