There is something strange in Australian policy debate. There is a lamentable consensus that the transmission mechanism of monetary policy works predominately via the 30% of Australian households with mortgage debt.

Consequently, much of what passes for economic discourse too often reverts to discussions around the impact of interest rate changes on this minority of Australian households. Yet there are other policy decisions that are equally as important in influencing the economic outlook which impact virtually all households and receives scant comment and certainly doesn’t appear to enter the thoughts and discussions of our central bankers.

In this note, we isolate the impact of lifting the Superannuation Guarantee (SG) levy and superannuation wealth has upon economic growth and we compare those impacts to interest rate hikes and the Stage 3 tax cuts. 

In short, the RBA can no longer think in terms of managing domestic policy relative to the actions of major foreign central banks and domestic fiscal policy. There is now a third home grown force that is acting as an important influence upon the economic cycle which has positive long-term benefits, but ultimately may compound the need for a domestic easing cycle through 2024-25. 

Tim Toohey
Tim Toohey, Head of Macro and Strategy