RDP 2004-01: The Impact of Superannuation on Household Saving Appendix A: Data Definitions and Sources

Household assets in superannuation (Figure 1)

Sources: For Australia, the data are households' net equity in reserves of superannuation funds and life insurance corporations from the Australian Bureau of Statistics (ABS) Financial Accounts and Foster (1996) prior to 1988. The ABS Financial Accounts began in December 1988, with some classification changes in June 1992. For the US, reserves in pension funds and life insurance from the Federal Reserve Flow of Funds. For the UK, net equity of households in life assurance and pension funds reserves from the UK National Statistics Financial Statistics and net assets of life insurance and pension funds prior to 1987.

Net inflation-adjusted household voluntary saving

Construction: Household net saving is obtained from the National Accounts and is the difference between disposable household income and consumption. The inflation adjustment is made using Reserve Bank of Australia (RBA) household debt estimates from 1976/77 to 2001/02, Foster (1996) from 1965/65 to 1975/76, interest-bearing asset estimates from the Financial Accounts from 1988/89 to 2001/02 and Foster (1996) from 1965/66 to 1987/88, and the household final consumption expenditure deflator from the National Accounts. Employer superannuation is removed from saving using unpublished National Accounts data back to 1983, and prior to 1983 by replacing compensation of employees in disposable income with wages and salaries (from various ABS Cat No 5204.0 prior to 1994/95) and contributions to workers compensation.

Sources: ABS Cat No 5204.0 (2001/02); ABS Cat No 5232.0; Foster (1996); Reserve Bank of Australia Bulletin.

After-tax labour income

Construction: This series is constructed consistent with the measure used in Tan and Voss (2003). After-tax labour income is defined as

Transfers are calculated as Total Secondary Income – Social Contributions for Workers Compensation. γ is the share of labour income in total household income. It is calculated as Wages/Total Primary Income. Tax is calculated as the sum of Income Tax Payable and Other Current Taxes on Income, Wealth etc. Wages is a quarterly wage bill measure constructed from Average Weekly Earnings and measures of employment as follows:

where AWE is average weekly earnings, WSE is the total number of wage and salary earners from the National Accounts and Scale converts the wage bill for wage and salary earners to one for all employed individuals. ω is the number of weeks in a quarter, calculated as . Scale is the ratio of aggregate hours worked by all individuals in the quarter, including those not identified as wage and salary earners by the ABS, to aggregate hours worked in the quarter by wage and salary earners. These are unpublished ABS data.

Sources: ABS Cat No 5204.0 (2001/02); Foster (1996).

After-tax compulsory superannuation

Construction: An annual series for employer contributions to superannuation funds is available from the ATO from 1988/89 to 1999/2000. For 2000/01 and 2001/02, National Accounts unpublished funded employer superannuation contributions are spliced on. It is possible that some non-compulsory employer contributions also appear in this series, but the impurity appears to be small when the series, as a share of wages and salaries, is compared with the SGC rate.

Compulsory superannuation contributions are zero in 1985/86 and interpolated for 1986/87 and 1987/88. This provides a plausible measure of Award superannuation from 1986/87 to 1991/92 which is consistent with movements in employee coverage over the period. Taxation is removed from the series by applying the 15 per cent contribution tax from 1988/89, and by removing the receipts of the superannuation surcharge, introduced in 1996/97.

Sources: ABS unpublished estimates; ATO Taxation Statistics 1999–2000.

After-tax voluntary superannuation

Construction: Contributions to superannuation and life insurance companies are obtained from the National Accounts. Funded employer contributions to superannuation are removed using: the after-tax compulsory superannuation series above from 1990, private sector employer superannuation contributions from the ABS Major Labour Costs survey from 1985 to 1990, and the ABS employer superannuation contributions series in ABS Cat No 5204.0 (various) back to 1966, using the private sector share of total employer superannuation contributions in 1985.

In line with the standard ABS classification, assets in life insurance, part of which is not governed by the superannuation scheme, are reported as part of voluntary superannuation assets. Unfortunately, separate data for life insurance are not available over the entire estimation period. However, they account only for between 30 per cent (in the earlier part of our sample) and 10 per cent (in the later part of the sample) of voluntary contributions, and they account for about 5 per cent of the total superannuation contributions in the later part of the sample, having steadily fallen from around 15 per cent in the earlier part. Taxation of voluntary contributions (mainly the self employed) is removed using ATO tax data.

Note that voluntary contributions here do not include voluntary employer contributions, which in any case are only a small share of total employer contributions.

It is possible that the data are contaminated with some double counting of ‘rollover’ funds, which were introduced in 1983. This double counting has probably fallen since 1992, when ‘rollover’ operations were allowed to be carried out within the same fund (see Edey and Simon (1998)). APRA have found evidence that double counting is less of a problem recently, indicating that in 1999 less than 10 per cent of voluntary contributions were reinvested superannuation withdrawals (Australian Prudential Regulation Authority 1999).

Sources: ABS Cat No 5204.0 (2001/02); ABS Cat No 6348.0

Household wealth

Construction: Household wealth is the sum of financial and non-financial wealth, consistent with Tan and Voss (2003). Household financial wealth includes household holdings of currency, bank deposits, building society deposits, credit co-op deposits, cash management trusts, public unit trusts, public common funds, friendly society holdings, government bonds, life office and superannuation fund assets and direct holdings of equities, but excludes unfunded superannuation and prepayment of premiums. Household non-financial wealth consists of dwellings and durable goods. The measure for the value of dwellings is taken from the product of the estimated number of dwellings and the dwelling price index. The estimated number of dwellings is calculated using ABS data on completions and the census number of dwellings. The dwelling price index is constructed by using a weighted average of metropolitan and regional dwelling prices in each state, as reported by the CBA/HIA Housing report. The methodology for calculating the value of the dwelling stock is outlined in Callen (1991).

Sources: ABS Cat No 5232.0 for data 1988/89 onwards. Data prior to 1988/89 are from Foster (1996). ABS Cat No 2015; ABS Cat No 8752 and CBA/HIA Housing Report.

Household debt

Construction: This measure consists of all financial institutional lending of personal credit, housing credit and securitised mortgaged lending. Prior to 1977, data from Foster (1996) are used to back-cast household debt, assuming that household borrowings from other non-bank deposit taking institutions grew in line with borrowings from building societies prior to 1977. This assumption is valid over the late 1970s, when data for non-bank deposit taking institutions become available. This debt series is also used in the debt-to-income ratio.

Source: Reserve Bank of Australia Bulletin.

Total consumption deflator

Construction: Implicit price deflator for total household final consumption expenditure.

Sources: ABS Cat No 5204.0 (2001/02).

Population

Construction: Estimated resident population of Australia.

Sources: ABS Cat No 3101.0; Foster (1996).