Reliance on government or empowering individuals?

Young Australians looking to buy their first homes, and their families, face a choice on Saturday between sharply contrasting housing schemes proposed by the Morrison government and Labor. Labor’s home equity scheme is built on the power of government, using taxpayers’ money, to invest in up to 30 to 40 per cent of the value of some first-home buyers’ homes. The scheme imposes tight restrictions on participants, who would be limited to 10,000 people a year. It is not known how they would be chosen.

The Coalition plan is simpler, without such limitations. Nor does it involve taxpayers’ money. It would enable individuals, couples or families to use part of their own superannuation savings to invest in their first homes, using up to $50,000 or 40 per cent of their super balances. It would be a boost for those unable to tap into the bank of mum and dad. And it would not, as critics with vested interests tied to the super industry claim, short-change home buyers’ retirement incomes. That is because when the property was sold, the original investment plus a portion of the capital gain would be returned to the owner’s super fund.

Residential property is a proven investment. It outperforms many super funds over time. Even if owners decided to live in their first home for decades and not sell, they would be better off in retirement from owning it. Lack of home ownership is the major contributing factor to poverty in old age, especially for those depending on the private rental market.

The Labor scheme is bureaucratic and convoluted. Under its rules, “If the home buyer’s income exceeds the Help to Buy income threshold for two consecutive years, they will be required to repay the government’s financial contribution in part or whole as their circumstances permit.” The income threshold is $90,000 for individuals, $120,000 for couples. In a dampener on aspiration and effort, a promotion, pay rise, finding a better job or switching from part-time to full-time work would tip many participants over those limits, forcing them to start repaying the government. Investing in a new kitchen, bathroom or a pool would be problematic, too. The government would share in any capital gain realised when the property was sold, which would be boosted by the owner’s home improvements.

As Scott Morrison said on Sunday, the Coalition’s scheme has no such restrictions: “You don’t have to sell it if you get a pay rise or someone wants to go back to work full time. There are no complex rules about income thresholds or who gets what when you do an improvement. You don’t have to check with the government every time you go to Bunnings to buy a can of paint. Because it’s your home and it’s your super.” That principle is vital. During the pandemic, about three million people accessed some of their super early under hardship provisions. In April last year, Australian Bureau of Statistics figures showed more than half (55 per cent) used it to pay their mortgage, rent or other household bills. About 15 per cent used it to pay off debts and 13 per cent saved it. The government housing scheme, to start in July next year, might cause an initial bump in home prices that would be offset, under current trends, by rising interest rates. Labor’s scheme, being so small, would be unlikely to affect prices.

One dollar in 10 earned by workers goes towards their super nest eggs to help relieve the burden on the welfare system in funding the Age Pension. The Australian supports compulsory super, an important legacy of the Hawke-Keating governments. At this stage it is still a long way from replacing the pension for most retirees. That could change eventually as workers who joined the compulsory system from the start of their careers moved towards retirement and if contributions increased. We also support reforms that have improved transparency and accountability of super funds to members about fees and returns.

Home ownership (with or without a mortgage) has long been the great Australian dream. It rose from 53.4 per cent of private dwellings in 1947 to about 70 per cent until 2006. It since has dropped to about 66 per cent as home prices have soared. The government and opposition schemes are designed to take years off the time spent paying rent while saving for a deposit, taking first-home buyers closer to their dreams. But the plans are chalk and cheese. Labor’s model has a heavy bureaucratic footprint. The Coalition’s plan harnesses aspiration, setting participants up for a more comfortable retirement.