Urgent need for a wise rethink on policies that raid super

09 May 2024

The Super Members Council calls for an urgent rethink on policy proposals that would erode people’s super, as new modelling shows a push for young Australians to raid all their super for a house deposit could cost taxpayers a cumulative $1 trillion¹.

Super Members Council CEO Misha Schubert said today’s Senate committee report recommending even deeper raids on super for housing ignores the large body of clear economic evidence that shows such policies would only push up house prices and make buying a home even less affordable.

“We urge a swift and sensible rethink on any policy ideas that undermine the strength and success of super to continue to deliver strongly for all Australians in retirement.” 

“To fix the housing crisis, politicians need to focus on policies to boost housing supply – but instead these latest policy proposals simply put more cash into the demand side of the market which will just push up house prices.”

“Ideas to break the seal on super don’t help get more young Australians into homes – they just leave people with less savings in retirement, put more pressure on the federal budget, and run up a bigger age pension bill that all taxpayers have to fund.”

“It’s economically reckless. It sets a policy trap for young Australians because it hikes house prices and pushes the great Australian dream of home ownership even further out of reach.”  

New modelling released today shows the policy proposal the report recommends to completely bust open super for housing could cost taxpayers a cumulative $1 trillion – mostly from higher pension costs.

And a policy to encourage super withdrawals capped at $50,000 could still create a $300 billion cost to federal coffers across coming decades.

The modelling – commissioned by the Super Members Council – shows pension costs climb exponentially as first home buyers start to retire with far less super in the coming decades and are forced to rely more heavily on the taxpayer-funded age pension.

To meet the rising Budget costs, future Governments may have to increase taxes or cut services to offset the extra fiscal pressure created by the bigger age pension outlays.

At its peak, the capped super for a house policy could cost taxpayers an extra $8 billion per year, while the latest push to uncap it would cost taxpayers an extra $25 billion a year.

Previous Super Members Council modelling also shows the policy would simply raise capital city house prices by $75,000 – forcing future generations of young Australians to wait even longer to buy.

All credible economists confirm that a push to raid super for house deposits – whether capped or uncapped would just drive-up house prices – overheating the inflated housing market and pushing the dream of home ownership further away. 

The modelling – completed by Deloitte – is based on a rigorous microsimulation model accounting for population change, super contributions and balances, tax and pension expenditures.

It finds a $50,000 capped super for a house deposit policy risks:

• costing the Budget more than $300 billion by the end of the century and $40 billion cumulatively by 2060 – mostly due to the rising age pension bill but also a loss of tax revenue on super earnings
• adding an extra $320 million a year in costs to the Budget by 2030, more than $3 billion per year at 2060, and peaking at an extra $8 billion a year.

The latest uncapped super for a house deposit policy push risks:

• costing taxpayers around $1 trillion by the end of the century and a cumulative extra $200 billion by 2060
• adding an extra $2.5 billion a year to the Budget by 2030, $15 billion per year by the mid-2060s, and peaking at $25 billion a year towards the end of the century.  

SMC analysis predicts the current capped policy proposal would unleash a massive price hike that would push up prices by 9% or $75,000 for median house in Australia’s major capital cities. An uncapped scheme would set off an even bigger property price hike and cost future taxpayers billions in higher pension costs.

The creation of super is a remarkable Australian achievement that delivers a dignified retirement for millions – and it is rightly the envy of the world. Any time politicians float using super for something else, it undermines its purpose to deliver strong returns for all Australians.

SMC analysis shows a 30-year-old couple who withdrew $35,000 each from their super could retire with about $195,000 less in today’s dollars. That couple would draw an extra $88,000 from the taxpayer-funded pension over their lifetime or about $3,300 a year more.

Capital city	Median house price*	Supercharged price hike	Median after price hike	Difference
Sydney	$1,128,300	7%	$1,206,500	$78,200
Melbourne	$780,500	9%	$849,300	$68,900
Brisbane	$787,200	10%	$865,100	$77,900
Adelaide	$711,600	4%	$740,400	$28,800
Perth	$660,800	13%	$746,800	$86,100
Weighted five city average	$859,700	9%	$934,100	$74,400

Notes: *CoreLogic Hedonic Home Value Index as at 31 December 2023. Prices rounded to the nearest hundred. Property prices encompass both houses and units. First home buyers typically enter the housing market at more affordable price points. However, increased demand from first home buyers will flow through to median property prices as represented in the table.

Source: SMC analysis.