Question

The current age pension system in Australia is best described as a pay-as-you-go system (PAYG). An alternative system is a fully-funded social security system.

a. Explain the two systems.

b. The Australian Federal Parliament has approved the early access to the superannuation fund up to $20,000 before 30 June 2021 in order to help people adversely financially affected by COVID-19 Crisis. What motivates the Australian government to make such a move? Discuss the impact of this policy on Australian output per worker and the growth of output per worker in the long run

Answer 1

Ans.

a.

A pay-as-you-go pension plan is a particular kind of pension conspire where the advantages are straightforwardly attached to the contributions or expenses paid by singular members. This contrasts with completely supported pension plans where the pension trust subsidize isn't effectively paid into by its future recipients.

Pay-as-you-go pension plans run by governments may utilize "commitment" to depict the cash that enters the trust subsidize, yet for the most part, these contributions are charged at a set rate and neither laborers nor managers who contribute have any decision about if or the amount they pay in to the plan. Private pay-as-you-go pensions, notwithstanding, offer their members some tact.

On the off chance that your manager offers a pay-as-you-go pension plan, you probably get the opportunity to pick the amount of your paycheck you wish to be deducted and contributed toward your future pension benefits. Contingent upon the provisions of the plan, you can either have a set measure of cash pulled out during each pay period or contribute the sum in a singular amount. This is like how a few characterized commitment plans,

b. The Australian Federal Parliament has approved the early access to the superannuation fund up to $20,000 before 30 June 2021 in order to help people adversely financially affected by COVID-19 Crisis. Here Australian government’s motive is to ensure people have the liquidity available with them to meet with the crisis.

The impact of this policy on Australian output per worker and the growth of output per worker in the long run will be that in the short term the people may be better able to navigate the crisis. In the long run it may reduce the savings in the nation, increase the spending and investment and improve the level of the economic growth.