Introduction
Superannuation is one of the social schemes of managing income and expenditure by encouraging aggressive savings. In fact, it is argued to be a policy that mandates people to save from their incomes. Saving is one of the best components of economic development among countries. This is especially in modern economic times where economic constraints are inherent. This paper discusses the superannuation scheme of Australia. The paper explains the relevance of the superannuation policy and the role it played in cushioning the economy from the recent global financial crisis.
Superannuation scheme in Australia
The superannuation scheme was introduced in Australia during the 1980s as an initiative to encourage savings among the people. Superannuation has formed a major policy in the Australian economy, which controls inflation emanating from wage wars. This was one aspect of bettering the income policy of the country. Superannuation policy in Australia is based on product regulation where information concerning products and services is closely monitored by the government (Veltman, 2001, p. 181). In addition, the competencies of firms that market the services are closely monitored to ensure that they observe tactics that are economically friendly. Trustees who sought prudent issues concerning the funds manage the superannuated funds. Trustee boards are established through support from the government. This ensures that there is a proportional representation of both employers and employees. Supererogation is a critical pillar of the income policy of the Australian government (Australia & CCH Australia Limited, 2011, p. 806). The scheme has also sought to make improvements to the retirement income of the country. Superannuation takes charge of supporting national employment in Australia by supporting the income scheme of employees. This is achieved by supporting savings hence investment (The Australia Institute Industry Super Network, 2008, p. 1).
Australia is among the countries in the world that have successfully implemented the superannuation policy. Superannuation supports both public and private investment in Australia. Venture capital in the Australian economy is also provided by superannuation funds (Kraal, 2012, p. 95).
The high level of maturity of superannuation as practiced in Australia has been supportive of the Australian economy (Marriott, 2010, p. 124). Amidst the international financial crisis that affected major economies in the world, Australian firms were able to raise equity from the well-established capital markets. This capital was availed with the aid of off-market purchases, which were strongly backed by superannuation funds. The Australian banks had large reserves that supported the capital market equity. Corporate risks of firms were reduced because firms could easily access financing from the heavily loaded banks (Kraal, 2012, p. 95). However, the global financial crisis brought about negative effects on the funds according to financial reports that were released in 2009. The crisis has caused a fall in superannuation funds raising questions on the ability and role of the funds in cushioning employees from the crisis. The financial crisis resulted in economic pressures that resulted in the reduction in savings (Bateman, 2009).
The major problem that has been witnessed in superannuation within Australia is the problem of accounting for the superannuated funds through exposure. This was evident in the year 2007 when there were many claims that only companies with large funds had their risk disclosures exposed. This is the period when the financial crisis began (Snoke, Kendig & O’Loughlin, 2011). The accounting mechanisms used in managing superannuated funds are argued to be general. In this case, it leaves out many details that exposed the funds to risks from happenings in the economy. Risk disclosure is practiced at a very low level putting firms with minimal funds at risk of losing out. The administration of superannuated funds has to put a lot of emphasis on improving the accounting standards used in managing the funds. This can be achieved through the inclusion of information on market risks. This is a learning lesson for the management of the superannuation scheme in Australia. All firms have to state the objectives and their policies concerning the embrace of superannuation. This has to be reflected in financial statements that are submitted by firms to the fund managers. On the other hand, the fund managers have to design mitigation measures that will aid in spreading the risks that emanate from the economy (Kraal, 2012, p. 99).
Kraal (2012) observed that the superannuation scheme in one way or another affects almost all employees in Australia and is supposed to have an enormous effect on the financial markets. However, the arrangements of the implementation of this scheme do not contain principles favoring the working of financial markets. Default arrangements ought to contain sound principles to back the working of the financial markets that are critical in determining the working of the economy. This can be achieved by making the scheme reasonably proactive by embracing the social development aspect of the scheme. This should be done by engaging all workers in a comprehensive manner (Borowski, Encel & Ozanne, 2007, p. 205). The level of risk disclosures has to be improved in order to improve the quality of financial information thence mitigating financial problems in financial schemes (Kraal, 2012).
Conclusion
Compulsory superannuation is one of the social schemes that help in controlling the incomes of Australia. This is achieved by instilling savings in the national economic culture of the country. It has been argued to have aided in dealing with the problems of the global financial crisis through the facilitation of ease access to funds from the scheme.
References
Australia., & CCH Australia Limited. (2011). Australian superannuation legislation 2011. Sydney, NSW: CCH Australia.
Bateman, H. (2009). Retirement incomes in Australia in the wake of the global financial crisis. Discussion Paper 03/10. Centre for Pensions and Superannuation. Web.
Borowski, A., Encel, S., & Ozanne, E. (2007). Longevity and social change in Australia. Sydney: UNSW Press.
Kraal, D. (2012). A Study on Industry Superannuation in Australia: Risk Disclosure and Pre-Global Financial Crisis. Asian Journal of Finance & Accounting, 4(1): 93-117.
Marriott, L. (2010). The politics of retirement savings taxation: A Trans-Tasman comparison. Sydney, N.S.W: CCH Australia.
Snoke, M., Kendig, H., & O’Loughlin, K. (2011). Australian Evidence of Baby Boomers Financial Security: A Review. Journal of Economic and Social Policy, Vol. 14(1): pp. 1-25.
The Australia Institute Industry Super Network. (2008). Choosing Not to Choose Making superannuation work by default. Web.
Veltman, L. (2001). Living & working in Australia: Everything you need to know for building a new life. New Delhi: Health Harmony.