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Superannuation for housing deposits and the 'deposit gap'


The idea of allowing early access to superannuation for housing has recently resurfaced in public debate. As the Treasurer noted, an Australian Labor Party policy document from the 1993 election included a policy to provide early access to superannuation for housing deposits.

While home-owners can currently access superannuation early to avoid mortgage default, the idea of using superannuation for housing deposits was examined in some detail by both sides of politics in the 1990s. This FlagPost provides a high-level chronology of major announcements and reviews, and a brief discussion of decreasing housing affordability reflected in the ‘deposit gap’ measure.

Superannuation for housing deposits – major policy processes

Superannuation for housing deposits was discussed in a number of reviews and other policy documents in the 1990’s.

  • Prior to the 1993 election: Both the Coalition’s Fightback  package (released November 1991) and the Australian Labor Party’s (ALP’s) election policies (released February 1993) included measures allowing some form of access to superannuation for housing deposits.
  • June 1993: The Fitzgerald Report, commissioned by the Hawke Labor Government, discussed the issue briefly and recommended that ‘The Government could review whether or how direct diversion of superannuation funds into housing can be provided without impairing the long term effectiveness of superannuation’ (p. 61).
  • April 1994: The Labor Government decided not to proceed with the election measure following consultation, on the basis that it could impact superannuation outcomes, and that ‘conditions in the housing industry have changed dramatically … Home ownership affordability is now at its highest level for almost a decade’.
  •  May 1994: The Senate Select Committee on Superannuation reported on the issue. Its sole recommendation after an extensive report was that ‘That the Government give further consideration to the adoption of a tightly targeted super for housing policy’ (p. 83).
  • 1996 election: The Coalition’s Housing and Urban Design Policy included a policy to ‘consult with the superannuation, housing and welfare sectors on the implications of any superannuation for first homebuyers scheme’.
  • May 1997: The Coalition Government released a discussion paper, Allowing access to superannuation for housing, in conjunction with the 1997-98 budget.
  • May 1998: The 1998-99 budget included a measure stating that ‘Following consideration of all of the issues and responses to the discussion paper, the Government has decided not to introduce a superannuation for housing scheme’, noting both improvements in housing affordability, and that the measure ‘could not be targeted efficiently to those individuals who would not otherwise achieve home ownership before retirement’.

While the issue subsequently received less attention, it was discussed by a 2004 Productivity Commission inquiry on first home ownership. The PC did not make an explicit recommendation, merely discussing the benefits and disadvantages. It noted that ‘… Early access would effectively turn superannuation into a special savings account for first home buyers’.

An existing program, the First Home Saver Account, in fact offers a reduced rate of tax similar to superannuation. Savers pay a fifteen per cent tax rate and receive a government co-contribution on savings into the account (which is separate from an individual’s superannuation balance). After a very low takeup, the closure of the program was announced in the 2014-15 Budget

Housing affordability

The policy debate in this area frequently refers to housing affordability. One particularly relevant measure of housing affordability is the ‘deposit gap’ – a rough measure of the gap between what ‘a household on average weekly earnings could afford to borrow … and median house prices’. A measure calculated by Judith Yates in a 2011 paper (Figure 1, below) shows that the gap between borrowing capacity and median house prices has tended to increase over time.

Recent data reflects this trend. Depending on the price estimate, a twenty per cent deposit equates to:

  • $114,300 for the Australian Bureau of Statistics’ estimate of the mean residential dwelling price ($571,500)
  • $124,180 for the Real Estate Institute of Australia’s (REIA) September 2014 median house price ($620,901)
  • $99,448 for REIA’s median other dwelling price ($497,239)

In contrast, recent data from the Association of Superannuation Funds of Australia suggests that the average superannuation account balance:

  • $16,168 for people aged 25-29, and
  • $27,772 for people aged 30-34.

While these figures are for individual superannuation balances, a significant proportion of first home buyers are in dual-income households.

Figure 1: Deposit gap as a multiple of average annual income

Deposit Gap

Source: Judith Yates, ‘Housing in Australia in the 2000s: On the Agenda Too Late?’, The Australian Economy in the 2000s, Proceedings of the Reserve Bank of Australia conference, ed. Hugo Gerard and Jonathan Kearns, 2011, p. 281. Yates notes that these figures are only approximate (average weekly earnings are used as a proxy for median wage), but illustrate the general increase.

 This post was co-authored by Tarek Dale and Kai Swoboda.