Compulsory superannuation - Macro or Micro? (1 Viewer)

[tau281290]

I got a very simple question.

Is compulsory superannuation a Macroeconomic policy or Microeconomic policy?

Many people favour Macro, but how come tax reform is Micro? Isn't Compulsory Super a tax reform as well?

 

[bling05]

It is a microeconomic policy.
Tax reform is Micro, it is just announced during the macro fiscal budget and is a discretionary decision of fiscal.

 

[tau281290]

Hey, r u 100% sure? I just got marked wrong for this in the exam. I am ganna get marks back?

 

[bling05]

Yep I'm 100% sure.

 

[tau281290]

Thx, i will talk to the marker =)

 

[gnrlies]

Super reforms are a micro policy.

Basically anything that ISN"T fiscal policy or monetary policy is a micro reform.

 

[tau281290]

The marker said that super reforms are done through the Fiscal policy, therefore it is a macroeconomic policy.

What can you say about that gnrlies? I need something solid to prove it..

 

[michael1990]

Super reforms are a micro policy.

Basically anything that ISN"T fiscal policy or monetary policy is a micro reform.

I also have a question for you.

Is the Budget short-term or long-term?
Like are the changes in the budget immediate?

Sorry to go completely of track.
Just curious.

 

[gnrlies]

Your 'marker' is incorrect and deserves a slap on the wrist! The worst thing is that you probably have a stubborn teacher who will keep coming up with some reason as to why they are right and why you are wrong just to maintain their reputation (rather than doing the right thing and giving you the correct mark).

Superannuation doesn't have ANYTHING to do with fiscal policy. Compulsory superannuation comes under the 'Superannuation Industry (Supervision) Act 1993' which is not the same as the Appropriation Bills for which fiscal policy is implemented. If your teacher disagrees then simply quote those acts. This will demonstrate that they are completely different. Your teacher is probably confusing the super changes that occured a few years ago and were announced on budget night but they were still two separate policies.

Furthermore, even if they were in the same bills (which they are not) Macroeconomic policies are demand management tools. They are concerned with aggregates. Fiscal policy is a macroeconomic policy because it has an overall net effect on the economy. I.e. the surplus or a deficit will have an effect on aggregate demand between years. Now remember Fiscal policy is a macroeconomic tool. Subsequently we are concerned with the components of the policy that have an effect on the macroeconomy (via the size of the surplus or deficit). How this is achieved is not the focus of a macroeconomic policy.

So even if somehow it was linked to fiscal policy (which it isn't), superannuation policy would not be regarded as fiscal policy in the same was as tax reform is a microeconomic reform. Superannuation is a microeconomic policy because it is to do with the supply side of the economy. Specifically it is aimed at reducing Australia's low national savings problem, and if you like 'privitising' the old age pension.

 

[gnrlies]

I also have a question for you.

Is the Budget short-term or long-term?
Like are the changes in the budget immediate?

Sorry to go completely of track.
Just curious.

It all depends which way you look at it...

When you want to look at the immediate effect of the budget you look at the underlying cash balance because it essentially tells you whats happening here and now (not thats planned to happen in a few years). This will give you an idea what the macroeconomic impact of the budget will be for that year.

The changes in the budget are not always immediate and the spending is not always upfront. For example when they announce they are going to allocate money to build new schools, that money doesn't get spent on the first of July. Feasibility studies and other reviews need to take place and it might take some time to know where the money will be spent. Furthermore, it is common practice to announce spending over four years. For example if they say they are going to spend 100 million dollars on childcare, what they really mean is 25 million over the next four years. So thats 75 million dollars that wont be seen in the financial year of the budget.

I would say thay Fiscal policy is more of a long term thing because thats the way its used. It is no longer used to achieve macroeconomic stablisation. It is mainly for other longer term objectives like fiscal consolidation, lowering taxes etc.

 

[tau281290]

Thx for that gnrlies, that was a superb answer! You are so knowledgeable , still wondering what uni course u do.

I guess this taught me a lesson: just memorise the text books to ace the exams. People who memorised it word for word will get high marks but crazy yet correct ideas will be wrong. Teachers just don't appreciate much of the stuff outside text books >.<. The education system is kind of flawed, sorry if i offended anyone.

 

[Advv]

I also have a question for you.

Is the Budget short-term or long-term?
Like are the changes in the budget immediate?

Sorry to go completely of track.
Just curious.

Pretty sure that fiscal has an immediate impact. Its the opposite of monetary which has a time lag.

I think that's what the text book says. Of course, it depends how you look at it (judging from a previous post in this thread it could be long term) but I'd go with the text book answer. That's what the markers usually look for.

 

[kokodamonkey]

Thx for that gnrlies, that was a superb answer! You are so knowledgeable , still wondering what uni course u do.

I guess this taught me a lesson: just memorise the text books to ace the exams. People who memorised it word for word will get high marks but crazy yet correct ideas will be wrong. Teachers just don't appreciate much of the stuff outside text books >.<. The education system is kind of flawed, sorry if i offended anyone.

So what did the teacher say when they realised they were wrong?

What a shame i say, the economic teachers at my school were actually half-decent.

 

[onlinenooby]

It's micro.

 

[haiderr]

just did my trials n i remember reading that fiscal policy can be implemented only once a year, but can have immediate impacts. but as i mentioned - if a change is to be implemented, the govt must wait till the budget time to implement it.