This isn’t the first election when the Coalition promised to allow the use of super for housing.
In what might be an auspicious sign for Scott Morrison and his chances for victory, the Coalition went to the 1996 election promising to examine “allowing first homebuyers to withdraw a portion of their superannuation contributions from their superannuation fund or Retirement Savings Account for the deposit on their first home”.
In government, having examined it — a discussion paper was issued by Treasury with the 1997 budget — the Coalition abandoned the idea.
In the 1998 budget, buried in the budget measures paper, the government reported:
A superannuation for housing scheme could not be targeted efficiently to those individuals who would not otherwise achieve home ownership before retirement. It would also reduce retirement incomes and national savings.
What happened in the interim? Treasury actually examined the proposal, and found it wanting.
This was a different era — when Treasury still had some of its credibility as the powerhouse of economic policymaking, before years of politicisation by Howard, Abbott and Morrison wrecked it. And it was a different era in super. Compulsory super was still a relatively new thing, introduced, in the teeth of relentless hostility from the Coalition, by Paul Keating. Howard and Costello had already broken their promise to allow the legislated increase in super saving to 15%. The national superannuation pool was less than $300 billion.
But even Howard and Costello couldn’t bring themselves to wreck super by allowing access to it for housing, because Treasury told them their proposal was a dud. Not merely did Treasury release a discussion paper, it undertook a series of modelling exercises around all the government’s proposed changes to super. The one looking at super for housing concluded:
there would be a moderate but definite detrimental impact on national saving associated with a targeted scheme — of the order of 0.2% of GDP in 2019-20. Initially the scheme would lead to some increased taxation associated with the housing withdrawals but in the long term this is more than overtaken by lower earning taxes and additional pension costs and lower income taxes from the retired.
What Treasury modelled wasn’t what Morrison and the anti-super crowd have proposed now. Crucially, the Howard-Costello policy did not require people who had raided their super to repay it when they sold their house — a back-end that one suspects people superficially attracted to the Morrison proposal don’t quite realise.
But the other difference is that what Treasury examined in 1997 was a targeted scheme. Morrison’s is completely untargeted — there is no limit on which first-home buyers can access the scheme or their incomes and no limit on the value of the property that can be bought. As the Coalition admitted in 1998, that means that many of the people raiding their super would have been able to buy a home anyway. They would have forfeited the certain benefits of compounding interest for the vagaries of housing market values, and paid more for a home than they would have if they couldn’t have raided their super, which, as Jane Hume acknowledged yesterday, would increase prices.
In attempting to explain away Hume’s profoundly damaging admission, Morrison has been trying to argue that the increase in demand created by allowing people to raid their super would be offset by an increase in supply created by Morrison’s policy of widening access to superannuation for the proceeds of the sale of homes by older people, in order to incentivise downsizing (Labor promptly adopted that policy itself).
If you think through Morrison’s logic, what’s he saying? That there’ll be no net change in housing affordability because the increase in demand is offset by the increase in supply — although Morrison, in admitting there would be a “marginal” impact on prices, appeared to suggest yesterday that the increase in demand would not be fully offset by an increase in supply (clearly he has no modelling that he dares release). The same criticism could be made of Labor’s Help to Buy scheme whereby the government would help fund equity in first-home purchases.
So by Morrison’s own admission, his housing policy would have zero impact on affordability — or perhaps “marginally” reduce it.
Costello and Howard were right. Howard was right just six weeks ago when he bluntly rejected super for housing again. “Super is for retirement.” And Treasury agrees.
