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A modelling framework for analysing the role of superannuation in Australia's financial system

Listed author(s):
  • Jason Nassios
  • James A. Giesecke
  • Peter B. Dixon
  • Maureen T. Rimmer

The proportion of employee wage income compulsorily allocated to superannuation is set to increase from 9.5% to 12% by July 2025. In this paper, we investigate the implications of an expanded superannuation system for the Australian commercial banking sector. This leads to a discussion of the structural implications of such a policy, particularly on the financing of Australian residential property. We find that an increase in the superannuation guarantee drives important short-run structural shifts within the Australia economy that persist in the long-run: namely, a reduction in Australia's foreign financing requirement, an increase in the ratio of debt-to-equity used to finance the residential housing stock and the private debt to income ratio, a shift in the capital structure of the commercial banks towards corporate bonds and away from bank deposits, and an expansion of the financial intermediaries, e.g., the commercial banks, the non-bank financial intermediaries, life insurers and the superannuation sector. In future work, we intend to explore the implications of these structural shifts within the corpus of research relating to macroeconomic stability.

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Paper provided by Victoria University, Centre of Policy Studies/IMPACT Centre in its series Centre of Policy Studies/IMPACT Centre Working Papers with number g-266.

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Date of creation: Nov 2016
Handle: RePEc:cop:wpaper:g-266
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  1. Glenn Otto, 2007. "Central Bank Operating Procedures: How the RBA Achieves Its Target for the Cash Rate," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 40(2), pages 216-224, 06.
  2. James A. Giesecke & Peter B. Dixon & Maureen T. Rimmer, 2016. "The Economy-wide Impact of a Rise in Commercial Bank Capital Adequacy Ratios," Centre of Policy Studies/IMPACT Centre Working Papers g-261, Victoria University, Centre of Policy Studies/IMPACT Centre.
  3. Peter B. Dixon & James. A. Giesecke & Maureen T. Rimmer, 2015. "Superannuation within a financial CGE model of the Australian economy," Centre of Policy Studies/IMPACT Centre Working Papers g-253, Victoria University, Centre of Policy Studies/IMPACT Centre.
  4. Dixon, Peter B. & Rimmer, Maureen T., 2016. "Johansen's legacy to CGE modelling: Originator and guiding light for 50 years," Journal of Policy Modeling, Elsevier, vol. 38(3), pages 421-435.
  5. Philip Lowe, 1995. "The Link between the Cash Rate and Market Interest Rates," RBA Research Discussion Papers rdp9504, Reserve Bank of Australia.
  6. J. Nassios & James A. Giesecke & Maureen T. Rimmer & Peter B. Dixon, 2016. "Comparing the Impacts of Financial Regulation in Australia and the United States via Simulation with Country-specific Financial CGE Models," Centre of Policy Studies/IMPACT Centre Working Papers g-263, Victoria University, Centre of Policy Studies/IMPACT Centre.
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