The RBA warns Australia's superannuation safety net is changing

Australia's $4.8 trillion superannuation system has long been a stabilising influence during financial crises. But the Reserve Bank is warning that this may become harder as millions of Australians retire and begin withdrawing their savings.

Speaking at the AFR Super and Wealth Summit on 26 October, RBA Assistant Governor Brad Jones identified a fundamental change in the structure of Australia's retirement savings system.

Why has superannuation helped during crises?

Australia's compulsory superannuation arrangements generate approximately $1–2 billion in net inflows every week.

This steady flow of contributions has historically allowed superannuation funds to purchase financial assets when other investors were selling.

During the 2008 financial crisis and the COVID-19 market disruption, funds were net buyers of Australian shares, helping stabilise markets.

Restrictions on early withdrawals also reduce the likelihood that funds will be forced to sell investments during downturns.

What is changing?

As Australia's population ages, an increasing proportion of superannuation members will move from accumulating savings to drawing retirement income.

More funds will consequently experience net cash outflows.

At the same time, superannuation funds are becoming larger owners of Australian financial assets and increasingly investing overseas.

That creates additional liquidity requirements, particularly when movements in the Australian dollar generate cash demands associated with foreign-exchange hedging.

What could go wrong?

Jones highlighted the COVID experience.

Most funds experiencing net withdrawals saw outflows equivalent to approximately 1–2% of assets, but some experienced 5–6%.

For a hypothetical $10 billion fund, that represents withdrawals of $100–200 million, potentially rising to $500–600 million.

Funds holding substantial unlisted assets, such as infrastructure and private credit, may find it more difficult to generate cash quickly without selling other investments.

A simultaneous cyberattack or disruption at a major administrator could compound the problem.

Is this an immediate threat?

Not according to the RBA.

Recent stress testing suggests superannuation funds are generally well positioned to withstand severe financial shocks.

The longer-term challenge is different: as retirement withdrawals grow, the steady inflows that previously helped stabilise markets may become less dependable.

Australia's superannuation system has been a buyer during financial crises. The question is whether it can maintain that role as more Australians become retirees rather than contributors.