Crisis sparks second wave of superannuation raids
Superannuation fund members are expected to dip back into their retirement savings from this week as households struggle with surging expenses, with the economy still a “long way” from normality.
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Super fund members are expected to dip back into their retirement savings from this week as households struggle with surging expenses.
More than 2.2 million people have withdrawn $18.5 billion from their superannuation through the Federal Government’s early access scheme introduced in April to help fight the coronavirus economic downturn.
They were able to withdraw up to $10,000 before June 30, and the scheme allows another $10,000 to be taken out in the new 2020-21 financial year that starts on Wednesday.
The popularity of super withdrawals highlights a cost of living squeeze that has seen essential expenses such as utilities, education, childcare, medical care and council rates climb at double the rate of wages.
AMP Capital chief economist Shane Oliver said more super withdrawals were likely, and while the economy had improved since April it was still “a long way from being normal”.
“Some may have seen their jobs come back but on a part time basis,” he said.
Worries about the end of JobKeeper wage subsidies and winding back JobSeeker unemployment benefits were also weighing on people’s minds, Dr Oliver said.
“There’s enough financial uncertainty around to suggest there will be a fairly high demand for the second round of superannuation withdrawals,” he said.
A News Corp Australia analysis of the latest Consumer Price Index and wages data shows sharp rises in the past decade in costs that people can often not avoid.
While average full-time wages have grown 35 per cent in 10 years, price rises within individual sectors have been much higher:
• Medical and hospital services rose 73 per cent, although pharmaceutical prices increased only 9 per cent and dental costs climbed 24 per cent.
• Secondary school costs rose more than other types of education, up 63 per cent, while primary and preschool rose 53 per cent and tertiary costs 42 per cent.
• Electricity prices increased 67 per cent, gas 63 per cent and water and sewerage rates 50 per cent.
Many grocery prices – including fruit and veg, cheese and eggs – climbed less than wages growth, but some products such as beef and lamb increased almost 40 per cent.
Tobacco prices had the biggest increase by far, up 263 per cent, while alcohol costs rose just 20 per cent.
Dr Oliver said the biggest price rises came in sectors that were in some way influenced by governments, which often were not subject to competition like private enterprises.
“I think we will see ongoing pressure on things like health costs, education costs and local government rates,” he said.
Sort My Money founder David Rankin said rising living costs for the one-third of households paying off mortgages had been offset record low interest rates, but others were finding it tough.
“Slow wages growth is a factor,” he said.
Mr Rankin said many of the people who had made early super withdrawals were low-income earners.
“These individuals will continue to suffer hardship in the new financial year and will need the lifeline offered by the government’s early-release scheme,” he said.
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