Copycat Labor not matching Morrison’s housing scheme shows how industry super funds dictate their policy

Prime Minister Scott Morrison and first homeowners Andy and Caitlin at their new digs in Wangaratta, Victoria. Picture: AAP

I’m not sure leaving the best to last is good politics, but the Coalition’s Super Home Buyer Scheme is good policy. By allowing potential first home buyers to access a portion of their own savings – mandated through superannuation contributions – to bridge the deposit gap, it should enable more young folk to get into the housing market.

The idea is relatively straightforward: individuals/couples will be able to withdraw up to 40 per cent of their superannuation balances, up to a cap, to be used to purchase a first home.

Variants of this policy apply in a number of countries, including Canada, New Zealand and Singapore.

When the house is sold, the withdrawn amount plus a proportion of any capital gain is deposited back into superannuation, to be used for the purpose of providing income in retirement.

Morrison’s idea is straightforward: individuals/couples will be able to withdraw up to 40 per cent of their superannuation balances, up to a cap, to be used to purchase a first home. Picture: NCA NewsWire/ David Crosling

The fact that Labor hasn’t me-too’ed this proposal is actually good news because it reveals the extent to which the self-interested industry super funds dictate Labor policy. Any policy that allows the withdrawal of funds, even temporary, will always be opposed by these funds.

The argument that superannuation is for retirement and not housing is contradicted by the fact that the majority of retired persons, both now and in the future, relies on the Age Pension, in full or in part. Superannuation may be a helpful add-on for a comfortable retirement, but it is not the be-all-and-end-all.

The fact that Labor hasn’t me-too’ed this proposal is actually good news. Picture: NCA NewsWire / Dan Peled

And here’s the most important aspect of this debate: the strongest correlate of poverty in old age is not owning a home. That’s right – for older folk who continue to rent, particularly in the private sector, the outcomes are grim compared with those who own their own homes.

What this means is that the primary object of policy should be to enable as many people as possible to own their homes, an objective above ensuring adequate retirement incomes, particularly given the Age Pension. (They might even use their final superannuation balances to pay off the mortgage.)

On current trends of home ownership, it is likely that a lower proportion of older people will be homeowners in the coming decades unless there is a significant turnaround in ownership rates.

The Prime Minister visits the Singh family at their new home in the outer suburb of Donnybrook, in WA. Picture : NCA NewsWire / Ian Currie

As to the argument that the Coalition’s policy will simply drive home prices up, the truth of the matter is that all demand-side measures run this risk – and this includes a number of Labor’s own housing policies, including its ill-thought out shared equity scheme.

In the case of the Super Home Buyer Scheme, there is no reason to think there will be a flood of withdrawals as long as the policy stays in place. Individuals/couples will make their own decisions about the timing of accessing their superannuation to buy their first homes, which in turn will depend on their personal circumstances and the state of the housing market at that time.