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Some Policy Issues in Providing Retirement Incomes

  • John Freebairn


    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

The paper compares and contrasts the pay-as-you-go system of government provided age pensions funded from recurrent tax revenue with the pre-paid system based on a compulsory superannuation levy funding an actuarially fair retirement income. Under special assumptions, including constant levels of GDP, the two systems are similar. However, given specific details of the current Australian versions of these two systems, the second system is shown to result in a higher level of GDP. Some policy design issues for the superannuation scheme, including the need for compulsion and at what rate, who pays the levy and the congruence of various eligibility ages, and the effects of the 2006 budget changes on the taxation of withdrawals, are assessed.

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Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2007n06.

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Length: 24 pages
Date of creation: Feb 2007
Date of revision:
Handle: RePEc:iae:iaewps:wp2007n06
Contact details of provider: Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
Phone: +61 3 8344 2100
Fax: +61 3 8344 2111
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  1. Louise Carter, 2005. "Labour Market Responses to the Abolition of Compulsory Superannuation," Economics Discussion / Working Papers 05-18, The University of Western Australia, Department of Economics.
  2. Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
  3. Lindbeck, Assar & Persson, Mats, 2002. "The Gains from Pension Reform," Seminar Papers 712, Stockholm University, Institute for International Economic Studies.
  4. Louise Carter, 2005. "Labour Market Responses to the Abolition of Compulsory Superannuation," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 8(4), pages 351-364, December.
  5. Creedy, J & Van de Ven, J, 1997. "Retirement Incomes : Private Savings versus Social Transfers," Department of Economics - Working Papers Series 569, The University of Melbourne.
  6. Freebairn, John, 1998. "Compulsory Superannuation and Labour Market Responses," Australian Economic Papers, Wiley Blackwell, vol. 37(1), pages 58-70, March.
  7. Ross S. Guest, 2004. "Superannuation, Owner-Occupied Housing Demand and Private Saving in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 37(2), pages 198-204, 06.
  8. Guest, Ross S & McDonald, Ian M, 2001. "Ageing, Optimal National Saving and Future Living Standards in Australia," The Economic Record, The Economic Society of Australia, vol. 77(237), pages 117-34, June.
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