Could the Super Home Buyer Scheme ‘torpedo’ Aussie super savings?

By Jon Bragg

May 20 2022
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Industry Super Australia has argued that the scheme would force funds to hold more cash.

New modelling from Industry Super Australia has suggested that the Coalition’s proposed Super Home Buyer Scheme would increase the liquidity requirements of super funds and subsequently lead to lower returns.

ISA argued that the scheme would force funds to hold more cash and invertedly invest less in long-term growth-oriented assets.

“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,” said ISA chief executive Bernie Dean.

“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.”

During the Liberal Party’s campaign launch last Sunday, Prime Minister Scott Morrison pointed out that New Zealand and a number of other countries already have policies in place that allow people to use their retirement savings to help them buy their first home.

However, analysis by ISA suggested that a balanced option under New Zealand’s retirement savings scheme, KiwiSaver, delivered returns roughly 1 per cent per annum lower than a balanced MySuper fund over both five and 10 years.

Additionally, the KiwiSaver balanced option held about 13.5 per cent less in growth assets than its Australian counterpart.

AMP Capital chief economist Shane Oliver told InvestorDaily that, while the Super Home Buyer Scheme may inflict a short-term impact, the money withdrawn would likely be balanced by funds deposited back into the super system once a sale is made.

The scheme allows first home buyers to withdraw 40 per cent of their super up to a maximum of $50,000 to put towards the purchase of a first home, but the buyer is obliged to return the money, including any associated capital gains, when that home is sold.

As such, Dr Oliver estimated that liquidity issues could potentially persist for up to eight years before money starts flowing back in.

“I suspect it will even out over time because, if someone buys a property and accesses their super when they’re 30, and then they want to trade over and get a bigger property 10 years later, then the money will come back in,” Dr Oliver said.

He also noted that it was difficult to estimate the full impact of the scheme because it was unclear how many people would actually end up taking advantage of it.

The scheme received a mixed response from industry stakeholders upon its announcement, with opponents arguing that it undermined the purpose of the super system and would lead to higher house prices.

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Retirement