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.
Good analysis. It’s increasingly obvious this policy is primarily motivated by Liberal hatred of compulsory superannuation, although the Morrison Gang hopes it will also get plenty of votes in this election from confused house buyers who don’t understand it and greedy house sellers who understand it very well. Jane Hume was unconcerned about the inflationary effect on house prices that she acknowledged in her radio interview because to her it’s incidental. There’s a good reason she’s the Minister against Superannuation.
In response to that interview Labor interviewees such as Greg Combet made the obvious point that if superannuation funds can be used for a house deposit, why not for almost anything else somebody deems desirable? Electric vehicles? Weddings? House repairs and improvements? I suspect Jane Hume was delighted with that criticism, because that’s exactly the debate she wants. Get the public to take seriously the idea that your own superannuation is just a savings account to use as and when you will and that’s the end of superannuation for retirement. Then the Liberals can concentrate on the aspect they like – superannuation as a tax avoidance scheme exploited to the hilt by the very wealthy.
A perfect title for the Minister’ function.
Ministers usually are ‘for‘ something, unlike Hume – as Talcum was for Minister for NBN Destruction.
There was once said to be an executive position at Gore Hill, pre the David downHill broom under Hawke in the late 80s, called the Programme Prevention Officer.
Apparently quite a stressful job because the vast estate – almost four acres of verdant scenery, bushland with studios, sound stage, production offices, dressing rooms, laundry facilities, wood/metal workshops, cutting edge broadcasting technology etc etc – the sheer creativity was palpable the moment one entered the old wrought iron gates .
Given that the Property Council says that Morrison’s scheme is great, means it must be bad for home buyers.
“Real Estate Commissions Inc.”?
I’m surprised there has not been more discussion about the effects, and the chickens yet to come home to roost, over Scotty’s Homebuilder (cum McMansionImprover) program. Favouring one his corps of “mates” – building tradies – with a guaranteed flow of work through the pandemic, he unleashed a mini-boom at a time when that same pandemic caused serious disruption to supply chains. Cost of materials soared, and skilled labour very competitive to secure. Many Brisbanites needing repairs to flood/storm damaged homes are still waiting. The $25K grants have simply evaporated in spiralling costs, increasing home prices more than ever.
And according to some analysts there is probably worse to come, with project home builders locked into fixed price contracts struggling not only to make any profit, but facing the prospect of liquidation leaving behind unfinished homes. Thanks Scotty, you’re a real mate! Scott’s yellow brick road turning into the road to Hell paved with good intentions.
If successful on Saturday, one of the first tasks of an Albo government may be to rescue a lot of stranded first-home buyers who have sunk everything they had into one of those half-finished homes.
https://www.newcastleherald.com.au/story/7704666/a-lot-more-insolvencies-to-come-expert-warns-of-building-industry-crisis/?cs=9676
This is a criminal attack on young people fof the benefit of existing house owners.
There is another group of psychpaths who think the same way as this government – domestic violence perpetrators. They do everything they can to exhaust their partners financial resources by whatever means. One of the ways is by limiting their ability to work. Another is by stealing from them. They do it because they want control over the person and its a lot easier to control people who are dependant and dont have the resources to take independant action, such as leaving the relationship.
Thats what this plan does. It reduces the options for independant action of anyone who accepts the deal. They will become dependant on some one else. It might be the govts Aged Pension. It might be some rich liberal voter who commits them to a reverse mortgage in their retirement. No matter how you look at this it turns your guts.
Hopefully the voters will see it as a last CYNICAL and desperate ACT.
Unfortunately, I think that short-term thinking and greed will win and many will fall for it. There is a reason why certain political parties do what they can to discourage certain demographics from obtaining higher education and fill people’s heads with ‘aspirational’ nonsense. It makes easier to fool and exploit people.