The impact of population and labour force scenarios on superannuation, tax expenditures and pension costs

George Rothman and Bruce R Bacon
Publication type


Conference Paper 94/3

Paper presented at the Colloquium of Superannuation Researchers 1994, Melbourne.

This paper presents modelling results which show how major demographic trends and alternative scenarios impact on important Australian aggregates such as the asset holdings of Superannuation Funds and Age and Service Pension costs.

The paper discusses briefly recent major trends in demographic factors, particularly fertility and mortality and important labour force trends such as the changing workforce participation patterns of women. Projecting the likely course of these trends in detail over a time scale exceeding 50 years is difficult but necessary for the modelling work of the RIM Task Force. To facilitate this work and particularly to give greater accuracy in estimating the population at higher age ranges, a population projection model POPMOD has been built and is described.

Using the Task Force's enhanced version of the National Mutual Retirement Incomes Policy Model (RIP), the impact of varying immigration levels on the assets of superannuation funds, pension costs, tax expenditures and national savings is examined. Given the potential importance of mortality assumptions, variations of the single mortality assumption of the Australian Bureau of Statistics are constructed and the sensitivity assessed, particularly of the aggregate costs of government pensions.

The results presented in relation to the labour force show considerable sensitivity of aggregates to the age of entry to the workforce. Following parameter adjustments, the current base RIP runs indicate a somewhat higher impact of the Superannuation Guarantee on national savings than the results published in the FitzGerald Report on National Savings.

Derivation of the estimated value, and range of uncertainty, of Superannuation assets in the year 2000 is used to exemplify sensitivity analysis to a range of other important parameters, such as inflation rates and the earning rates of superannuation funds, additional to the demographic ones.

Overall, the aggregates produced by the RIP model, with its associated analytical framework, are shown to be quite robust to a range of views about the future. The new aggregate model of the Task Force (RIMGROUP), now under development, will maintain the strengths of RIP and add to them.