Statement 4: Building Resilience Through National Saving (Continued)
Conclusion
Since the mid‑2000s there has been a significant increase in Australia's national saving rate. Australia's system of compulsory superannuation has made a substantial contribution to national saving since its introduction in mid‑1980s. More recently, national saving has been boosted by a marked shift to more cautious saving and borrowing behaviour by households, particularly since the GFC.
This represents a reversal following a long period in which household saving declined and household borrowing rose. As this period of household debt accumulation appears to have come to an end, much of the recent increase in saving is likely to be sustained for some time to come, with the boost to the superannuation guarantee progressively from 9 to 12 per cent helping to secure the gains in national saving.
The increase in the superannuation guarantee, the revenue cost of which is funded by the Minerals Resource Rent Tax, helps ensure the benefits of the boom are spread fairly across the economy.
In the period prior to the GFC very strong revenue growth was in substantial part channelled back into the economy, rather than being saved. This fed into increased household spending, which added to demand pressures and contributed to a significant rise in inflation that occurred in 2007‑08 and significantly tighter monetary policy than otherwise.
Returning the Budget to surplus from 2012‑13 will add to national saving, ensure fiscal policy is not generating price pressures in the economy and will continue to provide monetary policy with scope to respond to economic developments. It will also maintain confidence in the strength of Australia's public finances.
Delivering surpluses, along with further improvements to superannuation will foster fiscal sustainability which will assist in managing the high terms of trade while helping meet the challenges of population ageing. Higher national saving will also improve economic resilience by reducing Australia's vulnerability to adverse shocks.
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