Finance Your Super Raiding super ‘not the answer’ to affordable housing

Raiding super ‘not the answer’ to affordable housing

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Allowing early access to super to buy a home is a superficially attractive idea which seems to provide a popular ready-made news and talkback radio topic every six months or so.

This exciting prospect then runs immediately into a wall of counter-argument about lack of housing supply and the self-defeating consequence of inflaming an already overpriced housing market.

These are valid responses but bigger still is the question of why we would deliberately introduce a measure that would weaken and possibly cripple our highly successful system of compulsory retirement saving.

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The idea of raiding super for a house deposit or a HECS debt or any other immediate expense is completely at odds with the singular purpose of our super system.

The best thing about super is the compound interest. But if you drawdown early, you lose that. Photo: Shutterstock. 

Super was introduced to encourage Australians to build private savings to secure a comfortable retirement and take pressure off the age pension.

The magic ingredient is compounding interest, a long-term process that relies on keeping your money safely, patiently locked away to deliver a sizeable pay-off.

Our super system is still some years away from maturity, but we are yet to realise the full benefit of that process.

As a nation we are building towards it with collective savings now worth close to two trillion dollars, however we have some serious structural repairs that have to be attended to sooner rather than later if we are to reap the rewards. There is a consensus and great concern about this among economists, academics, politicos, employers, unions and other specialists in the field.

The priority for super must be a careful, holistic package of reforms to ensure a decent retirement living standard for as many people as possible in coming decades. Most urgent is a more equitable targeting of tax concessions and a re-think of the recent regressive pensions changes.

Without these changes, super will not fulfill its great potential. Without these changes, we know that women in particular will continue to be disadvantaged. As many as 80 per cent will still not be reaching a comfortable level of retirement by 2055.

We cannot afford the persistent ‘super for housing’ thought bubble to distract us from the real task at hand.

There is no easy answer to the housing conundrum, says David Whiteley. Photo: Getty

Affordable housing is unquestionably a priority too but early access to super is the wrong answer.

Releasing super savings for a deposit would increase the leverage of Australian households and concentrate asset risk into residential property. Perversely, retirement savings would be increasingly contingent on housing price growth – exactly the opposite of what would be needed for long-term improvement in housing affordability.

Super funds could also face increased liquidity demands, undermining optimal asset allocation and potentially reducing investment returns to members.

There is no easy answer to the housing conundrum. There are complex planning and approval processes to consider, issues over land ownership, funding needed for infrastructure for greenfield developments and public concern about urban density and ‘infill’ developments.

Public policy could focus on directly expanding the supply of housing perhaps by providing government credit support for institutional investment in affordable rental housing and limiting negative gearing to new construction.

Super is seen as the easy fix for any number of thorny public policy problems. It is gratifying that we have purpose-built such a successful system and it is truly one of the great reforms of the modern era.

The great challenge now is to fend off temptation and pressure, which will come from many quarters and continue to increase as the bounty grows, while we keep patiently building this national asset.

David Whiteley is Chief Executive of Industry Super Australia.

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