Backlash Against Using Super for Home Deposit Idea

The Assistant Treasurer’s refusal to rule out allowing first home buyers access to their superannuation funds for a deposit has been met with industry and opposition disapproval ahead of the May 9 Budget.

Assistant Treasurer Michael Sukkar has refused to rule out changing superannuation policy to allow everyday Australians the opportunity to enter the property market earlier by allowing them to dip into their super savings.

According to Sky News, Prime Minister Malcolm Turnbull has asked his office to have a closer look at the proposal.

.@samanthamaiden: The PM is 'considering' letting some first home buyers use their super to purchase a house MORE: https://t.co/Zv9ProHNGB pic.twitter.com/LRapOGWGa1

— Sky News Australia (@SkyNewsAust) March 16, 2017

The rising prices of housing, accompanied with relatively flat wage growth, means that there is a greater challenge for young Australians to save the required deposit and enter the property market.

Essentially, this solution allows people to take money out of their Super funds and put it towards their first home deposit.

The idea of allowing first home buyers to use their super earnings to pay a deposit and enter the housing market is not new.

This policy change has been floated through once in 1993, and was also shot down in 2015 by current Prime Minister Malcolm Turnbull and Finance Minister Mathias Cormann.

However, when speaking to Sky News on Tuesday, Mr Sukkar stated that the policy may be beneficial to new home owners, if housing supply also increased.

“Anything you do on the demand side of the ledger will be finely calibrated to make sure we are not lazily pumping more money into the market. You’ve got to be more sophisticated, and I’m confident we will be,” said Sukkar.

This suggestion has been lambasted by the federal opposition and industry experts, who labelled the move as “bad policy”.

Shadow Treasurer: ‘Stupidest idea ever’

Shadow Treasurer Chris Bowen led the chorus of disapproval for superannuation policy change by quoting Prime Minister Malcolm Turnbull’s comments in 2015, saying that it was a “thoroughly bad idea”.

“Early access to superannuation for a home deposit would undermine retirement savings, create new financial risks, and ultimately serve no credible purpose other than bidding up the price of housing and pushing home ownership further out of reach of young, aspirating [sic] Australians”, Bowen said.

https://twitter.com/Bowenchris/status/840329365816668160

The Financial Services Council (FSC) and Industry Super Australia supported these views, saying the proposal was “inconsistent” with super objectives outlined in 2016.

The spokesperson for the Self-Managed Super Fund Association (SMSFA), Andrea Slattery, agreed with Labor’s position, saying that allowing people premature access to their super funds is “bad public policy”.

“Although it is tempting to view superannuation savings as a tool for fixing policy problems, it is essential that superannuation is maintained to meet its sole policy purpose – to give people security and dignity in retirement”, Slattery said.

“Making superannuation available to housing would be akin to opening Pandora’s Box; super would be seen as a cure-all for every social issue.

“The proposal to allow people to access super to fund housing purchases would only see greater demand for housing stock, driving prices higher, achieving the exact opposite of what proponents of this proposal seek to achieve.”

Greens: “An atrocious idea”

The Greens called the idea ‘idiotic’, with Greens housing spokesperson Senator Lee Rhiannon saying it “would add more fuel to the fire” rather than fixing the housing crisis.

“Allowing first home buyers to dip into their super in order to buy a home is an atrocious idea, and will likely make things worse for those hoping to purchase a home and in the long term for people when they retire,” Senator Rhiannon said.

“Of all the ideas they have come up with, this has got to be one of the worst.

“Even if young people have earned enough super for a deposit, expecting anyone to choose between retirement savings and a home is insulting.”