Labor has slammed the government’s early super access scheme after new research showed a massive jump in gambling expenditure by people taking advantage of it.
Shadow Assistant Treasurer Stephen Jones said: “Today we learn that one in 10 dollars that has been provided through the government’s early access to super scheme has been spent on online gambling.
“Labor was reluctant to agree to this scheme in the first place because we were concerned that it was going to be open to abuse.”
Mr Jones said the early withdrawal scheme, allowing people to withdraw up to $20,000 in two tranches by September, was problematic because it was automated and didn’t explore members’ personal situations.
As a result, it had similar issues to the Coalition’s controversial Robodebt scheme, which ended with the government agreeing to repay $721 million to unfairly treated social welfare recipients.
“Instead of learning from the problems with the Robodebt scheme, they’ve just repeated them. They have set up a process with no manual oversight,” Mr Jones said.
The research from credit bureau illion and AlphaBeta, a part of Accenture, found the scheme was not achieving its aim of helping people suffering financial hardship as a result of COVID-19.
In fact, it found that 11 per cent of the money paid out was used for gambling, with many people withdrawing funds under the scheme seemingly in no financial strife.
Nearly half had no income dip
“Nearly half (40 per cent) of those who accessed their superannuation actually saw no drop in their income during the COVID crisis [because] there was no income check prior to allowing people to access their super,” AlphaBeta director Andrew Charlton said.
“While this policy was aimed as a lifeline, what we see is many people accessing their super, who really could have kept it working away until their retirement,” Dr Charlton said.
The research found that, on average, people withdrew about $8000 and spent $2855 more in the two weeks after receiving their withdrawal than they spend in a regular fortnight.
Much of that appears to have been spent on non-essentials, with 64 per cent going towards clothing, furniture, restaurants, gambling and alcohol.
“There’s a group of people out there living very large on pizza and beer courtesy of tax-free super. These are the most expensive pizzas they will ever eat,” illion CEO Simon Bligh said.
The largest segment of the repayments went to debt.
However, the researchers characterised this as not necessarily positive as it included “credit cards, buy now pay later bills and other bills”.
What the researchers characterised as ‘essential’ spending accounted for 22 per cent of the overall spend.
Treasurer Josh Frydenberg said he was unconcerned about the research, which covered the spending habits of 13,000 people.
He told a media conference in Melbourne that “this is their money and they will use that money for a range of purposes … we are going through a once-in-a-century pandemic and people do need that extra funding.”
National Seniors campaign director Ian Henschke told The New Daily “it is sad to see that some people who got their hands on a lump sum spent on consumption, especially on things like gambling. But we take heart that the largest category of spending was to pay down debt.”
While the research showed much of the super withdrawals went to consumption, data released by the Australian Prudential Regulation Authority last week showed the amount of money held in household savings accounts in May had jumped 7 per cent year on year to $1.02 trillion.
Independent economist Stephen Koukoulas said that jump was partly because people withdrawing from super were channeling it into their bank accounts before they did anything else with it.
A rise in savings was to be expected in difficult times, he said.
“During the GFC the savings ratio went from zero to just under 10 per cent [of income] because people became scared to spend.”
Financial literacy deficit
The spending data from illion and AlphaBeta highlights the need to educate young super fund members on the importance of building accounts for the long term, Industry Super Australia CEO Bernie Dean said.
“Stories, like these, of the money being used for gambling and not for essentials are sad and a reminder that young people especially need help to save for their future,” Mr Dean said.
“We have cautioned members that tapping into super should be a last resort as it comes with a steep price at retirement, especially for young members.”
KPMG’s superannuation specialist Ross Stephens said early withdrawals should not be used for unnecessary consumption or a housing deposit.
“A deposit should be saved for from day-to-day income. It shouldn’t be borrowed from your retirement.”
The New Daily is owned by Industry Super Holdings