Superannuation funds now make up a "substantial share" of Australia's capital outflows, buoyed by a jump in offshore asset allocation, said Reserve Bank of Australia Assistant Governor Christopher Kent on Tuesday.
Speaking at an event in Sydney, Kent said super funds' offshore asset allocation has grown to about half in 2024 from nearly one-third in 2013, making the long-term investment instrument the "natural counterparties" to domestic banks. Traditional banks typically hedge their foreign-exchange exposures from offshore debt issuance.
Kent also acknowledged elevated volatility in foreign exchange markets in early April as investors digested the impact of US tariffs. The Australian dollar fell 4.5% against the greenback to mark its largest daily decline outside the global financial crisis.
"[M]easures of volatility from FX options increased to levels observed during the pandemic and liquidity deteriorated noticeably," Kent added.
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