Jeremy Cooper warns against early access to superannuation

The man who led super review warns the government to slam the door shut on early access to retirement savings.

Jeremy Cooper says the early access scheme should not be repeated every time there is a ‘wobble’. Picture: Renee Nowytarger

The author of the 2010 Super System Review, Jeremy Cooper, has called on the Morrison government to slam the door shut on future “special” early access schemes to retirement savings.

The call comes amid a concerted push from some Coalition backbenchers and senators to give young Australians the ­option of dipping into their super to help pay for housing.

Mr Cooper, who now leads the public policy and research division at financial services firm Challenger, said the “ideal policy outcome would be that the door is closed (on early access) and back to the very constrained hardship provisions we had ­before”.

He said he recognised that the pandemic was a crisis that justified an emergency policy ­response to allow Australians to draw on their super. He pointed to other countries with equivalent super systems, such as Denmark, which during the health crisis were allowing workers to take their weekly super contributions as wages instead.

But “it would be a great pity if (say) the equity market had a wobble in five years’ time (and) it was to be accompanied by calls for early release”.

The popularity of the early access scheme threatens to open a Pandora’s box of reasons to allow Australians to unlock their super savings before they retire. Liberal MPs Tim Wilson and John Alexander, alongside ­Coalition senators such as ­Andrew Bragg and Gerard Rennick, are now advocating to allow workers to raid their super accounts to help build a deposit to buy a home.

They have been joined by crossbenchers, including One Nation’s Pauline Hanson and ­independent senator Rex Patrick. Former Reserve Bank governor Bernie Fraser is reported to have said low-income Australians should be given early access to their super to help them buy homes.

Mr Cooper argued strongly against such measures, saying it confused two separate policy ­issues. “The super system can’t solve housing affordability,” he said. A shortage of housing in the major cities, alongside record low interest rates and favourable tax treatments for investors and the family home had created an overheated housing market, Mr Cooper said.

“Give the housing market more access to finance and you just drive up prices,” he said.

The Australian this week revealed that total withdrawals are on track to surpass $36bn by the time the COVID early access policy ends on December 31, with 3.3 million Australians having taken up the scheme — and 1.7 million dipping in twice.

The scheme has proved far more popular than Treasury initially expected, despite the COVID-19 downturn proving less severe than feared in March. The department’s early $27bn estimate was quickly surpassed by July, as the second round of withdrawals became accessible.

Treasury revised its estimate to $41.9bn on July 30, which, barring a last-minute, pre-Christmas rush of applications, is likely to prove an over-estimate as the pace of new withdrawals has slowed markedly since.