Inflationary NZ super-for-housing scheme a warning on Dutton’s election pitch

Peter Dutton’s major home ownership offer to Australian voters would actually drive up house prices and slash home ownership, an analysis shows.

As Peter Dutton and the Coalition campaign on a super-for-housing scheme, the corresponding New Zealand policy has been shown to push up house prices and slash home ownership.

Ahead of the impending Australian election, the Liberal National Party coalition is promising to give eligible first-time buyers immediate access to $50,000 of their super to buy a home if they win the election.

Kiwis have been able to pull essentially their entire superannuation savings – minus $1000 that has to stay in the super account – to buy a first home since 2010.

New analysis by the Australian Super Members Council (SMC) says the scheme is a cautionary tale back on our side of the Tasman Sea.

Opposition Leader Peter Dutton is offering voters a chance to raid their superannuation. Picture: NewsWire / Martin Ollman

“There is broad consensus among the overwhelming majority of leading economists, and policymakers, that demand-side measures such as allowing super to be used to purchase a home are poorly targeted and won’t arrest the systemic decline in home ownership for younger Australians,” the SMC report says.

Modelling done last year by the SMC figured Australian house prices would rise by an average of $75,000 (9 per cent) in the five major capital cities if super-for-housing went ahead.

In 2022, then prime minister Scott Morrison took a similar scheme to the election.

After the Coalition was booted from government, Labor enacted a more moderate scheme. You can withdraw up to $15,000 of your voluntary contributions from any one financial year, up to a total of $50,000 across multiple years.

Mr Dutton’s opposition are promising voters can pull 40 per cent of their super – up to $50,000 – to buy a first home. Separated women would also be eligible.

Yet few people under the age of 40 have enough superannuation savings to pull out $50,000.

Unzoned councils in Auckland (pictured), Canterbury, and Lower Hutt accounted for about two-thirds of all the dwelling consents issued across New Zealand in 2023. Picture: Supplied

The average male aged 30-34 has about $83,000 in their super. The average woman aged 30-34 has about $60,000. The median super balance for people aged 30-34 is more than $10,000 less than the averages.

Most Kiwis who drew on their super to buy their first house are still working, as the scheme began just 15 years ago, so there is little data on how many people are struggling to live during retirement having emptied their accounts.

But there is a wealth of data connecting the New Zealand scheme, house prices, and home ownership rates since 2010. Prices have risen 134 per cent compared with 86 per cent over the same time frame in Australia.

In Aotearoa, homeownership has fallen 7 per cent among people in their 30s.

“This data shows starkly that KiwiSaver withdrawals have failed to achieve any improvement in home ownership rates for New Zealanders and, instead, have contributed to making housing more unaffordable,” the Australian Super Members Council concludes.

As the KiwiSaver withdrawal scheme kicked in, buyers had to pull from their super to compete for a house. On the latest figures, 77 per cent of first-home buyers are dipping into KiwiSaver for a house deposit, up from 65 per cent a decade ago.

New Zealand Prime Minister Chris Luxon and Housing Minister Chris Bishop scrapped a $10,000 first-home buyer grant scheme in early 2024. Picture: Hagen Hopkins / Getty Images

In the decade before Kiwis could use their money in this way, New Zealand house prices rose 7.6 per cent. In the first decade of the scheme, prices grew 9.2 per cent.

In 2016, the NZ Treasury said the scheme was inflationary and had self-defeating tendencies; a proposal to expand the scheme would have increased demand for lower-priced housing when demand already exceeded supply.

“The likely effect would therefore be to increase house prices, to some extent negating the goal of the proposal and negatively impacting housing affordability,” the Treasury found.

As house price growth accelerated, people had to take out more and more of their super to compete. Since 2014, the total number of Kiwi first-home buyers taking a mortgage with a loan-to-value ratio of more than 80 per cent has tripled, and the proportion of high LVR loans taken out by first-home buyers has risen from 25 to 75 per cent.

Australians pay more into super than New Zealanders. If Aussies can pull a big chunk of their superannuation now, that would put an increasing burden on the public purse come retirement time.

Peter Dutton’ is reviving a failed Morrison government policy. Picture: NewsWire / Martin Ollman

In early 2022, Mr Morrison picked the final week of the election campaign to pitch his $50,000 super-for-housing scheme. “It’s your home and it’s your super,” he said.

The architect of Australian superannuation, Paul Keating, said the Morrison government was “intellectually corrupt”.

“(The Liberals) object to working Australians having wealth in retirement independent of the government … The Libs believe ordinary bods should be happy with the age pension,” Mr Keating said at the time.

As happened around the world, voters kicked the pandemic-era government to the opposition benches, and the scheme never got up.

Three years later, Mr Dutton is replicating Mr Morrison’s policy offer.

Multiple media advisers from Mr Dutton’s office failed to respond to NewsWire for this article.

Originally published as Inflationary NZ super-for-housing scheme a warning on Dutton’s election pitch