Super (and debt) in trillions

Total assets in Australian superannuation funds have just passed one trillion dollars according to APRA statistics for December 2006. These assets have increased at 14.9%pa over that last five years. The same week these statistics came out, the RBA announced that Australian household debt also reached one trillion dollars for the first time. Household debt has increased 15.3% per annum of the last five years.

What we don?t know is how super assets and debt are distributed by households and age groups. We do however have some overall ratios which are deteriorating. Household debt is now 159% of average disposable income [105% five years ago] and interest payments on debt are now 11.7% of disposable income [6.9% five years ago]. What would be interesting to know is for people approaching retirement, what super assets they have and what their debt position is. One can speculate from anecdotal evidence that, due to the escalation of city house prices relative to average wages [in Sydney from 4.8 times to 9.6 times average annual wages over the last ten years] the older baby boomers have lent funds to the 30 year old children to accommodate the grandchildren in the style they would like to see them in.

A subtle sign of trouble brewing is the government decision to [from 1 July 2007] let people over 60 withdraw all their super assets in one year if they want to. This sends a message to the banks (and their struggling children) they might be able to rely upon super assets for collateral for intergenerational bad debts.

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