A Coalition policy proposing the use of superannuation for house deposits could lead to increased rental costs, according to new research. The policy is projected to cause a 9 per cent rise in median property prices, which would likely result in higher rents for tenants.
Analysis from the Super Members Council reveals that if property prices increase as projected, median rents could go up by nearly $3,000 a year, or approximately $57 a week. Various data sources and studies indicate that long-term rents tend to move in line with property prices. Thus, using super for deposits is expected to push property prices up, subsequently driving rents higher.
The research also highlights a significant financial impact on a typical couple who withdraws super early to buy a home. They would have $165,000 less in disposable income after housing costs over their lifetimes. This reduction is due to higher housing expenses and a smaller superannuation balance at retirement.
Misha Schubert, CEO of the Super Members Council, will present these findings today in a speech to business leaders at the Committee for Economic Development of Australia. Schubert argues that allowing first home buyers to access $50,000 from their super for a house deposit would not create more homeowners but would leave people financially worse off. She emphasises the need for bipartisan support to preserve superannuation for retirement purposes.
“A couple withdrawing their super early for a house deposit is projected to be $165,000 worse off over their lives,” Schubert stated. She added that the policy would lead to increased rents, mortgage repayments, stamp duties, and rates, reducing the amount of super available at retirement.
Schubert stresses that the policy would exacerbate financial difficulties for young Australians, particularly renters, and increase cost-of-living pressures. In her speech, she will highlight how superannuation provides dignity in retirement for millions of Australians, boosts retiree incomes, reduces pressure on the pension system, and supports Australian businesses.
The success of superannuation is attributed to its foundational policies of preservation, universality, and compulsion. Schubert warns that undermining these foundations would harm all Australians and reverse the progress made in savings, living standards, and budget stability.
“Australia has built a transformative policy miracle in super. It is the envy of the world,” Schubert will declare. She emphasises the responsibility of both major political parties to protect superannuation and the need for strong bipartisan support to ensure that Australian retirees have sufficient income.
Schubert calls on business leaders to advocate for safeguarding Australians’ retirement savings to avoid risks to retirees’ incomes, potential fiscal damage, higher taxes, and a weakened capital base for the economy.
In her speech, Schubert will also reveal new data indicating that profit-to-member super funds are set to invest nearly $200 billion into Australian businesses and infrastructure over the next five years. Additionally, a typical 30-year-old today could expect to retire with $500,000 in super.
As Australia’s savings pool grows to $3.9 trillion, there is an increasing temptation for policymakers to use super to address unrelated policy issues. The proposal to use super for house deposits is the latest in a series of attempts to divert super from its primary purpose: providing retirement income.
A research briefing note accompanying Schubert’s speech outlines the negative outcomes of the policy. A couple who withdraws a combined $55,000 from their super at age 30 would face $165,000 less in lifetime disposable income after housing costs. This reduction results from higher housing expenses, including higher rent before purchasing a home, and lower retirement income, even if they buy a home two years earlier than they would have without the scheme.
The policy would also force super funds to hold more liquid assets, resulting in lower investment returns for all, including current retirees. International comparisons show that such a change could reduce retirees’ savings significantly. For instance, in New Zealand, where early super withdrawals for house deposits are allowed, investment returns are 1.14% lower than those of typical Australian super accounts. This difference could mean up to $130,000 less at retirement for a 30-year-old.
Schubert concludes by emphasising the potential of superannuation to transform the economic fortunes of Australia and the collective responsibility to protect, grow, and strengthen super for future generations.
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