Don’t pour super fuel on housing bonfire

Liberal MP Tim Wilson contends that Australians should be able to access their superannuation to pay a housing deposit.

However, the Association of Superannuation Funds of Australia (ASFA) released a report yesterday staunchly opposing the move, arguing that it “would make a bad situation catastrophic” by putting additional upward pressure on house prices and adversely impacting housing affordability:

The impact on the housing market of early release of superannuation for housing deposits would be an increase in house prices. As take-up of the measure increased, additional purchasing power available to a broader group of potential first-home buyers would be competitively bid into higher house prices, exacerbating the upswing of the current house price-credit cycle…

None of the comprehensive reviews of superannuation have recommended the early release of superannuation for housing deposits, while several have made recommendations to the contrary…

The direct effect on the housing market of early release of superannuation for housing deposits is that increased purchasing power would be near fully capitalised into higher house prices, exacerbating the upswing of the current house price-credit cycle.

I am an outspoken critic of Australia’s compulsory super system and believe it needs root-and-branch reform. I also oppose lifting the superannuation guarantee to 12% for a multitude of reasons.

That said, allowing households to use their super savings to purchase a home would be a retrograde move. Like all demand-side subsidies, the extra purchasing power would simply be capitalised into higher house prices, resulting in no ‘affordability’ gain and the downside of having less savings available in retirement.

Australians are already heavily indebted and property prices are inflating at a feverish pace. Do we really want to pour superannuation fuel on the housing bonfire?

Demand-side gimmicks like this might play well with the electorate and property lobby, but they risk making housing affordability and retirement outcomes worse.

Unconventional Economist

Comments

  1. This has already happened by stealth through last year’s $20k “Rona Raid” on super.

    I’m dead against it, but if they crack open the piggy bank I am heading to the front of the queue.

  2. RobotSenseiMEMBER

    I’m meeting with the bank in just over an hour to talk home loans.

    I think if these changes roll through, I’m sitting out and waiting for the inevitable catastrophe. There is no way in five frozen hells I am pumping my superannuation into a house I buy; I’m hardly a savvy investor (“looser” if you will) but sticking everything I have into one asset class seems like a recipe for disaster.

    Of course, no doubt when I’m hitting retirement age everyone will look at my super balance and go “well that’s not fair, we should tax that into oblivion, why should you have a super nest-egg when everyone else doesn’t?” Ah, the joys of Australia in the early 21st century.

    • happy valleyMEMBER

      Tim Wilson – I doubt there’s much this bloke (or indeed, any other LNPer) wouldn’t do to pursue self-interest?

      • RobotSenseiMEMBER

        He hates superannuation, loves franking credits, loves fearmongering boomers, and loves high house prices. Suddenly, it all makes sense.

  3. This is just capital destruction
    There will be no money left in the system
    Pull $ out of super, lose all of it in property when equity is gone
    Interest rates rise bond funds/fixed collapse in price

    These people will stop at nothing to keep this Ponzi scheme going

  4. kierans777MEMBER

    What happened when #ScottyFromTourism announced discounted flights. The prices went UP as everyone scrambled. #QantasKeeper it is. Tim Wilson is a shocker. 🤦‍♂️

  5. TailorTrashMEMBER

    Back when ah were a lad we used to sing this Aussie song when we were pi$$ed . Some thing to do with jelly ( and no not Reusa’s type )

    Time to change the words to suit the new straya

    “ I like high house prices
    High house prices for me “

    • “I like them for Dinner, I like them for Tea
      A little each day, is a good recipe!
      I like highhigh house prices, highhigh house prices for meee!”

  6. Think Chaser did an excellent article on Tim ‘Adam Smith’ Wilson and his agendi sometime ago.

    How does a full time senator, like other IPA graduates, find the time for promotion of their pet and/or /IPA special interests e.g. flying to HK other year for a photo opp on ‘freedom’ and democratic rights….. or campaigning for the IPA on trashing of compulsory superannuation while egregiously ignoring future impact on pension payments and budgets?

    PS Grattan Institute has been no better in specious framing of super analysis based on existing settings, past, present but ignoring future demographics….