Like clockwork, a familiar bad idea returns to the political debate: let Australians raid their superannuation to buy a home.
This week the clock ticked over, followed by proposals being floated to use super to solve housing affordability challenges. An opposition frontbencher confirming options are being considered.
It follows a One Nation proposal to allow Australians to cash out a quarter of future compulsory super contributions for current spending.
Australians will be the losers from a policy arms race to the bottom. Current proposals would lead to Australians paying more for homes, retiring with less, and leaving future taxpayers to pick up the bill.
Australia’s housing affordability challenge is primarily a supply problem. Increasing the amount of money buyers can access does not create more homes. Instead, it increases demand and pushes prices higher in a supply constrained economy. Research found that allowing first-home buyers to withdraw super for house deposits could increase house prices by up to 10.3%.
We do not need to speculate about the consequences. New Zealand provides a real-world case study. Following the introduction of a similar scheme, house prices grew at twice the rate of Australia’s up to the market peak in 2022, while home ownership rates among people in their 30s fell by seven percentage points. A policy designed to help people into homes ultimately made home ownership harder to achieve.
Every dollar withdrawn from super today is a dollar that misses out on years, and often decades, of compound returns. The immediate gain can look attractive, but the long-term loss is significant. For a 30 year old, withdrawing $20,000 today could mean $93,000 less at retirement (in today’s dollars).
The release of the latest Intergenerational Report reinforces why preserving super matters more than ever. Australia is ageing rapidly, yet Age Pension spending is projected to fall from 2.3% of GDP today to 1.8% by 2066, even as the number of Australians above pension age doubles. The proportion of older Australians relying on government income support is also expected to decline. That is one of the great successes of Australia’s retirement system.
By comparison, the GDP pension burden in other OECD economies is estimated to be 10 per cent in the United Kingdom, 8% in Canada, 7% in New Zealand, and 6% in the United States.
Weakening super by encouraging early withdrawals risks turning back that progress. It would leave more Australians dependent on taxpayer-funded support in retirement and reduce the funds available for the services communities rely on, from hospitals and medicines to schools and infrastructure.
Australia needs more homes. But raiding retirement savings is not the answer. The path to better housing affordability is building more housing, not making more Australians poorer in retirement.
