In a capital-hungry economy like Australia, retirement savings will make a significant contribution to the nation's investment needs, Treasurer Wayne Swan has said.
"National savings are so absolutely critical to our capital-hungry country. The challenge we have is to take on board a once in a century investment boom without straining our economy," he told attendees at the Financial Services Council Deloitte Leadership Series luncheon.
"We saw this investment boom coming even during the depths of the crisis - so we started thinking about how we could boost savings and make Australia an even more attractive investment destination.
"We planned to substantially increase a domestic savings pool that is already roughly the same size as our GDP. We're not unique in this respect - but we're in the top tier of countries in terms of national pension savings as a proportion of GDP."
The government's superannuation reforms, including an increase to the superannuation guarantee, will add another half a trillion dollars to national savings by 2035, Swan said.
"And by deepening that pool we can generate more of the capital we need across our own economy," he said.
"The GFC [global financial crisis] showed how crucial it is for capital-hungry nations to have domestic savings. But we're not just focusing on private savings. Our fiscal strategy also means we are increasing public saving relative to investment by around 4.5 per cent of GDP over the next three years.
"The other way to satisfy our hunger for capital is to attract it from overseas. That's why we had the foresight during the GFC to start planning to lower the corporate tax rate to 29 per cent, making it easier for Australian businesses to compete and making us a more attractive location for foreign investment."
Swan said the government has asked the Board of Taxation to look at an investment manager regime, to encourage offshore investors to put money into Australia through more tax certainty.
