Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Hansard source

That is managed funds. That does not include self-managed superannuation, which is about 23 per cent of superannuation. Managed funds not only include superannuation but include other funds that are under management. If you were to bring in self-managed funds for superannuation, of course, the savings would be greater than $1.1 trillion.

The measure of savings in Australia’s national accounts has been negative for several quarters, but that measure does not capture the accumulation of assets. This is a point that has been made by Ric Battellino, the Deputy Governor of the Reserve Bank of Australia, who said in a speech in August of 2006:

... conventional measures of saving do not take into account capital gains. This has a particular bearing on Australian households because, as noted, they now hold a high proportion of their financial assets in investments such as shares and superannuation on which a significant part of the return is in the form of capital gains. ... we showed that once allowance is made for capital gains, the saving rate of Australian households ... is neither low nor falling.

In fact, it is estimated by the Reserve Bank of Australia that, looking at household net financial wealth, savings are around 24 per cent of disposable income. This measure suggests that Australia’s savings, by global standards, are actually quite high. This is an important point which has perhaps been overlooked in a lot of the economic commentary to date. When you do a household savings ratio and you are looking just at income, you are not allowing for the fact that many Australian households are actually making quite a rational decision to put their savings into better yielding returns, either in the stock market or in superannuation. In many European countries, you might put your money into a bank which then invests. That is counted in the conventional measure of saving because it is held at a bank. But many Australians have taken quite a rational decision to invest either directly into the share market or to invest through self-managed funds.

I have no doubt that the volume of money that Australians now have in managed funds and directly in the stock market has contributed greatly to the increase in stock market values. It was estimated at the beginning of this year that the complete market capitalisation of the Australian Stock Exchange was around $1.4 trillion. When you think that managed funds have $1.1 trillion and there is, in addition to that, considerable self-managed superannuation, you can see that there is an enormous stock of savings in the Australian economy which is now looking for a home to invest and no doubt—

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