The Productivity Commission has done its best to swim in politically treacherous waters while reporting on superannuation
The Productivity Commission has released the final of its three technical reports into the superannuation industry ahead of the release of its final report next month. This paper, which according to deputy chair of the commission, Karen Chester, contained some of the “most complex modelling the commission has ever done,” looked at the question of economies of scale in the industry and found that merging smaller, high cost super funds with larger ones could save up to $1.8bn a year in costs and lead to an extra $22,000 on the average superannuation balance.
Economies of scale involves situations where firms are able to carry out operations better the bigger they get. It can occur to due cost savings – as it may cost less on average to administer one million accounts than it does 10,000 – or it may come from being able to make better investments because the size of your assets enables you to seek out investments with better returns, or enables a better diversification of the portfolio.
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