The hopeful gather for an auction. Raiding nest eggs would push up prices and undermine the superannuation system and the budget. Photo: LJ Hooker.
I have every sympathy for young people staring at the implacable cliff face of home prices and mortgage repayments who may be tempted by the prospect of raiding their superannuation nest egg to get a foot on the housing ladder.
If it got back into government, the Coalition would unlock these savings for first-home buyers, and those desperate to leave the soaring rental market could see it as their only chance.
Such is where Australia’s housing market has landed after decades of policy failure, mostly at the hands of Coalition governments, that shamelessly fed the bubble that shows no signs of bursting.
Now, it is promoting a first homeowners grant on steroids to prise open the door for people locked out of the market it helped to create.
A Coalition-dominated Senate committee this week recommended that first-time home buyers be able to withdraw their entire super balance for a deposit, capped at $100,000 or $150,000.
This would expand the Coalition’s 2022 policy, allowing super withdrawals of up to $50,000.
But there are plenty of people saying this is a bad idea
Like the first-home owners grant, allowing people to use part of, or clean out their savings would put another fire under house prices. While some whose savings might cover the cost of a deposit would skip through, the door would soon slam shut again as prices surged.
Super Members Council modelling found that letting first-time home buyers access up to $50,000 could cause price rises of between $69,000 and $86,000 in the major capital cities of Sydney, Melbourne, Brisbane and Perth.
You can bet Canberra would not be left out.
Deloitte has also modelled the impact of cracking the super piggy bank, finding this would blow a hole of up to $2.5 billion a year in the federal budget by the end of the decade, rising to $15 billion a year by the mid-2060s, when the cumulative cost of the policy would be $200 billion.
Its work for the Super Members Council released last week found a 30-year-old couple who withdrew $35,000 each from their super could retire with about $195,000 less in today’s dollars.
They could be expected to receive $3270 more a year from the aged pension, costing $88,400 to the budget over their lifetime.
Many young people won’t care – they’d argue they need it now, not in their dotage.
They might also argue that it is more important for them to be secure in their own homes than to be short on their super when they retire.
However, the Coalition’s plan would only be a temporary fix for some and would fail to address the underlying problems in the market.
It also undermines the very principle of superannuation, which is designed to provide dignity in retirement and reduce the dependence on the age pension.
An idea like this could blow up the whole system, and maybe that’s at the back of the Coalition’s mind anyhow, given their antipathy towards industry-based super funds and their connections with unions.
The nation would be better served if the superannuation funds’ investments were directed towards building affordable and social housing that would put a roof over the heads of the increasing number of Australians paying exorbitant rents and/or at risk of homelessness, as long as they could achieve a return for their members.
This boost to supply would provide relief to the market in general and help ease price pressures.
Tempting as it may be for some, the Coalition’s opportunistic and economically irresponsible policy should be dismissed.
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