Superannuation report warns of housing ‘catastrophe’

The Association of Superannuation Funds of Australia has stepped up its campaign to defend super from cash raids for housing in the May budget.

Senator Jane Hume. Picture: NCA NewsWire / Daniel Pockett

The Association of Superannuation Funds of Australia has stepped up its campaign to defend superannuation from cash raids for housing in the May budget.

The association, which represents both retail and industry super funds, released a report on Monday warning that allowing early access to superannuation for housing deposits “would make a bad situation catastrophic”.

The association says the report showed that using super for housing would “put significant upward pressure on house prices and exacerbate housing affordability concerns for low-income earners.”

“Australia already has some of the most expensive housing in the world,” ASFA chief executive Martin Fahy said releasing the report.

“With the prevailing macro-economic conditions and surging demand for housing, using super for housing deposits would be disastrous and push prices further out of reach of first-time buyers.

“Using superannuation for housing deposits is fundamentally inconsistent with the objective of superannuation to provide an adequate retirement income.”

The report comes as the federal government is coming under pressure, including from some Coalition backbenchers led by Victoria Liberal MP Tim Wilson, to allow early access to super for housing deposits as part of a larger package to address housing affordability as prices in some capital cities, particularly Sydney, skyrocket on the back of record low mortgage rates.

This follows the move last year to allow fund members early access of up to $20,000 from their super funds for emergency purposes as a result of the COVID-19 pandemic, a move which saw about three million super fund members withdraw more than $36bn from their super, with some fund members draining their balances entirely.

While federal Superannuation Minister Senator Jane Hume has said that last year’s early release moves were a one-off response to an emergency situation, there is a growing coalition of critics of the compulsory superannuation system pushing for policy changes to erode the growth of the $3 trillion superannuation system.

The forces are also putting pressure on the federal government to block further increases in the superannuation guarantee levy from the current 9.5 per cent, despite the fact that it is set to rise to 12 per cent of wages by 2025.

Federal Liberal Mr Wilson, who is also chair of the House of Representatives economics committee, has launched a “housing before super” campaign, arguing that superannuation should be used to allow first-time home buyers to fund a deposit for their home.

Mr Wilson has said he believes that encouraging people to own their own homes is in their best interests and is more important than putting money into the compulsory superannuation system.

“The greatest leading indicator of poverty in retirement is not owning your own home,” Mr Wilson said recently.

“I make absolutely no apology, I am for home ownership.”

While Senator Hume has rejected the idea of superannuation being tapped to pay for the deposit on housing, the superannuation industry is also awaiting the Morrison Government’s decision on whether it will go ahead with the planned increased in the compulsory super guarantee levy from the current 9.5 per cent to 10 per cent in July.

The increase, which is part of the move to increase the SG to 12 per cent by 2025, has already been legislated.

Prime Minister Morrison has hinted he might move to reverse the legislation, out of concern for employers during a time when the economy has been under pressure as a result of the pandemic.

Some sources tip that the government could go ahead with the July 1 increase to 10 per cent but freeze the SG at that level. The Retirement Income Review, released last November, also raised the issue of investing in housing as opposed to putting more money into superannuation.