Labor to block Coalition’s FHB super bribe

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By Leith van Onselen

In his post Budget speech delivered yesterday, Labor Shadow Treasurer, Chris Bowen, pledged to block the Coalition’s Budget measure allowing young Australians to make contributions into their superannuation for future use as a home deposit. From The New Daily:

In his budget reply speech on Wednesday, Mr Bowen said most of the measures in the government’s “sham” affordability package were “ineffective”, but he took issue with what has been dubbed the ‘First Home Super Saver Scheme‘.

He confirmed Labor would vote against the “badly designed and ill thought out” proposal if and when it comes before Parliament.

Mr Bowen’s primary concern seemed to be that extra contributions from mortgage savers would be lumped together with compulsory contributions from employers.

“How voluntary contributions will be kept separate from compulsory contributions in the event of a downturn, where balances can contract, is beyond me. They can’t be”…

Mr Bowen also said the scheme would breach the very same ‘sole purpose’ test the government is trying to legislate, which would clarify that super savings are intended to provide income in retirement to substitute or supplement the age pension…

“Without negative gearing and supply side reform, if it has any impact at all, it will simply drive up house prices. It is badly designed and ill thought out.”

Bowen is correct when he argues that the Coalition’s super savings scheme is bad policy. At the margin, it would raise demand and place further upward pressure on house prices – the antithesis of a ‘housing affordability’ measure.

It also clouds the purpose of super from being a retirement savings vehicle that is intended to relieve pressure on the Aged Pension.

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And the measure is budgeted to cost some $250 million over four years – money that could be better spent elsewhere (see below).

The only positive thing that can be said about the scheme is that like its predecessor, Labor’s First Home Savers Account, it is rather weak – both in its likely impact on the housing market (which would be moderate) and its impact on the Budget.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.