Super savings doing work of wealth fund

COMPULSORY superannuation is effectively doing the job of a sovereign wealth fund.

National savings

AUSTRALIA'S rate of savings is remarkably high compared with other developed nations and one of the main savings drivers - compulsory superannuation - is effectively doing the job of a sovereign wealth fund.

Senior Treasury official David Gruen told the Growth Challenge conference yesterday concern about Australia's savings levels was answered when comparisons were made with countries with similar economies such as the US, Britain, New Zealand and Canada.

"Australia's gross national saving rate in the 2000s is clearly similar to or, in many cases, higher than the savings rates of comparable countries," Dr Gruen said. "Of particular note is the comparison with the other Anglophone countries, which have similar deregulated financial systems that facilitate people's capacity to borrow against assets and future income and thereby tend to reduce national saving rates. Australia's national saving rate stands out as being high."

He said compulsory superannuation boosted private saving by about 1.5 per cent of GDP, but that would rise over the next decade to about 3 per cent as the superannuation guarantee levy rises to 12 per cent.

While many were arguing for a sovereign wealth fund to save more of the bounty from the mining boom for future generations, he said, the compulsory super scheme shared many of its elements.

"In both cases, a large stock of financial assets is being accumulated in a long-term compulsory saving vehicle," Dr Gruen said.

The conference also heard that despite the comparatively high saving levels, superannuation savings fell massively short of covering Australia's growing proportion of retirees, with actuarial work putting the shortfall at about $695 billion.