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Using super for house deposits will lead to a spike in property prices and upward pressure on rental payments, according to research by the Super Members Council.
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SMC urges government to ‘safeguard’ Australian super
31 July 2024
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New research by the Super Members Council suggests the coalition policy to use super for house deposits is predicted to cause a 9 per cent increase for a median property.
This price spike in properties is expected to flow through to private rents.
The SMC said this potential increase in rents could increase prices by almost $3,000 a year or around $57 more a week.
The SMC said policymakers are turning to the “temptation” of using super to fix other policy problems, which will not have a beneficial impact as intended.
“Using super for house deposits is the latest in a long line of ideas to divert super from its key purpose: to deliver income for Australians in retirement.”
Various data sources and studies have shown long-term rents move in line with property prices, SMC said.
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Super Members Council CEO Misha Schubert said allowing first home buyers to use money from their super would not create any more homeowners but would leave people financially worse off.
“A couple withdrawing their super early for a house deposit is projected to be $165,000 worse off over their lives,” she said.
“It would make life harder financially for young Australians- especially those renting- and make cost of living pressures worse.”
Schubert has called for the policy to be dropped and for strong bipartisanship on the preservation of super for retirement.
At the Committee for Economic Development of Australia, Schubert outlined SMC’s new research findings to Australia’s business leaders.
Through the proposed policy, allowing couples or first home buyers to use $50,000 from their super wouldn’t be wise due to the “twin effects of higher housing costs and having less super to live on,” Schubert said.
“That’s because rents, mortgage repayments, stamp duties and rates would all rise- and people would lose a mountain of money from their super at retirement.”
The research conducted by SMC also found the policy would result in funds being forced to hold more liquid assets, which would lower investment returns for everyone.
“Based on international experience, that could mean retirees have thousands less in savings at retirement,” the SMC said.
In addition to this, the findings suggest by decreasing the pool of investment in capital funds, more could be invested in the Australian economy.
Limiting the ability of profit-to-member super funds is forecasted to inject $180 billion more into the Australian economy in the next five years.
In the speech to the committee, Schubert said: “How super is delivering dignity in retirement for millions of everyday Australians, lifting incomes for retirees, reducing fiscal pressure on the pension and powering Australian businesses.”
The success of super is built on the policy foundations of preservations, universality and compulsion, Schubert said.
“Eroding those system foundations would be bad for all Australians- and risk reversing the gains super has made for our savings, living standards and the Budget.”
Schubert said Australia’s super foundation must be protected as it is “the envy of the world.”
“Australia has built a transformative policy miracle in super,” she said. “Both major parties of government have contributed to super’s success- and both of them have a duty to safeguard it.”
Schubert called for Australian business leaders to defend Australians’ savings for retirement to avoid risks to the incomes of retirees, fiscal damage, higher taxes and a weaker capital base for Australia’s economy.
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