In the dying days of a desperate, decaying government, a plan was hatched. Let’s let first-home buyers dig into their super to purchase a home. No need to think about them later when their super balance is eroded because of the loss of not only the capital, but the compound interest which would have been applied to their withdrawal had it remained in super. We won’t be around then as those who take the money out now will most likely be young and their retirement benefit will be substantially reduced because of this measure.
This idea has been floating around for years but has been rejected as imprudent by Liberal and Labor Prime Ministers alike. Paul Keating described it as “a frontal attack on super”– which it was. A desperate attempt to gain votes.
Let’s face it, many in the Liberal/National Party hate super! It’s collective, it’s progressive, it’s looking after working people so they can have a dignified retirement. It provides low cost life and income protection insurance. It provides member appointed trustees on boards making significant financial decisions for the benefit of their members.
The guiding principle of compulsory superannuation was set out by the Keating government when it was introduced in 1992. The ‘sole purpose’ of superannuation is to provide retirement benefits for members and their dependants (as described in the legislation). Not to purchase property, not to pay for education, not to subsidise travel, aged care or medical costs. If the LNP government had been serious about helping first home buyers, why not go to the source of the problem – affordable housing supply. Why not build more houses and public housing rather than throw more money at an already inflated housing market? Where’s the plan?
And of course, there was no thought given to the obvious result of this ill-conceived policy – housing prices would increase substantially because of the extra money in the system. And who would be the beneficiaries? The property sellers. The buyers would be hit with a double whammy – higher house prices and a reduced retirement benefit. Keating’s point was that the tax concessions provided through super were there to produce income in retirement and that the super balances had to be preserved to gain the benefit of compound interest throughout a working life. In relation to this proposal, Keating said before the 21 May election: “The Libs believe ordinary bods should be happy with the age pension. Let them know their place. If the public needs yet another idea to put this intellectually corrupt government to death, this is an important offence – and with this government, it's unprincipled prime minister.”
The idea of releasing super to pay for housing goes back to 2015 when a suggestion by Joe Hockey introduced the idea. It has since been propounded by several of the Liberal hounds on the back bench (one of whom no longer has a seat). But Industry Super CEO, Bernie Dean, estimated that using super savings for housing would drive up property prices by 16 percent in Sydney, nine percent in Melbourne and eight percent in Brisbane and 14 percent in Perth. Labor’s former housing spokesman (now Education Minister), Jason Clare, described the proposal as throwing fuel on the fire that would drive up housing prices. Even the Financial Services Council warned, “The FSC is concerned that the government’s proposal weakens the sole purpose of superannuation, which is to provide higher standards of living in retirement”.
Fortunately, with the change of government, this proposal will not go ahead, but it does illustrate the extent to which a desperate government will go to win votes. The honey pot of superannuation is just too tempting for governments to use to solve their own short- and medium-term problems. But it is reassuring for us to know that the Albanese team is fully committed to the core principles of superannuation (the sole purpose test) and to the phased in increases until the employer contribution reaches the full 12% in 2025. After all, they follow in the footsteps of the architect or our world-class retirement system, Paul Keating.