Removing savings from superannuation accounts to buy housing will be “disastrous”, the shadow treasurer said.
Chris Bowen slammed treasurer Joe Hockey’s “thought bubble” that superannuation money could be used to help first time buyers get onto the property ladder or retrain, describing the proposal as “ridiculous” and “disappointing” at the Centre for International Finance and Regulation’s workshop on the Financial System Inquiry.
Bowen said the proposal would undermine retirement incomes, a point supported by Industry Super Australia calculations that a first time house buyer using $40,000 of their super as a deposit (10 per cent of $400,000 average first home buyer price) will lead to a member being $140,683 worse off in retirement.
Source: Industry Super Australia
The $40,000 deposit would wipe out the first nine years of young adult’s super savings (assuming a starting salary of $50,000) with $100,000 lost in compound interest from their retirement savings.
“It would achieve a rare double of worsening housing affordability while undermining retirement incomes at the same time. It would allow first time buyers to bid against each other at auction with their retirement incomes. The only winners will be vendors and we will see housing prices rise even further all the while eating away at retirement incomes when we should be increasing them,” Bowen said.
He added that housing affordability was a real issue, with Australians being right to be worried about it, but it was the supply side that needed to be addressed. In another Liberal split, Malcom Turnbull also stated that it is a supply side problem with Hockey’s proposal being a “thoroughly bad idea”.
Bowen used the proposal to reiterate again the need for an agreed objective for superannuation as it would mean these debates could be held in an improved context.
“Not only did the Murray inquiry not recommend such a ridiculous idea, but it specifically confirmed that superannuation should be used exclusively for income in retirement. So I am disappointed that such a recommendation will be undermined before the government even formally responded to the Murray inquiry,” Bowen said.