The Reserve Bank of Australia (RBA) has cautioned that the rapid growth of the nation’s superannuation sector is increasing liquidity vulnerabilities, with rising allocations to unlisted assets and foreign markets creating potential channels for financial instability.
In its October 2025 Financial Stability Review, the RBA said superannuation assets have reached $4.3 trillion, equivalent to 160 per cent of gross domestic product.
Around two-thirds of these assets are managed by APRA-regulated funds, which hold a significant share of domestic financial assets and are now considered systemically important.
While the sector has historically stabilised markets through long-term investing and countercyclical buying during downturns, the RBA warned that the composition of super funds’ portfolios is changing in ways that could amplify stress under severe scenarios.
“As the sector expands in size relative to domestic markets, it is expected to continue increasing its exposure to foreign assets and foreign exchange hedging,” the review said. “In turn, funds’ exposures to rollover risk and margin calls may also increase.”
Foreign investments bring greater reliance on hedging strategies to reduce currency risk, and while funds spread maturities to manage liquidity demands, unexpected shocks could still trigger substantial margin calls.
The RBA noted that if several risks materialised simultaneously, funds might be forced to sell assets or draw on liquidity in ways that exacerbate market volatility.
Unlisted investments add to the challenge as super funds have continued to increase allocations to infrastructure, property and other illiquid assets, which are difficult to sell quickly without steep discounts.
If large-scale withdrawals were to occur abruptly (whether from retirees in the decumulation phase or members switching strategies) the pressure on liquidity could intensify, according to the central bank.
“Investment in unlisted assets can create difficulties if system-wide early withdrawals and additional withdrawals from members in retirement were to occur abruptly and unexpectedly,” the RBA said. “If several risks materialised simultaneously, funds might need to secure liquidity in ways that could amplify financial market stress.”
Although most funds hold large buffers of liquid assets and have strategies to manage outflows, the RBA emphasised that the sector’s growing size and complexity increases the potential for stress transmission.
APRA has responded with a system-wide stress test this year to better assess how shocks could spread between super funds and banks during a major market disruption or operational incident.
The review also noted that while defined contribution structures mean losses fall on members rather than threatening fund solvency, a severe shock could still have wide economic implications.
As a result, the RBA stated that household wealth would decline, member confidence could be shaken, and sudden shifts in switching or withdrawal behaviour could create liquidity strains across the system.
The April 2025 cyber attacks on large superannuation funds further underlined the operational dimension of liquidity risk.
Several major funds were targeted by credential stuffing attempts, with a small number of members affected. Although most attacks failed, the timing coincided with tariff-related market volatility, highlighting how operational incidents can complicate financial pressures.
“The interaction of market volatility and more severe cyber incidents at superannuation funds could undermine confidence in a fund or the sector more broadly,” the review said. “This could prompt members to switch investment options or withdraw funds and disrupt members’ access to income.”
To mitigate these risks, APRA is engaging closely with industry on operational resilience and liquidity management, particularly around service provider vulnerabilities.
Its CPS 230 prudential standard, due to take effect in mid-2026, is expected to strengthen resilience and provide regulators with greater insight into potential vulnerabilities, the RBA stated.
The RBA concluded that while the super sector remains a stabilising force under most conditions, the growing exposure to foreign markets and unlisted assets means liquidity management will play an increasingly central role in safeguarding Australia’s financial stability.
