Statement 4: Building Resilience Through National Saving (Continued)
Introduction
The compulsory superannuation system has made an important contribution to national saving since it began to be phased‑in from the mid‑1980s.
More recently, the significant increase in national savings likely reflects a combination of a return to more sustainable rates of consumption growth and cautious households consolidating their financial position — particularly by reducing the pace of their debt accumulation. This increase in saving is important for a number of reasons:
- A higher level of national saving helps moderate price pressures in the economy, providing scope for monetary policy to respond to economic developments.
- While the terms of trade are likely to remain at high levels for some time yet, some portion of our current national income is likely to be temporary and so it is prudent to save more now for the future.
- With the international economic environment more uncertain, borrowing less and saving more makes Australia more resilient to possible external shocks.
- The ageing of Australia's population means that there are benefits to saving more as a country now to support a progressively older population, before the impacts of population ageing become increasingly important from around the end of the decade.
The Government's planned increases in compulsory superannuation contributions will consolidate and build on the increase in national saving in the second half of the 2000s, with the revenue cost of this measure funded from the proceeds of the Minerals Resource Rent Tax. Further, delivering on the Government's fiscal strategy of budget surpluses on average over the medium‑term ensures that the Government will make a positive contribution to national saving.
Consistent with this strategy, returning the Budget to surplus from 2012‑13 will contribute to national saving and maintain confidence in the strength of Australia's public finances. This will support Australia's capacity to respond to unexpected adverse events.
Delivering surpluses will also improve medium‑term fiscal sustainability and macroeconomic stability by helping to manage the challenges of demographic change and the high terms of trade.
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