Assistant Treasurer Michael Sukkar suggested on 14 March that allowing people to use their super to buy a house could be part of the budget response to address housing affordability, despite acknowledging “pumping further liquidity" into residential housing would push prices higher.
This proposal would go against the Financial System Inquiry recommendation that superannuation’s objective be enshrined in law as to provide “income in retirement to substitute or supplement the age pension”, Rice Warner noted.
This recommendation was accepted by Financial Services Minister Kelly O’Dwyer without modification last November, Rice Warner said, and will become law “as soon as a Senate committee has finished discussing the finer details of how this simple phrase should be worded”.
“Despite this clear objective, the Assistant Treasurer Michael Sukkar has ignored his own policy and this week suggested that he is reviewing whether young people could use their superannuation benefit as a deposit to buy a home,” the company said.
“Perhaps he will regret this when he realises what such an asinine policy would cost future governments in increased age pension costs.”
Modelling conducted by the consultancy firm found that in addition to driving house prices up, the proposed policy would increase the number of people requiring an age pension in retirement.
“We have modelled the impact on a member aged 35 on average earnings taking $100,000 out of their super account to use as a housing deposit,” Rice Warner said.
“Our young member now loses the power of compound interest and, assuming they only receive super guarantee contributions and don’t top up their super later in life, they will draw an extra $92,000 (present value) in age pension payments in their retirement years.”
Rice Warner said even if the money taken out of super was loaned out and had to be repaid, any super member using this system would “still lose out on years of fund earnings”, which comprise a larger component of retirement benefits than contributions do.
“Clearly, there are far cheaper ways of getting people into home ownership, by looking at addressing the supply and demand for housing in our capital cities. Using super as a piecemeal solution is not the way to fix the housing problem,” Rice Warner said.
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