There are only two reasons to suggest allowing young Australians to raid their superannuation funds to get into the housing market – economic illiteracy, or the desire to dismantle core elements of Australia’s ‘social wage’.
The economic harm of the idea is straightforward.
On the housing side, capital tipped into the market would be leveraged up by the banks. The housing credit bubble would grow larger. House prices would rise, and first home buyers, investors, and the banks themselves would end up even further out on a limb.
On the super side, young Australians would be left with the bulk of their super invested in a single, risky asset class that simply cannot repeat that capital growth of the past two decades.
Cock-up or conspiracy?
It’s hard to believe that the Coalition and crossbench MPs who want a ‘debate’ on this idea haven’t grasped these fundamentals.
That’s why former prime minister Paul Keating sees an ideological agenda at work. He wrote on Monday that: “In the last 40 years, the Australian community has adopted two new community standards; universal health protection with Medicare and universal retirement coverage with superannuation. The Liberal Party has done everything within its power to either thwart or destroy both of those standards.”
He forgot to mention the Howard government’s success in undermining the ‘progressive’ tax scale itself, by creating a suite of tax lurks that are disproportionately generous to the wealthy.
However, the issue today is neither Medicare, nor tax concessions for the wealthy. It’s the super system.
Time and again, the superannuation guarantee that Mr Keating set up in 1991 has been misrepresented as an attack on individual liberty.
Former treasurer Joe Hockey wailed about the injustice of locking up money that belonged to the individual, when it should be up to them to decide what to do with it.
And that complaint was made again last week by Simon Breheny, director of policy at the Institute of Public Affairs.
He wrote in the Financial Review: “The most obvious [objection] is that money in your superannuation account is yours. You have earned it, and you should be able to do with it what you like. If you want to use your money to buy a house you should be free to do so.”
Actually, they’re both wrong.
State and federal governments raise taxes to fund infrastructure, education, health, administration and so on – goods and services which on balance make the economy work more efficiently and increase the ‘common wealth’.
Activities that add to that wealth are to be encouraged – and one of the easiest ways to do that is through tax concessions.
When the superannuation guarantee was created, working Australians were forced to invest in their own future, primarily so the nation could afford to care for them in old age.
The flat 15 per cent tax on every dollar added to a super fund is, for most middle Australians, a lot less than their effective personal tax rate.
The difference – a tax concession – is handed back for a reason. If Australia had not amassed a pool of $2 trillion in superannuation assets so far, with more to come, we’d have had no hope of providing for the ageing population in retirement.
So no, it’s not true that money in your super account is your and yours alone.
It has not only been topped up by your fellow taxpayers, but it is a comprehensive plan to prevent older Australians living in cars and dining on tinned dog food.
The super-into-housing bubble idea is a direct threat to that system.
It would make mortgage brokers, banks and the real estate industry richer, but it would swindle young Australians out of the sensibly invested assets that will otherwise give them a fighting chance of a dignified retirement.
For that reason alone, it must be stopped.