NSW kids’ future fund ‘a bad idea’

A leading economist says Dominic Perrottet’s plan to establish superannuation-style funds for NSW children under 10 is a ‘bad idea’

NSW Premier Dominic Perrottet. Picture: NCA NewsWire / Julian Andrews

NSW Premier Dominic Perrottet’s signature election promise has been lashed by a leading economist who says the plan to establish superannuation-style funds for children under 10 is a “bad idea” and a “gimmick” that will fuel soaring housing prices.

Under the co-contribution “future funds”, announced at the Liberal Party’s campaign launch on Sunday, every child will be given $400 when they are born and the state government will match parent contributions by up to $400 a year until children can access the fund at the age of 18.

Centre for Independent Studies chief economist Peter Tulip criticised the policy as simply supporting the children of wealthy parents to access the property market, exacerbating existing inequities that were stacked against lower socio-economic families and preventing young people from purchasing their first homes.

“It’s a bad idea,” he told The Australian.

“The first point to make is what’s the market failure? What is the problem that this is trying to address? There isn’t any clear rationale unless you think the children of wealthy parents don’t get enough advantages in life.”

Mr Tulip – who previously worked for the Reserve Bank of Australia and the US Federal Reserve board of governors – said rather than addressing the real cause of soaring house prices, a lack of supply, politicians resorted to “gimmicks” such as Mr Perrottet’s policy.

“Housing affordability comes right up at the top of the list of voter concerns,” Mr Tulip said.

“And the government knows what it needs to do to fix it, which is to boost supply and take on the NIMBYs, but they think that’s too politically difficult.

“So we’re seeing these gimmicks instead.”

Mr Perrottet’s $850m scheme was likely to be counter-productive, Mr Tulip said.

He said there was a litany of government reports into housing affordability at the Premier’s disposal telling him a serious solution to the problem was increasing supply.

Parents will be able to contribute up to $1000 a year which, if done every year, would deliver about $49,000, under an assumed yearly growth of 7 per cent. If parents decided to match only the $400 contribution, it would reach an estimated $28,500.

Under the proposed policy, families on the commonwealth’s low income tax benefit – meaning about 300,000 in NSW will be eligible – will receive $200 a year for each child, with the state government then matching payments up to $400.

As he announced the ability for grandparents to chip in to the fund, Mr Perrottet heralded the policy as a nest egg for children that would set them up for “future success”, as he attacked Labor for being bereft of ideas.

“This is the biggest investment in our children’s future. It’s a game changer and it will transform lives,” Mr Perrottet said.

“It’d be nice at some point in this campaign if Labor had an idea. I mean, there’s been no ideas from Labor.”

But Labor leader Chris Minns said the scheme was “very expensive” and he would rather the resourcing went into supporting the NSW education system

“The single best investment we can make in the next generation of young Australians is to ensure we’ve got a world-class education system in the state,” Mr Minns said.