Tuesday was a historic day for philanthropy in the US. But bizarrely the announcement of the largest-ever private donation to America’s kids put the Australian superannuation system on the world stage.
Paul Keating, the father of our super system, can take a bow: Donald Trump is a fan.
The link between a US tech billionaire’s generosity and our retirement savings system seems tenuous, but Trump has plenty of form when it comes to thought bubbles and non sequiturs.
This was no exception as he stood next to Dell Technology founder Michael Dell and Dell’s wife, Susan, who were the philanthropic stars of the proceedings.
The couple pledged a showstopping donation of $US6.25 billion ($9.5 billion) to America’s children under the age of 11 who live in areas where the median income is less than $US150,000 a year.
The funds will be distributed through accounts set up by the US government (they’re colloquially referred to as Trump Accounts) – a previously announced policy that will give $US1000 to every child born between 2025 and 2028 in a move to address the country’s dwindling birthrates. Call it a financial Trump baby bump.
Paul Keating, the father of our superannuation system, can take a bow: Donald Trump is a fan.
It was a positive move by one of the big-tech billionaires. Such billionaires’ nose-bleed wealth and slavish support of Trump have tarnished their appeal.
Trump suggested he was thinking about following the lead of Australia’s gold standard superannuation system to promote a growing US population and manage their retirement.
Answering a question on how his administration would lift the US birthrate, he said it was “looking at programs. There’s a certain Australian plan that people are liking, and they’re talking about … not for children, necessarily, but it’s for people, working people.”
He later clarified that this was our superannuation system.
Trump has clearly picked up on the positive remarks of others such as BlackRock founder Larry Fink, somewhat like a godfather of investment firms and a financial influencer in the US with $US13 trillion in assets under management, who praised the Australian super model that has contributed to the population having more retirement savings per capita than people in any other country in the world.
In a letter to his shareholders, Fink commented that our 30-year-plus system, which is unique in the world, is delivering unprecedented levels of savings for Australians approaching retirement and has played a key role in the development of a much more sophisticated domestic capital market.
Trump could be impressed by the disproportionate size of Australia’s $4.3 billion superannuation pool and even more impressed at how much pressure it takes off the government’s need to finance retirement incomes. But the mechanics of implementing such a scheme in the US would be near impossible.
Enforcing contributions from workers and employers runs counter to the less prescriptive industrial relations laws in the US. Contribution to pensions (called 401k) during the lifetimes of US workers is currently voluntary, rather than compulsory as it is here in Australia.
Clearly Trump wasn’t across the detail of Australia’s superannuation model, but he may have gained a positive impression from US Treasury Secretary Scott Bessent, who attended a special superannuation summit in February at the Australian embassy in Washington, where he said he was impressed by the reliable growth of Australia’s pension funds.
And Trump wanting to mimic a model viewed by many as the gold standard is unsurprising.
Standing next to Michael and Susan Dell as they announced their generous contribution to the children of America is equally unsurprising. The halo effect of that would appeal to the president.
Money in Trump Accounts must be invested in an index fund, which tracks the overall stock market, his administration’s policy states.
“Trump Accounts will be the first – I guess you could say – first real trust funds for every American child, allowing family members, employers, corporations, generous donors to contribute money that will be invested and grow,” Trump said in a White House press conference on Tuesday, after the announcement of the Dells’ pledge.
He continued: “An investment’s gonna be made, that investment’s gonna continue to grow – we hope, right, we hope. But it will.”
Maybe that’s what his scheme has in common with Australia’s superannuation – they are both tax-effective investments that are inaccessible until a prescribed time. Australians can get their super on retirement, while Trump Accounts can be accessed when children turn 18.
Whether either has the effect of promoting population growth is anyone’s guess.
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