Superannuation, Population Ageing and Living Standards in Australia
AbstractIn this paper we simulate the effect of an increase in the Superannuation Guarantee Levy (SGL) by 3 percent and 6 percent, respectively, on average living standards. We apply the Guest-McDonald model of optimal national saving for a small open economy. The simulations account for the projected age structure of the population, the differences in productivity of workers of different ages and the differences in consumption demands of young and older consumers. In this way we account for the impact of population ageing on living standards. To the extent that an increase in the SGL increases national saving beyond what it would otherwise have been, there are two effects on living standards. One is an intergenerational redistribution of living standards from the present to future generations. The effect is to lower living standards for approximately the next 30 years after which living standards rise, compared to their levels under the benchmark scenario. However, the rise in living standards in the distant future is negligible in discounted terms. The second effect arises from the nature of the SGL as a tax on employment. This reduces employment and therefore reduces the future cash flows available to support living standards. The negative impact of this employment effect on living standards is small according to our calculations.
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Bibliographic InfoArticle provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).
Volume (Year): 32 (2002)
Issue (Month): 1 (March)
Ageing; Consumer; Consumption; Saving;
Find related papers by JEL classification:
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
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