The budget changes to superannuation may have an unintended consequence for Australian shares.
Analysts at Credit Suisse – known for their expertise in understanding self-managed super funds – say the budget measures will mean fewer dollars flowing to Australian equities.
Adjustments to superannuation concessions announced in the budget will bring savings of $2.9 billion over the next four years. Among the changes are caps for both pre-tax and after-tax contributions and a maximum of $1.6 million which can be used for the pension phase.
“If there was a single theme emanating from the budget it was bad for selfies,” write Hasan Tevfik, Damien Boey and Peter Liu in a note to clients today, using the term they use to refer to self-managed super funds.
“We have tracked the rise of selfie closely over the last three years and it seems the budget is trying to displace, what we consider, the back-bone of the Aussie equity market.”
Self-managed super funds own, according to Credit Suisse estimates, 17% of the Aussie equity market and they are currently buying $10 billion to $15 billion in shares a year.
“The budget will mean less money into the Australian pension pool, less money managed by selfies and less money flowing into Aussie equities,” the analysts say.
“While the budget provides small positives for Aussie equity investors we think the changes to superannuation leave our market worse off. So while we remain positive in the short-term, the budget means we have to think hard about our position in the long-term.”
This may mean more funds flowing into property.
“We expect other assets, namely property, should benefit,” the analysts say.
Within the equity market, the budget should be positive for building materials, retailers (personal income tax cuts, small business write-offs) and media (reduction in license fees).
Sectors which could suffer from budget changes include fund managers (superannuation changes), health care (changes to Medicare) and banks (ASIC costs, less demand from selfies).