The Morrison Government forecast that around $27 billion will be withdrawn from superannuation funds by people who have been hit financially by the coronavirus pandemic. New figures from the Australian Taxation Office (ATO) show that around 361,000 people had registered interest in such a withdrawal within three days of the policy being announced. However, the ATO has stressed that not all people who have registered their interest will necessarily apply to withdraw money from their super fund. Meanwhile, the superannuation industry has warned that up to $50 billion in total could be withdrawn from super accounts:
By the end of Thursday, April 2, about 361,000 people had registered their interest through the MyGov portal — roughly 2.5 per cent of Australia’s 15 million super members…
While the government has forecast a total of about $27bn will be drawn down under the scheme, the super sector fears the total could be in excess of $50bn, which would pressure some smaller cash-starved funds to engage in a fire sale of assets — further lowering the value of already depressed asset values — or liquidate long-term positions in infrastructure or property holdings.
The Grattan Institute has enthusiastically thrown its support behind giving Australians early access to their superannuation:
Our modelling suggests that a 35-year-old earning the median wage of about $60,000 who takes the full $20,000 allowed from their super can expect their super income through retirement to fall by around $80,000 in today’s dollars. But their total retirement income would fall by only $20,000 in today’s dollars, or around $800 each year.2 The Age Pension is means tested – the higher your super balance, the less pension you get. So workers who take money from their super will lower their super balance at retirement, but they will receive more Age Pension – helping to soften the blow…
Diverting superannuation money from retirement into Australians’ wallets today is not without cost. But it will put money into the hands of people when they most need it. And they need it now.
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Australians should be able to withdraw their savings when they need it most, even if it causes liquidity pain for some industry superannuation funds.
We can also presume that the legislated lift in the superannuation guarantee to 12% will be killed. There is simply no way that the federal government will cut take-home pay by 2.5% as Australia emerges from its biggest economic downturn since the Great Depression.
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.
