Government Senators' Dissenting Report
1.1The Coalition’s ‘super for housing’ agenda is bad for superannuation and bad for home ownership.
1.2The Chair has proposed that first home buyers be able to use their entire superannuation savings for a home deposit, up to an amount of $100,000, $150,000 or without any cap. If they sold this home, they could use the proceeds including the original superannuation amount for their second home, without ever returning any amount to their superannuation balance.
1.3Evidence to the March hearing demonstrated that releasing superannuation balances into the housing market would:
Push house prices up further;
Disadvantage young home buyers who wouldn’t have enough superannuation to compete in an even hotter housing market;
Reduce superannuation balances in retirement; and
Increase the tax burden on future generations.
1.4Government Senators believe this inquiry should focus on productive improvements to the retirement system, not on gutting one of its central and most successful pillars – Australia’s world-leading superannuation system.
1.5Australia has an enviable retirement system in global terms, underpinned by a strong and successful superannuation system. Along with the Age Pension, and private savings, our superannuation system means Australians are retiring with wealth and incomes unimagined in previous generations.
1.6Last year, the Senate agreed to hold an inquiry into improving aspects of Australia’s retirement system.
1.7In March 2024, the Committee held a public hearing focussed solely on the Coalition’s ‘super for housing’ policy.
1.8This hearing failed to make any case that ‘super for housing’ should proceed.
1.9The Coalition’s ‘super for housing’ agenda does not appear to be directed at any identifiable policy concern with our nation’s successful superannuation system but would undermine the retirement savings it creates.
1.10It also does not appear to be directed at improving home ownership, given the overwhelming consensus of evidence to this inquiry that flooding the housing market with superannuation dollars would only further inflate house prices and reduce affordability.
1.11Multiple studies have modelled the impact of ‘super for housing’ on house prices and shown it to be inflationary. Australian capital city median house prices have been estimated to increase by tens of thousands of dollars.[1]
1.12Writing in The Age and Sydney Morning Herald, Brendan Coates and Joe Moloney from the Grattan Institute noted that allowing a major cohort of Australians to access their superannuation all at the same time would add even more demand for housing, which would then push up prices, particularly within the already highly competitive lower end of the property market.[2]
1.13The Coalition took a proposal for people to empty their superannuation balances by up to $50,000 to purchase a first home to the last election.
1.14Even putting aside, the inflationary impact of this ill-advised policy on house prices, this policy fails to meet its own stated objective.
1.15The $50,000 limit would not be enough for a deposit for a home in most Australian markets.
1.16In an apparent attempt to solve this problem, the Chair proposes to double down on the policy, lifting or even uncapping the withdrawal amount:
Chair: So you think that, if this is going to be successful, $50,000 is not enough?
Mr. Ng: No, effectively not. That’s really only going to allow you to borrow $250,000.[3]
1.17Expanding the Coalition’s ‘super for housing’ policy in this way would only pour fuel on the fire of house price inflation contained in their existing proposal. The higher the withdrawal cap, the larger the impact on prices.
1.18That inflation would in turn most disadvantage those for whom the policy is inferred to assist – younger first home buyers locked out of the market.
1.19Witnesses noted that the revised scheme would clearly favour older home buyers who already have larger superannuation balances.
1.20‘Super for housing’ proponent Mr. Rice, who appeared with Mr. Ng, noted that:
We actually think if this policy came in it would target people aged 35 to 50 who had actually built up a reasonable balance of superannuation.[4]
1.21This reflects research conducted by Super Members Council on ABS data which shows a couple seeking to buy a first home would only have a combined superannuation balance large enough to form a house deposit in their mid-40’s.[5]
1.22Government Senators note that the problems for younger - and low and moderate income - first home buyers with any ‘super for housing’ policy are many.
1.23First, these cohorts don’t have enough superannuation to use for a deposit anyway. The median superannuation balance of people around 30 years old is around $38,000.[6]
1.24Second, if the Chair’s proposal were to become law, they would be unlikely to be successful competing for a home with first home buyers with much higher balances of $100,000 - $150,000 or more.
1.25Third, the market they would be competing in would literally be ‘supercharged’ with house prices moving even further out of reach.
1.26Fourth, the $38,000 they took out of their super today, would lose critical compound returns. As one witness put it with reference to early release policies during COVID:
Let’s again use the COVID example, where it was $20,000. For some people, that was their entire balance. That should have been either a 10 percent max or $20,000 in my view. Because what that does, for those people on the $20,000, zero times zero is still going to be zero. They’ve lost all chance of compounding interest on the investment return.[7]
1.27The flaws of the ‘super for housing’ policy were summarised by Ms Thistleton from the McKell Institute who told the hearing:
We also found, too, that the benefit would only pass on in the short term to a small group of young people that were already wealthy enough to have accumulated significant superannuation savings. But even for them, their long-term financial security would be compromised, because the housing market just doesn't consolidate the way that the superannuation scheme does too.[8]
1.28House prices have increased significantly, with prices in major capital cities out of reach for too many, at several times annual average salaries.
1.29Overwhelmingly, witnesses agreed that building more houses is the key to moderating prices, and that ‘super for housing’ would be inflationary.
Mr. Ng: We recognise that using the superannuation balance could have a potential inflationary effect and worsen the housing pricing issues. Giving people access to super to actually get home ownership probably needs to be coupled with some sort of supply side solutions as well.
Mr. Rice: We think there needs to be a dramatic increase in supply.[9]
1.30Indeed, some proponents of ‘super for housing’ agreed that to release superannuation funds into the housing market without significantly increased supply would ‘backfire’.
Chair: So you agree with Michael Rice and Peter Tulip that there should be an option for people to use their compulsory contributions to save for a first-home deposit?
Ms. Downey: Again, if it were introduced tomorrow, it would probably backfire in the short-term because of the supply challenges.[10]
1.31This consensus extends to retirement living, as representatives of the Retirement Living Council confirmed:
Senator Walsh: And you are the retirement living part of the Property Council. Do you have evidence for us on the importance of supply in this…?
Mr. Gannon: I might start… Supply is paramount in this part of the housing market.[11]
1.32In addition to agreement that increasing supply is critical to moderating house prices, witnesses saw an important role for the superannuation sector in contributing to supply, as institutional investors.
Senator Walsh:In terms of building that supply of retirement living, how important is getting the settings right to encourage institutional investors into that segment of the market?
Mr. Cockerill: Institutional investors are critical to helping us grow this sector. We spend a lot of time with institutional investors.[12]
1.33Similarly, Mr. Innes of Futureproof Financial agreed that it is preferable to engage superannuation funds as institutional investors in the market, rather than encouraging release of funds for housing.
1.34In making a proposal for funds to be able to back mortgages, he also noted the risks to funds’ institutional capacity of early release schemes like ‘super for housing’.
Senator Walsh: Just to clarify, in the interests of time, I heard what you said about opportunities for institutional investment, but my question was about the implications for super funds if they had to manage multiple early release options that people could take at different points in their life, for housing, for HECS? What implications might that have on their ability to invest in general?
Mr. Innes: I agree with you. That is a difficult one for them to manage, and that’s why I think an indirect approach is a better one where they do it through their investment activity, not through early release programs. I agree with you on that 100 percent.[13]
1.35These risks are well-understood in the investment community. If superannuation funds have to carry more liquid assets to allow for ad hoc early release, they are likely to make lower returns. This in turn would reduce returns for all fund members.[14]
1.36In summary, the overwhelming evidence to the inquiry was that ‘super for housing’ would inflate house prices, that increasing supply is the answer to prices, and the superannuation funds could play a vital role in investing in supply.
1.37Government Senators therefore welcome the Albanese Government’s policies to increase supply, comprising a historic $25 billion pipeline for new housing investment across private, social and affordable housing over the coming decade.
1.38We note the failure of the Chair’s report to articulate any measures to support housing supply.
1.39We further note the failure of the Chair’s report to articulate any measures such as the agreement from National Cabinet for a National Planning Reform Blueprint to outline planning, zoning, land release and other measures to improve housing supply and affordability.
1.40The impact of early release policies on superannuation balances is well understood.
1.41At retirement, the returns you have made on your contributions make up between two thirds and three quarters of your balance.[15] Preserving your balance to reap the rewards of compound returns is a cornerstone of an effective superannuation system.
1.42The Coalition’s COVID early access scheme, which allowed withdrawals up to $20,000, saw 3 million Australians withdraw $38 billion from their super balances.
1.43Analysis by the Super Members Council showed a 30-year-old who withdrew the full amount could be $93,600 worse off at retirement, in today’s dollars.
1.44Devastatingly, 725,000 Australians effectively wiped out their entire balance, mostly young Australians. This will have a significant long-term effect on superannuation balances.[16]
1.45If this impact was to be repeated by allowing access to superannuation for housing, many more Australians would similarly retire without adequate superannuation balances to provide a secure retirement income.
1.46Depleting superannuation balances during the accumulation and preservation phases of super also imposes a tax burden on future generations through the need to meet higher than needed demand on the Age Pension.
1.47Longitudinal modelling conducted for the Super Members Council estimates the Coalition’s COVID early release scheme will ultimately cost the taxpayer between $75 billion and $85 billion in today’s dollars by the end of the century. This would cost a 20-year-old today an extra $3,000 in taxes across their working life.[17]
1.48The Chair’s report recommends further examination of approaches that would utilise superannuation balances as a form of co-investment in a shared equity scheme. The Chair’s report aptly notes that ‘there are a range of details and policy settings that need to be resolved’.
1.49Government Senators note that the Coalition Senators’ Dissenting Report of the Senate Economics Legislation inquiry into the Help to Buy Bills labelled the shared equity scheme as “…not a home ownership policy. It’s a home nationalisation policy.” Coalition Senators also recommended that the Bills not be passed.[18]
1.50If the Coalition are now looking for a shared equity scheme, they should support the Help to Buy bills currently before the parliament.
1.51As evidence to the Senate Economics Legislation Inquiry into the Help to Buy Bills demonstrated, the scheme is an example of how government policies can address demand side barries without being inflationary to house prices.
1.52Government Senators reiterate that the Coalition should stop standing in the way of additional support for up to 40,000 people and vote for the Help to Buy Bills in parliament.
1.53Fundamentally, the Chair’s proposed shared equity scheme, where funds invest in an individual member’s house, would likely be inconsistent with the requirement that trustees perform their duties in the best financial interests of all members.
1.54The Chair also recommends using superannuation balances as collateral for a first home loan.
1.55This proposal also replicates the flaws of the existing ‘super for housing’ proposal, would push house prices up further, and disadvantage young home buyers who wouldn’t have enough superannuation as collateral to compete in an even hotter housing market.
1.56In addition, the proposal generates a whole new range of concerns.
1.57Evidence in the Chair’s report is clear, and as noted by the Chair, ‘… an individual’s superannuation balance is at risk of being lost in the case of foreclosure…”
1.58Borrowing against superannuation and exposing the balance to the risk of foreclosure and recovery by a lender is a significant concern that should not be quickly dismissed.
1.59Superannuation is a protected asset. Even in the case of bankruptcy, superannuation balances remain to support people in retirement. Removing this protection by allowing balances to become collateral would put retirement savings at risk.
1.60The Chair’s report notes that the Age Pension remains available as a safety net in the event of foreclosure. This underscores the concern of Government Senators that using superannuation in this manner will increase house prices, not improve affordability, and increase the cost to the taxpayer.
1.61The Chair’s report also suggests a significant expansion of the FHSSS via the abolition of existing contribution and withdrawal caps that would have genuine equity and revenue concerns that need to be properly considered.
1.62The Coalition established the FHSSS in 2017.
1.63The scheme allows first home buyers to make voluntary contributions to their superannuation and release these savings, with associated earnings, for a home deposit. It takes advantage of the concessional tax treatment of superannuation — 15 per cent on earnings and concessional contributions, compared to the applicable (and generally higher) marginal tax rate.
1.64Opening up the scheme by removing contribution and withdrawal caps would be inflationary and have significant revenue impacts – with the concessional benefit largely flowing to higher income individuals – that the Coalition would need to account for, if it was to progress with this policy.
1.65The Chair’s report also discusses streamlining the FHSSS. Treasury Laws Amendment (2023 Measures No.3) Bill 2023 addressed significant pain-points in the scheme which unfortunately meant around 4,000 individuals had been left unable to buy a home through the FHSSS because of the design by the Coalition.[19]
1.66The Government’s changes improved both the flexibility around the timeframe to access funds upon purchasing a home and the administration of the FHSSS by the Commissioner of Taxation.
1.67The ‘super for housing’ policies canvassed in this report fail on multiple fronts.
1.68It is unclear exactly what policy problem the proposals are attempting to solve.
1.69If it is enhancing retirement incomes, the policy fails by encouraging first home buyers to empty their super, lose compound returns, and retire with less savings.
1.70If it is enhancing home ownership, the policy fails by inflating house prices and making no improvement to housing supply. It fails by further locking out younger first homebuyers with lower superannuation balances from a proposed super-heated housing market.
1.71Evidence to the March hearing dedicated to ‘super for housing’ policies was clear on all these points.
1.72The policy is inflationary to house prices.
1.73It is inequitable in forcing young, lower and middle-income homebuyers to compete against those who can withdraw more.
1.74If it is targeted to anyone at all, it would be older, higher-balance buyers emptying significant superannuation balances to buy a house. It would disproportionately benefit men, who have higher average and median superannuation balances than women.
1.75This outcome would in turn undermine the core goal of superannuation – to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable way. It will place a greater burden on future generations of taxpayers to meet the cost of a rising Age Pension – the very challenge the superannuation system was designed to alleviate.
1.76Evidence to the March hearing also repeatedly found that supply is the number one priority for moderating house prices.
1.77Yet the Chair’s report offers no solutions whatsoever to this fundamental challenge.
1.78It is silent on the Government’s $25 billion pipeline of private, social and affordable housing, including the Housing Affordability Future Fund which the Coalition voted against.
1.79It is silent too on the National Cabinet’s Planning Reform Blueprint, designed to accelerate housing approvals and builds, supported by the New Homes Bonus program.
1.80Government Senators reject the proposals in the Chair’s report for these reasons.
1.81We reiterate that the complete lack of evidence to support the proposals indicates that the Coalition’s ‘super for housing’ agenda is not designed to help Australians buy a home, or to assist them in retiring with dignity.
Senator Jess Walsh
Deputy Chair
Labor Senator for Victoria
Footnotes
[1]See, for example, Super Members Council, Submission 16; The McKell Institute, Submission 21; Association of Superannuation Funds of Australia, Submission 27.
[2]Brendan Coates and Joey Moloney, ‘Coalition’s super-for-housing policy would only help wealthier homebuyers’, The Age and The Sydney Morning Herald, https://www.theage.com.au/business/the-economy/coalition-s-super-for-housing-policy-would-only-help-wealthier-homebuyers-20240505-p5fp0g.html(accessed May 6 2024).
[3]Mr Jonathan Ng, Proof Committee Hansard, 12 March 2024, p. 12.
[4]Mr Michael Rice, Proof Committee Hansard, 12 March 2024, pp. 12-13.
[5]Super Members Council, ‘Economically reckless push to raid super sets a trap for young Australians’, https://smcaustralia.com/news/economically-reckless-push-to-raid-super-sets-a-trap-for-young-australians/(accessed 6 May 2024).
[6]Australian Taxation Office, Individual Statistics, Chart 12: Individuals – median super balance, by age and sex, 2020–21 financial year, https://www.ato.gov.au/about-ato/research-and-statistics/in-detail/taxation-statistics/taxation-statistics-2020-21/statistics/individuals-statistics#IndividualsStatistics(accessed 8 June 2023).
[7]Mr Simon Jones, Home Super, Proof Committee Hansard, 12 March 2024, p. 10.
[8]Ms Rebecca Thistleton, The McKell Institute, Proof Committee Hansard, 12 March 2024, p. 39.
[9]Mr Jonathon Ng and Mr Michael Rice, Proof Committee Hansard, 12 March 2024, p. 14.
[10]Ms Liana Downey, Blueprint Institute, Proof Committee Hansard, 12 March 2024, p. 29.
[11]Mr Daniel Gannon, Retirement Living Council, Proof Committee Hansard, 12 March 2024, p. 6.
[12]Mr Nathan Cockerill, Retirement Living Council, Proof Committee Hansard, 12 March 2024, p. 7.
[13]Mr John Innes, Futureproof Financial, Proof Committee Hansard, 12 March 2024, p. 22.
[14]Industry Super Australia, ‘Super for housing could torpedo every worker’s savings’, Mirage News, 19 May 2022, https://www.miragenews.com/super-for-housing-could-torpedo-every-workers-785088/ (accessed 9 May 2024).
[15]Super Members Council, Submission 16 – attachment 1, p. 3.
[16]Super Members Council, Submission 16, p. 7.
[17]Super Members Council, Submission 16 – attachment 1, p. 7.
[18]Senate Economics Legislation Committee, Help to Buy Bill 2023 and the Help to Buy (Consequential Provisions) Bill 2023 [Provisions], Coalition Senators' Dissenting Report, pp. 29-35.
[19]The Hon Stephen Jones, Assistant Treasurer and Minister for Financial Services, ‘Improving the flexibility of the First Home Super Saver Scheme’, https://ministers.treasury.gov.au/ministers/stephen-jones-2022/media-releases/improving-flexibility-first-home-super-saver-scheme(accessed 8 September 2023).
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