While Australia is a relatively small country in comparison to the United States, 22M to 309M, its mix of capitalist and socialist policies for retirement policies are certainly something to be aware of when considering investing in Australian financial markets.
Specific to Australia, Superannuation is a retirement pensions program for Australian citizens. Employers are mandated by law to pay a proportion percentage of an of an employee's yearly salary and wage into a superannuation fund, which is only available to be redeemed at retirement.
The recent Australian government announcement of a rise in the compulsory super levy from 9 per cent to 12 per cent will certainly affect the national savings of the country as well investments in local and international financial markets.
The IFSA (Investment & Financial Services Association in Australia) estimates that Australian's national super funds hold about $1.2 trillion. These funds are heavily invested in domestic equities given that "some four out of five workers have their money in a balanced fund with at least 30 per cent held in local shares". They also may invest in property, cash and bonds.
However with the recent changes by the Australian government mandating a higher retirement savings rate it will push the pool of super funds to grow to $5.5 trillion by 2030. While in the short term it may be likely to spike local Australian equity markets, these funds could increasingly likely spill over into the Dow Jones, Nasdaq and international bond markets in the future.
The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com