The Association of Superannuation Funds of Australia (ASFA) has released research showing that Australia’s superannuation system has diversified the assets of most Australians, thereby reducing the risks associated with single asset holdings (such as the family home or cash savings).
Superannuation is also reducing the cost of the age pension, giving the Budget better form by increasing personal savings and reducing the cost of investment. This in turn results in greater economic stability and growth.
Previous research has focused on specific impact areas of superannuation within the economy, however the new report creates a more comprehensive and cohesive view that is set within an economic theory framework.
ASFA’s chief executive Pauline Vamos said, ‘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 new report demonstrates how tax policy within the superannuation framework has had a very real and positive impact on investments via this medium in Australia, leaving Australians – relative to the Organisation for Economic Co-operation and Development (OECD) average – with a high savings rate. This has occurred generally without the knowledge of Australians, who are traditionally poor savers and not that interested in their superannuation investments. The superannuation savings reduces Australians’ dependence on overseas capital, improving risk profiles, along with reducing costs of investment, since the domestic market is thriving and investing locally is cheaper than investing internationally. Reliance on foreign capital has been identified as a risk factor for the Australian finance system.ASFA members can access A framework for assessing changes to superannuation tax policy at the ASFA website.