Every Australian worker will be up to $30,000 worse off in retirement under Scott Morrison’s flagship policy allowing people to raid their superannuation to help buy a home, according to Industry Super Australia analysis.
In analysis released on Wednesday, ISA, which represents the profit-to-member industry fund sector jointly run by employers and unions, said the move would carve between 0.1 and 0.2 percentage points a year from the returns enjoyed by retirement savers.
This was because funds would need to hold more cash on hand to pay withdrawals to members, reducing the amount that can be pumped into far more lucrative but illiquid long-term investments such as real estate or infrastructure.
“Not only will throwing super into the housing market jack up prices and make houses less affordable, but all Australian workers will also be worse off because of lower investment returns,” ISA’s chief executive, Bernie Dean, said.
“Super is meant to be for people’s retirement, not supercharging house prices and pushing the home ownership dream further away.”
Under the Coalition’s plan, people would be allowed to withdraw up to 40% of their superannuation, to a maximum of $50,000. They would be required to return the money to their fund when they sell the property, together with a share of any capital gain.
If the scheme goes ahead a 30-year-old worker on the median wage who has $20,000 in the fund could be between $14,700 and $29,100 worse off by retirement, even if they did not draw down on their super for a house deposit, ISA said.
Economists and the Coalition’s own minister for superannuation, Jane Hume, agree the plan would cause an increase in house prices in Australia, which are already some of the least affordable in the world.
Morrison has defended the policy, saying it is “a balanced, responsible plan which we’ve thought through, which we think minimises any potential impact on house prices”.
He also pointed to New Zealand, where workers are allowed to use their Kiwisaver superannuation accounts to help fund a home deposit.
Dean rejected the comparison, saying that Kiwisaver returns were consistently worse than those enjoyed by Australians, in part due to the fact withdrawals for home purchases are allowed.
Kiwisaver accounts return about 1% a year less than the average Australian balanced MySuper fund, according to ISA’s analysis.
ISA said if Kiwisaver’s performance was replicated in Australia a 30-year-old on about $60,000 wages with a $20,000 starting balance could receive as much as $131,600 less in retirement.
The Coalition’s policy is also opposed by the for-profit super sector, represented by the Financial Services Council.
On Sunday, the FSC’s chief executive, Blake Briggs, said the policy “weakens the sole purpose of superannuation, which is to provide higher standards of living in retirement”.
He said the idea had been rejected by a parliamentary inquiry.
“The government’s own majority report into housing affordability and supply in Australia concluded that superannuation should only ever be used for housing if there were commensurate measures to increase supply,” he said.
“The government has an obligation to do more to boost supply, otherwise unleashing superannuation savings on the housing market risks driving prices higher still.”
