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Aussie retirement incomes influenced by Asia
The retirement income of Australians is being influenced by emerging market economies, and the benefits being gained come with a volatility risk, according to Access Economics director Chris Richardson.
Easing economic stimulus from developed nations will slow the currently rapid growth being seen in Asia, and the cheap money that was flowing in may have led to property bubbles that could deflate unevenly, creating a volatility risk for Australia.
There is also a big question mark over whether commodity prices will be able to stay at their current levels over the longer term, he said.
“China will have a bad year and when that happens Australia will have a very bad year,” he warned.
Australia can most likely look forward to strong growth in China for the next 10 years, and in India for the 10 years after that, but said “India will not be the next China” because it won’t see the same demand on heavy industry.
But with continuing growth and demand for Australian resources, “Asia means prosperity for Australia,” Richardson said.
Australia would also be wise to use the benefits being earned now while the markets are strong to plan for the future in the form of an increased superannuation guarantee (SG), he added.
From an economist’s point of view, increasing the SG isn’t right or wrong because it makes people better off in retirement at the expense of being worse off now, he said.
But with people living longer and retirement likely to go on for longer than people anticipate, that myopia is a reason to consider increasing the SG, he said.
The average Australian’s retirement income was currently around 70 per cent of their pre-retirement income, but in 60 years, once everyone had spent their whole lives working under a 12 per cent SG, that was likely to increase to 75 per cent, he said.
AUTHOR
Mike Taylor
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