OPINION | As the May 2017 issue of Investment Magazine went to print, Prime Minister Malcolm Turnbull had all but ruled out allowing young people to tap their superannuation for a first home deposit as part of the federal budget to be unveiled on May 9.
It is embarrassing for the PM that senior members of cabinet, including Treasurer Scott Morrison, stoked public debate about the idea in the first place.
This is the same government that is seeking to enshrine in legislation that the objective of the superannuation system is “to provide income in retirement that substitutes or supplements the age pension”. Allowing 20-somethings early access to super for a deposit to get into an overheating property market would deprive them of the benefits of compound interest accumulating in their retirement savings.
It would also add significantly to the budget deficit by re-directing capital form super, which is taxed, into owner-occupied housing, which is not.
But worst of all, it would be sure to do the exact opposite of improving housing affordability. Just like first home buyer grants – a vote hustling policy both major parties have perpetuated over the past two decades – it would merely fuel demand, adding to price pressure.
Perhaps the most offensive part of Morrison’s flirtation with the idea of tapping super for housing is that he has ruled out reforming negative gearing and the capital gains tax discount or curtailing the ability of SMSFs to invest in residential property.
Those were just three of 13 policy ideas put forward by independent economist Saul Eslake in his recent report, No Place Like Home, commissioned by the Australian Institute of Superannuation Trustees, that the government could consider if it were serious about improving housing affordability.
Eslake’s report highlights that while letting young people raid their super for a home deposit would be a disaster, both for individuals and the economy, something does need to be done about the worsening housing affordability crisis.
Home ownership rates are declining, meaning more people are set to retire while still renting or paying off a mortgage. Meanwhile, it is getting tougher for retirees to find affordable rental accommodation.
Maybe there is another way the superannuation system can help provide part of the fix to our nation’s housing problem. Rather than encouraging individuals to drain their retirement savings prematurely to throw fuel on the housing price fire, what if super funds were given better incentives to invest in affordable housing?
A number of large industry funds are already working behind the scenes to research how they might be able to form consortiums, with one another and with private developers, to do just that.
Collaboration with federal and state governments would also be essential. Fingers crossed we hear something about that in the budget.
