Yahoo Finance Flexi super move will blow $31 billion hole in budget: report
Prime Minister Tony Abbott and Treasurer Joe Hockey have flagged making the super system more flexible to help young homebuyers enter the market.
The move has been criticised by not just former treasurers Peter Costello and Paul Keating, but also by Communications Minister Malcolm Turnbull who described it as “a thoroughly bad idea”.
"My own view is that would be a thoroughly bad idea," Mr Turnbull said.
"It's not what the superannuation system is designed to achieve. Housing affordability is a big issue in Australia but as we've demonstrated over many studies over many years, this is a supply side problem."
The criticism is not unfounded.
A report published in the Australian Financial Report has found that allowing younger people to withdraw their savings to buy a property would punch a $31 billion hole in the federal budget by mid-century.
Also read: How to plan better and invest well in 2015
The report, based on a research by PwC, confirms the move would cost the government between $500 million and $1.1 billion a year in lost revenue.
PwC partner Paul Abbey told the AFR that he’d assumed the scheme would be limited to those under 35 years of age and a withdrawal of $25,000 to form the deposit of a first home.
“It’s obviously a relatively significant number and in policy terms, is not a small number to take out of the budget annually,” Abbey said.
Abbott has welcomed debate on the idea, but Labor, economists and treasurers have all warned it will only push up house prices and erode retirement savings.
Also read: Top places to retire in 2015
The Association of Superannuation Funds of Australia has also warned against the move, arguing that raiding the nest egg early could come at the expense of a comfortable retirement.
