Coalition pushes using super for home buying despite modelling showing proposal would cost billions
The Coalition has amped up its push to let Australians use superannuation to buy a home despite modelling showing the proposal could cost the government up to $2.5bn a year by the end of the decade.
First home buyers would be able to withdraw their entire super balance for a deposit under a recommendation from a Coalition-dominated senate committee, with its interim report on Thursday also canvassing withdrawal caps of $100,000 or $150,000.
Letting Australians buy their first home with superannuation-funded deposits would blow a hole of up to $2.5bn a year in the budget by the end of the decade, according to Deloitte modelling for the super industry.
The modelling for the Super Members Council, released on Thursday, shows a mounting annual and cumulative cost to the budget primarily from more people relying on the aged pension due to lower super balances at retirement.
Coalition senators further suggested letting buyers put up their super as collateral for a home loan, dismissing the risk that buyers would lose their entire balance if they failed to repay the loan.
“[Foreclosure] is a very rare occurrence in Australia … [and] the age pension also remains available as a retirement safety net in this eventuality,” the report said.
Deloitte found a couple comprised of two 30-year-olds who withdrew $35,000 each from their super could retire with about $195,000 less in today’s dollars.
Such a couple could be expected to receive $3,270 more a year from the aged pension, costing $88,400 to the budget over their lifetime.
The Coalition senators’ recommendations would allow even greater superannuation withdrawal than Deloitte’s modelled scenario.
The proposals go further than the Coalition’s 2022 policy of permitting withdrawals of up to $50,000 and are the clearest indication yet of the opposition’s housing policy direction, after Guardian Australia in March revealed the proposed expansion of super for housing.
This sets up a major policy fight with the Albanese government, which argues the policy will undermine the purpose of super and increase house prices.
Labor members of the committee, in their dissenting response to Thursday’s report, said an expanded super for housing policy would reduce Australians’ savings and lock younger workers out of the market.
“The policy fails by encouraging first home buyers to empty their super, lose compound returns, and retire with less savings,” they wrote.
“Younger - and low and moderate income - first home buyers … don’t have enough superannuation to use for a deposit anyway.”
Deloitte modelled two scenarios: one in which first home buyers can withdraw the lower of 40% or $50,000 of their superannuation for a house deposit; and a second with no cap on the amount they can withdraw.
It found that, under the capped scenario, access to super would cost the budget $320m a year in 2030, rising to more than $3bn a year in 2060, by which time the cumulative cost of the policy would be $40bn.
In the uncapped scenario, access to super would cost the budget $2.5bn a year by 2030, rising to $15bn a year by the mid-2060s, by which time the cumulative cost of the policy would be $200bn.
The Coalition senators’ recommendations go further than even the uncapped scenario, also letting buyers use their withdrawal plus proceeds to move to a new house after their first purchase, rather than returning the withdrawal to their balance.
The Deloitte model assumed that over the medium to long term 87% of first home buyers would access the scheme, a figure based on access to New Zealand’s KiwiSaver scheme to buy a house.
It assumed a first home buying household (with an average of 1.7 people) would withdraw about $60,000 under the capped scenario and $140,000 under the uncapped scenario.
Earlier Super Members Council modelling has claimed that letting first home buyers access up to $50,000 could cause price rises of between $69,000 to $86,000 in major capital cities of Sydney, Melbourne, Brisbane and Perth.
The Super Members Council chief executive, Misha Schubert, said the report’s proposals for “even deeper raids on super for housing” were “economically reckless”.
“It sets a policy trap for young Australians because it hikes house prices and blows a budget blackhole in the decades ahead mostly by pushing up age pension costs – which every taxpayer would pay,” she said.
“Ideas to break the seal on super just leave people with less savings in retirement and a bigger bill for all taxpayers.”
In April Guardian’s Essential poll found majority support for a range of more radical solutions to housing unaffordability including super for housing, the Greens’ public sector property developer, Labor’s shared equity scheme, and tackling housing tax concessions.
