Coalition MPs back super-for-housing push as RBA fears price rises

Coalition MPs have pledged their support for a backbench push for the Morrison government to give Australians early access to their superannuation savings to buy their first home, as the Reserve Bank reveals fears about rising house prices.

Victorian MP Tim Wilson’s “Home First Super Second” campaign, which aims to let first-home buyers access their funds for a housing deposit before being required to save it as superannuation, has infuriated Labor, industry super funds and the union movement.

Minutes of the Reserve Bank’s latest meeting shows concerns about possible financial fallout from high house prices and ongoing low wages growth.

House values in every capital city bar Melbourne are above their pre-COVID levels and Commonwealth Bank this week predicted a nationwide lift of more than 14 per cent over the next two years. Regional centres are reporting even stronger growth.

The issue has led Reserve Bank board members to raise concerns about how low interest rates are feeding into higher house prices while revealing businesses are extending pay freezes that could weigh on national wage growth for years.

Mr Wilson’s policy proposal has been attacked by major super funds, which argue it would drive up prices, force young Australians to choose between buying a home or financial security in retirement and only benefit banks and investors.

Several MPs, including Liberal MPs Craig Kelly, Gerrard Rennick and Jason Falinski and Nationals George Christensen and Matt Canavan, spoke in favour of the suggestion on Tuesday in a Coalition party room meeting. They argued helping Australians buy a home was the best thing for their retirement.

Senator Canavan said people wanted a home before they start a family and buying a home costs a lot of money.

“It is crazy to take money off people and tell them they can’t have it until they’re 65, when they might want kids when they are 25,” he said.

“We should give young people more freedom to make their own decisions. Once you have the nest then you can worry about the nest egg.”

Mr Kelly said he was concerned that it had become “more and more difficult” to buy a home, which was forcing people to rent into retirement.

“Anyone that bought a house in the 70, 80s or 90s probably think it’s the best investment they made in their lives. More people should be able to do that.”

Senator Rennick, an outspoken critic of the superannuation system, cited a speech from former Liberal prime minister Robert Menzies, known as The Forgotten People, pointing out he used the word “home” 23 times.

“Home ownership is the greatest manifestation of individual liberty and is the nest for our children where we nurture self belief in them,” he said. “I believe that super should be voluntary so that people can choose to own their home quicker.”

The Reserve Bank has sought to play down concerns about the lift in prices and the associated debt being held by home buyers.

But the minutes of this month’s meeting show board members discussed the impact of low interest rates on the nation’s financial and economic stability, as borrowers saddled themselves with higher levels of mortgage debt.

“They acknowledged the risks inherent in investors searching for yield in a low interest rate environment, including risks linked to higher leverage and asset prices, particularly in the housing market,” the minutes showed.

“The board concluded that there were greater benefits for financial stability from a stronger economy, while acknowledging the importance of closely monitoring risks in asset markets.”

ANZ’s head of Australian economics, David Plank, said the commentary suggested the bank hoped a stronger economy would offset any financial stability issues caused by higher asset prices.

“At some point, we may see developments in the demand and supply of credit that prompt action, almost certainly in the form of macroprudential rather than monetary policy, but that seems a long way off,” he said.

Before the coronavirus pandemic, the RBA had cut interest rates to a then-record low of 0.75 per cent, with a stated aim of driving down the unemployment rate to help lift wages growth and inflation.

But wages growth has since fallen to its lowest level on record. The RBA’s own forecasts only show wages growth back at a historically low 2 per cent by the middle of 2023.

The minutes show the board members are expecting it to take years for wages growth to get anywhere close to a “normal” level.

“Firms had responded quickly in the early stages of the pandemic by delaying wage increases, imposing wage freezes and, in some cases, applying temporary wage cuts,” the minutes show.

“Liaison contacts had suggested it could be some time before wage freezes were lifted.”

Another headwind for the economy is population growth, which is expected to slow to its lowest rate since World War I.

The minutes show the bank believes Australia’s economic output would fail to return to its pre-pandemic trajectory largely because of the slowdown in population growth.

“Lower population growth would continue to weigh on both aggregate demand and labour supply in the period ahead,” they show.

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