Prime Minister Scott Morrison’s proposal to allow first home buyers to access up to $50,000 of their super to buy a home could leave every Australian worse off.
Analysis from Industry Super Australia (ISA) found that, under the scheme, super funds would be forced to carry more cash - a lower-performing asset - so all Australians with a super fund could end up with less money at retirement.
A 30-year-old on the median wage with a $20,000 starting balance could be between $14,700 and $29,100 worse off at retirement, ISA found.
The need to carry more cash would lead to less investment in long-term, growth-oriented assets.
ISA modelling shows the liquidity requirements mean annual returns across investment portfolios could fall 10-20 basis points, depending on the demographics of the fund and existing asset allocations.
“Even those Australians that don’t use their super to buy a house will be left tens of thousands of dollars worse off because of the Government’s scheme,” ISA CEO Bernie Dean said.
“Not only will throwing super into the housing market jack up prices and make houses less affordable, but all Australian workers will also be worse off because of lower investment returns.
“Super is meant to be for people’s retirement, not supercharging house prices and pushing the home ownership dream further away.”
Morrison compared the scheme to New Zealand’s super system, which also allows the use of super for housing.
But Dean said the KiwiSaver balanced option returned around 1 per cent less every year than Australian balanced MySuper products.
The New Zealand Retirement Commission confirmed part of the reason for KiwiSaver’s lesser performance could “likely be linked to first home deposit withdrawals”.
Dean said if take-up in Australia mirrored New Zealand, super funds would have to process almost 250,000 applications for super withdrawals each year for first home buyers.
If average withdrawals were $37,500, the total amount released would be equal to around $9.4 billion a year.
“New Zealand might beat us at rugby, but Australia is better at growing workers’ retirement savings,” Dean said.