Register  
Super acting like a SWF: Treasury
Monday, 4 July 2011 12:45pm

Superannuation in Australia is acting like a sovereign wealth fund and is on track to boost savings each year by three per cent of GDP.

In a major speech last week on Compulsory Superannuation and National Saving, Treasury researchers David Gruen and Leigh Soding said that despite perceptions of low domestic savings rates, Australia's 24% gross savings rate matches Germany's and compared to other OECD countries is second only to Japan's 26%.

The big question however is to what extent does Australia's compulsory super system lift savings given that this is one of superannuation's fundamental objectives.

Gruen and Soding said about 30% of what is contributed into superannuation would have been saved anyway particularly by higher income earners who divert monies into it because of the tax concessions.

For low income earners they said the substitution is likely to be very low if it existed at all.

This lower than anticipated substitution effect helps explain why superannuation is considered to have a very positive influence on total national savings. In the last decade it added an average extra one per cent of GDP to savings each year and by 2030 is expected to boost national savings by as much as three per cent each year.

By boosting savings and making this capital available for later post-retirement consumption, Gruen and Soding said superannuation is acting as de facto sovereign wealth fund.

"Australia has a relatively high gross national saving rate, particularly when compared to other Anglophone countries with similarly deregulated financial systems. There are two noteworthy contributors to this relatively high national saving rate: a long history of prudent fiscal policy, and the compulsory superannuation system.

"A large stock of financial assets has been built up gradually in the Australian super system, a consequence of both compulsory and voluntary contributions into the system," they said.

Blogs
Follow the industry experts.
Christopher Page
Christopher Page
Managing Director

Medcraft's appalling speech
I am surprised. More than that, I am astonished, shocked. Last week I was left speechless by the address that the Australian Securities ...read more
 
Benjamin Ong
Benjamin Ong
Chief Economist

Reflation, rotation and the taper
'Tis being my final type (drivel, to some gentle readers) for the year, we'll take a look back at the 2013 that was to seek the lessons ... read more
 
Alex Dunnin
Alex Dunnin
Director of Research & Editorial Services

Women-led companies better for investors
The Australian government end last year released its first Gender Equality Scorecard and while the results are discouraging, a separate ... read more
News Search   
VideoBrought to you by
The global and Australian economic outlook
The anchor man of the panel, Saul provides great insights on the domestic economy. And bravely makes the forecast that the Reserve Bank will not cut interest rates this year and that the next move is up ... Watch video
Market Thinking - A different way of looking at economies?
First, a confession. Mark may have started his career as an economist but he joins this year's panel not as a chief economist but as the head AXA Framlington Asia. This is to the benefit of the audience ... Watch video
The major economies in 2015
Is the European economy dead in the water? Is faith on Abenomics waning? Why should investors be more optimistic about the US economy this year? Chris Probyn, the Boston-based chief economist of State ... Watch video
Great unwindings
Bob believes plunging oil prices may extend the stockmarket rally by a year or two and discusses why investors could expect a volatile few months. Overall, he believes we are entering an era of low returns ... Watch video
The two-speed economy in reverse
James provides a local perspective and explains to the audience why the mining investment boom is an aberration and it is now a 'return to the old normal'. To view James Bond's slides please click ... Watch video
Get it
Daily
FREE to your inbox, get the Financial Standard Daily Email.
Get the Free
iPad app
Download the Financial Standard iPad app for FREE
Industry
Events
MAR
05
MAR
10
Adviser Big Day Out Investment Manager Roadshow-Perth
11
Adviser Big Day Out Investment Manager Roadshow-Adelaide
12
Adviser Big Day Out Investment Manager Roadshow-Melbourne
18
Adviser Big Day Out Investment Manager Roadshow-Brisbane
19
Adviser Big Day Out Investment Manager Roadshow-Sydney
News
Bites

$245 (inc GST) for 1 year
 
 
Copyright © 1992-2015 Rainmaker Group
All material on this site is subject to copyright. All rights reserved. No part of this material may be reproduced, translated, transmitted, framed or stored in a retrieval system for public or private use without the written permission of the publisher.
Link to something llVjY5DH