Research released by the Association of Superannuation Funds of Australia (ASFA) today shows that compulsory superannuation has substantially diversified the assets Australians hold, reducing risk and increasing returns for people.
The research also shows that superannuation is reducing the cost of the Age Pension on the Budget, has increased savings and reduced the cost of investment, which have all contributed to economic stability and growth.
"While considerable research on the impact of superannuation on the economy has been undertaken in the past, much of it has focused on particular aspects of superannuation or the economy. This report brings that research together into one holistic document within a rigorous economic theory framework," said ASFA CEO, Ms Pauline Vamos.
"The primary purpose of superannuation is to improve the retirement incomes of Australians, however, compulsory superannuation has had a number of positive effects for individuals and the economy that must be taken into account in the tax white paper process.
"Over the past two decades, compulsory and voluntary superannuation savings have transformed the assets Australians hold. In 1990, Australians' savings consisted almost entirely of real estate and cash. Today, through their superannuation, Australians are investing in a diversified range of assets, including domestic and overseas equities, fixed interest, infrastructure and commercial property."
The report also shows superannuation tax policy has had a positive impact on investment in Australia. The growing superannuation pool has contributed to Australia having a high savings rate, relative to the Organisation for Economic Co-operation and Development (OECD) average, which is reducing Australia's reliance on foreign capital, reducing both the risk and the cost of investment in Australia.
Increased domestic savings reduces reliance on foreign capital, with the latter recognised by the ratings agencies as a key risk to the security of the Australian financial system.
"While companies in other countries had difficulty finding funding during the global financial crisis (GFC), superannuation funds provided an important source of capital for Australian companies refinancing during the GFC," concluded Ms Vamos.
Figure 1. Household asset composition, by wealth band, 1990 and 2010
Click here to view the paper, which is called A framework for assessing changes to superannuation tax policy.
ASFA is the peak policy, research and advocacy body for Australia's superannuation industry. It is a not-for-profit, sector-neutral, and non-party political national organisation, which aims to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice.