CoPS/IMPACT Working Paper Number G-253

Title: Superannuation within a financial CGE model of the Australian economy

Authors: Peter B. Dixon, James. A. Giesecke, Maureen T. Rimmer


Australia's superannuation sector has become both a major institution in guiding the allocation of the nation's financial capital across asset classes, regions, and sectors, and a central intermediary in channelling the nation's annual savings into domestic capital formation and foreign financial asset accumulation. To put the industry's scale in context, in 2012 the sector had assets under management of approximately $1.4tn (Australia's GDP in the same year was approximately $1.5tn). Annual inflows to the system represent approximately one third of gross national savings. The sector's influence over the allocation of the nation's physical and financial assets continues to grow. We model this important institution within an economy-wide setting by embedding explicit modelling of the sector within a model of the financial sector which is in turn linked to a dynamic multi-sectoral CGE model of the real side of the economy. We develop the financial CGE model by building on a multi-sectoral dynamic model of the real side of the Australian economy. In particular, we introduce explicit treatment of: (i) financial intermediaries and the agents with which they transact; (ii) financial instruments describing assets and liabilities; (iii) the financial flows related to these instruments; (iv) rates of return on individual assets and liabilities; and (v) links between the real and monetary sides of the economy. We explore the effects of the superannuation sector by simulating a one percentage point increase in the ratio of superannuation contributions to the economy-wide nominal wage bill.

JEL classification: C68, G11, G17, G21

Please cite the later published version in:
Giesecke, J.A., P.B. Dixon, M.T. Rimmer. (2016), Superannuation within a financial CGE model of the Australian economy, JASSA: The Finsia Journal of Applied Finance, Issue 2, 2016, pp. 72-82.

Keywords: Financial CGE model, superannuation

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