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Investing in Australia’s Future
Hi everyone and welcome back to Voice of Super, ASPR's podcast for the superannuation community and today we're exploring one of my favourite topics and one of the most fundamental questions in economic policy. So strap in. We're going to explore are we measuring what really matters? Because for decades countries have relied primarily on GDP to gauge economic success, but GDP only counts what's bought and sold in the market economy. So in 2023, we saw the Commonwealth Government launch a comprehensive well-being framework designed to complement GDP with 50 indicators across five themes, and we were thinking of it like a national dashboard that tracks everything from mental health and housing affordability to biodiversity and social trust.
Mary Delahunty:This week Treasury and the ABS released an update to Australia's Measuring What Matters dashboard updating 44 of the 50 well-being indicators. I think what's still particularly striking is what's missing. So how do we use this to make meaningful measurement, particularly of women's unpaid contributions and their connection to retirement security? And so how does SUPER fit into all this and how can we use the measuring what matters framework and the work of economists in this space to better retirement outcomes and to better capture unpaid work, I think are the two sort of things to cover. We've only got about twenty minutes so I think we should solve it by the end.
Mary Delahunty:Joining me today to discuss this is Doctor Jenny Gordon from the Lowy Institute and from the Australian National University. And Jenny brings a unique perspective to this discussion because she established the Office of the Chief Economist at DFAT and led major policy inquiries of the Productivity Commission into sectors where women's unpaid work is most pronounced so aged care, child care and the not for profit sector. So welcome Jenny, it's actually such a thrill to have you here. We've just had this update to measuring what matters but let's go back a few years when the policy was being explored. What was the conversations at the time?
Mary Delahunty:How did this come about?
Dr Jenny Gordon:So there's been a long term interest in what GDP doesn't measure and then how much that actually matters for people's well-being. So for a long time we thought it was fine we didn't need to worry too much we could sort of say that if the economy was growing then all the things related to it would be getting better as well. So you could kind of say well GDP was okay' and then the environmental people came in and said well actually you're using up the environment and GDP doesn't measure the use up of the environment so that's one problem. And then, long time, we've said well hang on a sec what about all this household work?' And we've had a really interesting phenomena because a lot of care work and even things like household production you know your veggie garden and things like that were not counted in the national accounts and yet they're real production. And so GDP can go up simply because those move into the market economy and so it looks like GDP has gone up but in fact total production hasn't really gone up.
Dr Jenny Gordon:So it's only if moving things into the market economy make it more efficient and more productive that you're actually getting a net benefit out of this. And I think there's some really interesting conversations to be had about what actually makes people feel fulfilled in their lives and that includes after retirement as well just as important. Paid work isn't everything. So how do we measure that? Because unfortunately government policy needs to measure things to be able to say we care about it' and we need to sort of say it getting better or is it getting worse?' and that's what this new 'measuring what matters' framework is trying to at least say 'let's take the first steps'.
Dr Jenny Gordon:What can we look at to say is there a general sense of whether things are getting better? And we're realising that a lot of these things aren't necessarily correlated highly with GDP anymore.
Mary Delahunty:And so before we get into the how can this possibly relate to super, can you tell us a little bit about what you saw from this week's release and those updated indicators?
Dr Jenny Gordon:The indicators are interesting because a lot of them are still actually a few years ago so they sort of finish in twenty twenty three-twenty four and there's only a few mostly in the economic stuff because we measure that one more regularly that are actually 2020, you know, 2024 or 2025 measures. What we saw in the ones that have got trend data is Covid really knocked people around. It really did detract from people's feelings of well-being across a range of dimensions. We saw post Covid an uptick things getting a little better, but what we've seen since is a little bit of a deterioration. Then some of the worrying ones are things around particularly around the care economy so NDIS and people you know care for older people with needs and are those care needs being met.
Dr Jenny Gordon:We're finding that those indicators, despite big investment increases in investment in NDIS and in aged care, are not getting better. So that's a really interesting question around what are Australians' expectations and are the government policies meeting those expectations?' And so that's something that we really have to have a really good conversation about what our expectations are, how much we
Mary Delahunty:think government should be paying for those things and how much people should be funding them themselves. So that's a really big debate that Australia needs to have and we're not having it. And so measures like that help tell us say hey why is this happening? How can we think about this? How can we do better?
Mary Delahunty:Gee that is a crucial data point isn't it? And I wonder at the moment I feel like we're using measuring what matters in a well-being framework like a report card as opposed to a decision making tool and is at some point have you seen in other jurisdictions that there's been a flipping point or do you have to be really intentional about that?
Dr Jenny Gordon:Well I think you have to actually be really intentional. What I liked about this framework is it kind of shows that you're not even going to capture everything. The one thing it doesn't capture obviously is what's happening to people's unpaid hour works. The trend we know is that women are working more outside the home, so women's participation rates, labor force deterioration rates are converging to those of men and so they're not much behind anymore. A lot more of them work part time than men work part time, but even that's changing because more men are working part time and more women are working full time.
Dr Jenny Gordon:And so they're trending to be much the same, but when you look at the amount of time spent on household work, women still do something like 67% I think somewhere around there of household work. And so that's the missing indicator that is an important indicator.
Mary Delahunty:I think that's an interesting point to explore. I really think that from a superannuation sector point of view we can think in three different ways about this particular exploration of well-being measures and measuring what matters. One of them is, as we were just touching on earlier, that retirement outcomes will be impacted simply because of the nature of our system by how much time you can spend in the paid labour force. And if you're of the gender who is doing more of the unpaid work, then it's going to have a relationship to your retirement outcome. So we can think about that way and we can use that measure in that way, I think, or to inform us I suppose and to sort of insist on compensatory measures or changes societally because we can see what's happening there.
Mary Delahunty:I think the other part to use to sort of inform conversations is about how retirement is, looks and feels and what's really happening, which is a little bit about the life you were just describing. How do you how do you actually make a retirement and life after work good for everyone? And this goes beyond just having financial advice. It goes to also being able to know makes people happy and connected and live well. And I think it helps in that space.
Mary Delahunty:And I wonder though, can we explore the third space for a second, which is does this matter to investors? And how does it matter to economic development? What is it telling us about prosperity and national growth or international growth even? What does it matter for an investor?
Dr Jenny Gordon:So that last one is a really good space actually and it's an interesting space because we've had Milton Friedman shareholder value focus for a long time and a lot of that has got quite short term. Managers of firms care about the next quarter or the next six months and the share price. Doing things like cutting labour is the easiest way to boost your share price. You've just seen another major company sack another 9,000 people and the like. And so that's the thing that short term does shareholder value or share price and so we look at that.
Dr Jenny Gordon:But what matters in the long run is actually the innovative nature of the economy, the overall rise in productivity. Those are the things that are going to drive the long term outcomes for companies and for investment. So we need to be thinking about it on a broader scale. So if you have a system that really rewards a smaller segment of the labor force and that's what we're seeing we're seeing wages for the people at the top who have skills that are in short supply or who are lucky enough to be in the right place at the right time We've seen their wages go up through the roof and everybody else's wages be much more particularly in The US stagnate. This is a little less in Australia because we've still got remnants of an award system where, you know, the top going up tends to drag up everybody else and we have a high minimum wage.
Dr Jenny Gordon:But you lead to discontent and then if you get bad politics you get policies that are really amicable to growth. You've got businesses really reluctant to invest right now because they're not sure what's going to happen with Trump's tariff raging And so we're seeing a chilling of business investment. One of the things in the national accounts, which was a couple of weeks ago, was that business investment growth has not shifted and it's low non mining business investment in Australia. And that's really worrying because we need to be seeing that growth and even though super funds can invest globally they're always going to have a major Australian exposure and what we really want to see is vibrant global markets and growth. So there is this feedback loop that Milton Friedman and the sort of neoliberal economists ignored, which is that feedback loop through to if you get rising inequality, you get rising discontent with governments and if you get government corruption and you see a smaller share of the population doing better and better and everybody else being left behind, you end up with the terrible problem of bad politics and populist policies that actually hurt everybody.
Dr Jenny Gordon:And so as investors, particularly when you're in the retirement phase, want stability. You don't want volatility because you may need to be cashing out at the time that the market is at a low point. So some volatility is always going to be there, but you don't want a highly volatile market where things are great or things are terrible. You want a market that's much more stable, but you also want a market that's looking about 'actually my portfolio depends on global growth and the value of my portfolio is incredibly vulnerable because of the structure of a lot of the way we buy index funds and the like'. We're very exposed to what stock markets do.
Dr Jenny Gordon:Private equity is the harder one, right? There's more and more in private equity and less and less in the stock market now, so firms that should be in the stock market are not in the stock market, and they're held by private equity. And so that's less opaque and we don't really know what's going on. But overall we've got to have this broader economic growth across the world for actually our portfolios to do well and to be more stable and to be more resilient to shocks. Those are the things that really ultimately matter for the superannuation industry.
Dr Jenny Gordon:The ones in the accumulation phase, they're saying what's that overall global growth going to look like? Is there going to be a structure where you don't have a government in The United States say oh sorry holders of US Treasuries, we're converting you to something called 'century bonds' are going to pay you zero coupon' and that's a worry. We actually need a system that has political stability, a system that means that nobody feels so left behind that they want to disrupt the whole system and a system that actually encourages innovation and productivity growth because those are the things that are going to grow those portfolio balances over time. That's what we want.
Mary Delahunty:Oh, I agree. That sounds like a lovely world to be a part of. Let's look back over then the way in which you've sort of, I guess throughout various stages of your career, prosecuted the argument that these well-being measures or measurements of well-being need to be explored and where you've used them in the past. And maybe we can end on what you kind of hope for. Where do you think that this is taking us and what do you want the national conversation to be?
Dr Jenny Gordon:So we did some early work at the Productivity Commission in 2008 that never quite saw the light of day, which I've always thought was unfortunate, expanded our measures of outcomes and introduced a more formal well-being framework. While that work didn't get published in the end, it did inform a bunch of things. If you look at our aged care report that we did back then, we actually had a well-being framework in there because we said what is it that older people value?' And we asked them. We went out and asked them what do they value?' They valued being able to have choice, valued having control over their lives and particularly in aged care. Those sorts of things were important.
Dr Jenny Gordon:You're trying to design a system that actually has this formal well-being framework in place. Child care is an interesting one. Know there's a whole bunch of research that early childhood development from actually prenatal all the way through to the age of two That is incredibly for the health and long term productivity of that small person as they grow over time. So it's not just a matter of bleeding heart, we should be looking after the elderly and we should be looking after the kids because it's the right thing to do though it is the right thing to do! It's actually how do we improve productivity of lives?' And so when you'd asked about other countries, New Zealand had the concept of a well-being budget that was introduced with Jacinda Ardern The challenge was, of course, it had some indicators around childhood poverty and when they went the wrong way, instead of childhood poverty coming down which unfortunately it went up for a variety of reasons, not all to do with government policy you get the kind of well, should we have this well-being budget?' so it's kind of sort of got abandoned in And New so you have this challenge about we need to keep going'.
Dr Jenny Gordon:It's the same way of closing the gap measurement. Sometimes those gaps widen sometimes those gaps widen not because government policy isn't actually leaning against the trend, it's because the trend is really bad. So, you've got built in long term declines and government policy slows down that decline, but you still get a decline. These are some of the things that we you know, makes these harder communicating measurement can be quite hard as well. But there's policy people who understand the intricacies of these and understand whether your policy worked or not.
Dr Jenny Gordon:That's the important component on the policy making side. So we've kind of been incorporating this stuff for a while. It's in there, but the public facing stuff is kind of hard to explain sometimes.
Mary Delahunty:Yeah, I think my hope is that every sort of sector across Australia picks it up and understands it for how it might apply to their decision making over time, just as well as we understand economic indicators. We've got to understand these human ones as well. And it seems if we're trying to, as superannuation sector, better cater for a more holistic role in retirement, that we need to understand this as well. We need to know what it means as an investor and I think we need to use these measures probably more accurately to describe the relationship between unpaid labour and retirement outcomes, particularly for women. So I think there's a lot for super in here.
Mary Delahunty:But as you say, have to be sort of intentional about using it. But I think we should, you know, we'll explore it more. Maybe we'll come back and talk to you again, Jenny, about some of those particular areas but more in-depth because clearly it's a subject matter that you and I both quite like so maybe maybe there's more to be said about it.
Dr Jenny Gordon:Yeah. Yeah. No. I'd be very happy to to come back and and chat more.
Mary Delahunty:Well, let's let's make sure we make that happen and please everyone who's listening, thanks so much for tuning in again. This has been Voice of Super, the superannuation the podcast should I say for the superannuation sector by the superannuation sector talking about measuring what matters today. Thanks for tuning in. Remember to subscribe if you want to not miss any future episodes.