Greater participation by superannuation funds in financing debt would help the domestic financial system become less reliant on banks, according to National Australia Bank business banking group executive Joseph Healy.
"The development of a fixed-income market, of a debt financial system, that is less reliant on the banking balance sheet will be a significant development for our domestic climate," Healy said at the Economist Bellwether Conference in Sydney last week.
"The discussions that take place and the momentum that you can feel in the financial system to develop that fixed-income market and draw more superannuation funds in that part of the economy, I think is a welcome and critical development."
A narrower banking system would assist in the development of a broader financial system in Australia, he said.
That would be particularly important in the financing of infrastructure projects, he said.
"The question of infrastructure is a big one; the pipeline of infrastructure investment in Australia is in order of $600 billion to $800 billion," he said.
"Some of that infrastructure is absolutely critical to our long-term economic growth, but only so much is going to be financed by solutions such as a fixed-income market.
"The banking system alone is not going to make a material contribution to that; clearly there is a role, but it is not going to be the saviour of financing debt."
Macquarie Bank senior economist Brian Redican said a greater contribution by super funds to debt financing also made sense from an investment perspective as investment returns from equities were likely to remain low for some time.
"We are not going to get the strong capital returns that we've had previously," Redican said.
"People will be looking for yield returns and ... debt securities is an obvious place for super funds to go."
