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 makes it mandatory for people to save from their incomes. Saving is one of the best components of economic development of countries especially so in the modern economic times where economic constraints are inherent. This paper thus s the superannuation scheme of Australia. The paper explains the relevance of the policy and the role it played in cushioning the economy in the recent global financial crisis.
Superannuation scheme was introduced in the 1980s in Australia in Australia as one of the moves to encourage savings in the country. This is one of the continuity in bettering the income policy of the country. Superannuation policy in Australia bases on product regulation where information concerning products and services is closely monitored by the government. Also, the competencies of the firms that market the services are closely monitored to ensure that they observe economic friendly tactics. The superannuated funds are managed by trustees who sought ought prudent issues concerning the funds. Trustee boards are established by the support of the government which ensures that there is a proportional representation of both employers and employees. Supererogation is considered to be one of the completion pillars of the income policy of Australian Government. The scheme has also sought to make total improvements to the retirement income by hiding to demand incomes of the country. Superannuation takes charged of supporting national employment in Australia by supporting the income scheme of the employees in the country by supporting savings thence investment (The Australia Institute Industry Super Network, 2008).
Australia is one of the best examples of countries in the world that have successfully implemented the superannuation policy. Superannuation supports both public and private investment in Australia. Venture capital in the economy in the Australian economy is also provided by superannuation funds (Kraal, 2012).
According to Kraal (2012) the high level of maturity of superannuation as practiced in Australia has been very supportive of the Australian economy.
The superannuation policy in Australia has been argued to be very critical in cautioning the country from the negative forces of the global financial crisis. With deficit in financing being a major problem presenting itself in the financial crisis, superannuation has aided firms in maintaining funding and liquidity. The financial turmoil in at the global scene was characterized by the removal of liquidity from international markets which operated on debts. Amidst the international financial crisis that emanated from 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. 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).
The major problem that has been witnessed in superannuation in Australia is the problem of accounting for the superannuated funds through exposure. This was evident in the year 2007 where there were a lot of claims that only companies with large funds had their risk disclosures exposed. This puts the many other companies with lots of doubts about the general stability of the superannuated funds. The accounting mechanisms used in managing superannuated funds is argued to be general leaving out lots of 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 more emphasis on improving the accounting standards used in managing the funds. This can be achieved by the inclusion of information about market risks. All the firms have to state the objectives and clearly state 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 and the fund managers have to design mitigation measures which will aid in spreading the risks that emanate from the economy (Kraal, 2012).
Kraal (2012) observes that the superannuation scheme in one way or another affects almost all the employees in Australia and are supposed to have a big impact on 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 which are critical in determining the working of the economy. This can be achieved by making the scheme to be more proactive in by embracing the social development aspect of the scheme by fully engaging all the workers.
Compulsory superannuation is one of the social schemes that help in controlling incomes of Australia by instilling savings in the national economic culture of the country. It has been argued to have aided in dealing with the problems of global financial crisis through ease access of funds from the scheme.
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