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

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  • Jason Nassios
  • James A. Giesecke
  • Peter B. Dixon
  • Maureen T. Rimmer

Abstract

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.

Suggested Citation

  • Jason Nassios & James A. Giesecke & Peter B. Dixon & Maureen T. Rimmer, 2016. "A modelling framework for analysing the role of superannuation in Australia's financial system," Centre of Policy Studies/IMPACT Centre Working Papers g-266, Victoria University, Centre of Policy Studies/IMPACT Centre.
    • Handle: RePEc:cop:wpaper:g-266
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    References listed on IDEAS

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    1. repec:bla:ausecr:v:40:y:2007:i:2:p:216-224 is not listed on IDEAS
    2. Michael Woodford, 2001. "Monetary policy in the information economy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 297-370.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. Philip Lowe, 1995. "The Link between the Cash Rate and Market Interest Rates," RBA Research Discussion Papers rdp9504, Reserve Bank of Australia.
    8. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
    9. James Giesecke & G.A. Meagher, 2008. "Modelling the Economic Effects of Population Ageing," Centre of Policy Studies/IMPACT Centre Working Papers g-172, Victoria University, Centre of Policy Studies/IMPACT Centre.
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    Cited by:

    1. Garaffa, Rafael & Gurgel, Angelo & Cunha, Bruno & Lucena, Andre & Szklo, Alexandre & Schaeffer, Roberto & Rochedo, Pedro, 2018. "Climate finance under a CGE framework: decoupling financial flows in GTAP database," Conference papers 332939, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Jason Nassios & James A. Giesecke & Peter B. Dixon & Maureen T. Rimmer, 2016. "Superannuation and Macroeconomic Growth and Stability," Centre of Policy Studies/IMPACT Centre Working Papers g-267, Victoria University, Centre of Policy Studies/IMPACT Centre.

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    More about this item

    Keywords

    Financial CGE model; superannuation;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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