Liberal MP’s major housing affordability idea savaged by experts

Raw Text

A Liberal MP’s bold idea to help Aussies cope with the hefty cost of housing has been savaged by experts as “bizarre” and “silly”.

Shannon Molloy

6 min read

/* global newscorpau */ const coralComments = newscorpau && newscorpau.coralcomments; const talkUrl = coralComments && `${coralComments.talk}/api/v1/comments-count?ids=`; fetch(`${talkUrl}${newscorpau.articleID}`) .then(response => { response.json().then(data => { document.querySelector('#comment-count_count').innerHTML = `${data[newscorpau.articleID]} comments`; document.querySelector('#comments-load a').innerHTML += ` (${data[newscorpau.articleID]} comments)`; setTimeout(() => { document.querySelector('#comment-count').style.visibility = 'visible'; }, 0); }); });

RBA reveals new deputy governor

One thing Aussies ditching in droves

Stark proof Australia is totally stuffed

A proposal to let mortgage holders raid their superannuation to help shoulder the burden of steep interest rate rises has been savaged by experts.

Liberal Senator Andrew Bragg today pitched his idea of letting homeowners shift chunks of money from their super into offset accounts linked to their home loans.

Such a move would lower the interest payable and offer some relief to the Reserve Bank’s brutal run of rate hikes, Senator Bragg argued.

The backbencher shared his brainwave in an article in the Australian Financial Review today.

“A person with a mortgage in a large city like Sydney could use super as an offset to materially reduce their interest bill in a way that no other government policy could do,” Senator Bragg told the newspaper.

“Housing is the number one issue facing Millennials and Zoomers who want to get into the market and stay in the market.”

But the example offered by Senator Bragg of the kind of Aussie who would benefit from his plan was a person in their 40s with about $200,000 in super and a mortgage of $1 million.

That’s not exactly the financial profile of most Millennials or Zoomers, experts argue.

“That example is someone who is pretty well-off,” Greg Jericho, Chief Economist at The Australian Institute, told news.com.au.

“A good super balance and bought a home with a million-dollar mortgage – probably not someone who needs the most help.”

‘Bizarre’ idea would have deep consequences

Mr Jericho believes most other economists would agree that Senator Bragg’s idea is “pretty bizarre”.

While it might offer some temporary relief to Aussies battling higher mortgage costs, it could also backfire significantly in the long run.

“This idea is particularly silly because what he’s suggesting would essentially counteract what the Reserve Bank is trying to do,” Mr Jericho said.

“They’re raising interest rates so people have to devote more money to paying off their mortgage and thus reducing the ability to spend elsewhere.”

Ironically, if implemented, the proposal would inevitably put pressure on the RBA it continue raising rates, he said.

“To me, it doesn’t seem to be an optimal policy. It’s tokenistic. It’s pretty transparent.”

Investment expert Scott Phillips said allowing people to remove sums of money from their super would also see them forego some of the massive benefits of compounding interest.

“I love the idea that politicians might be trying to help Australians get into homes – that’s a great thing,” Mr Phillips, Chief Investment Officer at The Motley Fool, said.

“The problem is that it’s being presented too frequently as an either-or conversation. You can either have super or a house, but not both.

“That’s not how you solve the housing crisis. All it does is erode the basis of superannuation, which I think has been the best financial policy decision of the past 30 years.”

Mel Birks, Executive General Manager of Policy at the Super Members Council, said the idea “dangerously undermines” the purpose of superannuation.

“Lots of people are doing it tough right now, but workers shouldn’t be called upon to use their superannuation to fix all of society’s problems or the issues of the day,” Ms Birks said.

“Superannuation isn’t a magic wand - its sole purpose is to provide income for a dignified retirement for Australia’s workers, giving them financial freedom.

“Policies that open up super for other purposes dangerously undermines its ability to provide millions of Australians the dignified retirement they deserve.”

A ‘slippery slope’

Senator Bragg has suggested letting people raid their super on multiple occasions in the past, making it something of a “default position”, Mr Jericho said.

“Every policy seems to be about trying to water down superannuation,” he said. “The only solution he has is raiding super to fix any problem.”

The Commonwealth will attempt to legislate an “objective of super” to make clear what the system is intended to do.

That would offer the first meaningful safeguard against attempts to erode its intended purpose, Mr Jericho said.

“Once you allow it to be used for a new thing, then it becomes about letting people spend it for other stuff. Suddenly, people will retire with a lot less super, and that’s crazy. It’s a slippery slope.”

Some within the Coalition have a “definite ideological preference” for “watering down” the strength of super, Mr Phillips agreed.

“It does seem like Andrew Bragg has more of a fundamental issue with superannuation than he does with housing affordability.

“When super is the solution for everything, you wonder if they’re starting with the answer and working backwards.”

Getting more people into their own homes is “absolutely important”, but throwing more money at housing demand is “not the way you do it”.

“It’s hard to see this as anything other than ideology dressed up as a solution,” he said.

Industry group the Association of Superannuation Funds of Australia was invited to share their thoughts on the proposal but a spokesperson declined to comment.

‘Good way to alienate young people’

Prominent pollster Kos Samaras said the idea sent “a clear message” to young Australians that they’re being treated differently to older generations.

The RedBridge Group director has conducted extensive research over the past six months on the issue of superannuation reform.

“The general response from young people is anger,” Mr Samaras said.

“They feel like they’re being asked to do things that older generations didn’t have to, and as a result they’ll have less money when they enter retirement.

“It sets it up as a generational schism.”

Mr Jericho agreed, saying: “Younger people will see this as being forced to give up some of their retirement to cope with the problems of today, while older generations have had a pretty good run with superannuation.”

For that reason, he described the ideas as “not very good political policy”.

Young Australians are “very protective” of super being only something to help them in retirement and generally oppose any proposals to tap into nest eggs for other purposes, Mr Samaras explained.

“For many young people, super is the only thing they have. They’re building it, they can control it, it’s going to be there when they retire and need it. Basically, they want it protected. They’re quite philosophical about super.

“The message the Coalition is telegraphing to young voters is that their own super balances are massive and so this is a great idea. The reality is that the people they’re speaking to don’t have big super balances.”

According to official data, the average super balances of those aged 25 to 29 are $25,910 for men and $23,429 for women. For those aged 30 to 34, the average balance is $56,344 for men and $46,289 for women.

Mr Samaras said those scenarios are “quite a way” off Senator Bragg’s hypothetical scenario.

“All this idea does it show how out-of-touch some in the Coalition are,” he said.

Albo needs to do something

The latest Newspoll results, which put Labor and the Coalition on a neck-and-neck standing on a two-party preferred basis for the first time since the election, should serve as a wake-up call.

That’s the view of Mr Samaras, who said there’s a perception among the general public that cost-of-living pressures are being overlooked.

“The government needs to send a really strong message to punters that they’re in their corner,” he said. “They need to signal to people that they understand the crisis and they’re focused on trying to help. Millions of people are struggling.”

It appears Senator Bragg’s proposal is not part of official Coalition policy work.

The Coalition’s Treasury spokesperson Angus Taylor said that “Coalition backbenchers are entitled to hold their own views … unlike [those in] the Labor Party”.

“There’s no doubt that under the Albanese Labor Government, things have gotten tough for hardworking Australian families,” Mr Taylor said.

“The key to addressing this cost of living crisis is bringing inflation down.

“Inflation is coming from Canberra – even the RBA Governor last week confirmed inflation is homegrown.”

Senator Bragg did not initially respond to a request for comment. After this story was published, he told news.com.au: “The idea of Australians using their super to offset mortgages is well worth exploring.

“Households are being squeezed with skyrocketing interest rates because of Labor’s economic ineptitude.

“Since Labor came to power, we have seen 13 interest rate rises, with the Reserve Bank warning of more to come. But at the same time, Labor has proposed no meaningful cost of living relief.

“Allowing Australians to use their super to offset their mortgages will have an immediate impact on easing mortgage stress.

“In the absence of Labor adopting a contractionary fiscal policy, all options should be on the table.

“Labor must abandon the Big Super talking points, and implement policies that help all Australians.

“This proposal will benefit from further analysis which I will be pursuing.”

Join the conversation

Add your comment to this story

To join the conversation, please log in. Don't have an account? Register

Join the conversation, you are commenting as Logout

Interest Rates

RBA reveals new deputy governor

A top official at the UK central bank is set to make the move to Australia and join the Reserve Bank as it battles to tame persistent price pressures.

Costs

One thing Aussies ditching in droves

Cash is no longer king, a new survey has found, with less than one in 10 consumer payments made with notes and coins.

Australian Economy

Stark proof Australia is totally stuffed

Just about everywhere you look, there are worsening signs that Australia is no longer the lucky country – for just about all of us.

Single Line Text

A Liberal MP’s bold idea to help Aussies cope with the hefty cost of housing has been savaged by experts as “bizarre” and “silly”. Shannon Molloy. 6 min read. /* global newscorpau */ const coralComments = newscorpau && newscorpau.coralcomments; const talkUrl = coralComments && `${coralComments.talk}/api/v1/comments-count?ids=`; fetch(`${talkUrl}${newscorpau.articleID}`) .then(response => { response.json().then(data => { document.querySelector('#comment-count_count').innerHTML = `${data[newscorpau.articleID]} comments`; document.querySelector('#comments-load a').innerHTML += ` (${data[newscorpau.articleID]} comments)`; setTimeout(() => { document.querySelector('#comment-count').style.visibility = 'visible'; }, 0); }); }); RBA reveals new deputy governor. One thing Aussies ditching in droves. Stark proof Australia is totally stuffed. A proposal to let mortgage holders raid their superannuation to help shoulder the burden of steep interest rate rises has been savaged by experts. Liberal Senator Andrew Bragg today pitched his idea of letting homeowners shift chunks of money from their super into offset accounts linked to their home loans. Such a move would lower the interest payable and offer some relief to the Reserve Bank’s brutal run of rate hikes, Senator Bragg argued. The backbencher shared his brainwave in an article in the Australian Financial Review today. “A person with a mortgage in a large city like Sydney could use super as an offset to materially reduce their interest bill in a way that no other government policy could do,” Senator Bragg told the newspaper. “Housing is the number one issue facing Millennials and Zoomers who want to get into the market and stay in the market.” But the example offered by Senator Bragg of the kind of Aussie who would benefit from his plan was a person in their 40s with about $200,000 in super and a mortgage of $1 million. That’s not exactly the financial profile of most Millennials or Zoomers, experts argue. “That example is someone who is pretty well-off,” Greg Jericho, Chief Economist at The Australian Institute, told news.com.au. “A good super balance and bought a home with a million-dollar mortgage – probably not someone who needs the most help.” ‘Bizarre’ idea would have deep consequences. Mr Jericho believes most other economists would agree that Senator Bragg’s idea is “pretty bizarre”. While it might offer some temporary relief to Aussies battling higher mortgage costs, it could also backfire significantly in the long run. “This idea is particularly silly because what he’s suggesting would essentially counteract what the Reserve Bank is trying to do,” Mr Jericho said. “They’re raising interest rates so people have to devote more money to paying off their mortgage and thus reducing the ability to spend elsewhere.” Ironically, if implemented, the proposal would inevitably put pressure on the RBA it continue raising rates, he said. “To me, it doesn’t seem to be an optimal policy. It’s tokenistic. It’s pretty transparent.” Investment expert Scott Phillips said allowing people to remove sums of money from their super would also see them forego some of the massive benefits of compounding interest. “I love the idea that politicians might be trying to help Australians get into homes – that’s a great thing,” Mr Phillips, Chief Investment Officer at The Motley Fool, said. “The problem is that it’s being presented too frequently as an either-or conversation. You can either have super or a house, but not both. “That’s not how you solve the housing crisis. All it does is erode the basis of superannuation, which I think has been the best financial policy decision of the past 30 years.” Mel Birks, Executive General Manager of Policy at the Super Members Council, said the idea “dangerously undermines” the purpose of superannuation. “Lots of people are doing it tough right now, but workers shouldn’t be called upon to use their superannuation to fix all of society’s problems or the issues of the day,” Ms Birks said. “Superannuation isn’t a magic wand - its sole purpose is to provide income for a dignified retirement for Australia’s workers, giving them financial freedom. “Policies that open up super for other purposes dangerously undermines its ability to provide millions of Australians the dignified retirement they deserve.” A ‘slippery slope’ Senator Bragg has suggested letting people raid their super on multiple occasions in the past, making it something of a “default position”, Mr Jericho said. “Every policy seems to be about trying to water down superannuation,” he said. “The only solution he has is raiding super to fix any problem.” The Commonwealth will attempt to legislate an “objective of super” to make clear what the system is intended to do. That would offer the first meaningful safeguard against attempts to erode its intended purpose, Mr Jericho said. “Once you allow it to be used for a new thing, then it becomes about letting people spend it for other stuff. Suddenly, people will retire with a lot less super, and that’s crazy. It’s a slippery slope.” Some within the Coalition have a “definite ideological preference” for “watering down” the strength of super, Mr Phillips agreed. “It does seem like Andrew Bragg has more of a fundamental issue with superannuation than he does with housing affordability. “When super is the solution for everything, you wonder if they’re starting with the answer and working backwards.” Getting more people into their own homes is “absolutely important”, but throwing more money at housing demand is “not the way you do it”. “It’s hard to see this as anything other than ideology dressed up as a solution,” he said. Industry group the Association of Superannuation Funds of Australia was invited to share their thoughts on the proposal but a spokesperson declined to comment. ‘Good way to alienate young people’ Prominent pollster Kos Samaras said the idea sent “a clear message” to young Australians that they’re being treated differently to older generations. The RedBridge Group director has conducted extensive research over the past six months on the issue of superannuation reform. “The general response from young people is anger,” Mr Samaras said. “They feel like they’re being asked to do things that older generations didn’t have to, and as a result they’ll have less money when they enter retirement. “It sets it up as a generational schism.” Mr Jericho agreed, saying: “Younger people will see this as being forced to give up some of their retirement to cope with the problems of today, while older generations have had a pretty good run with superannuation.” For that reason, he described the ideas as “not very good political policy”. Young Australians are “very protective” of super being only something to help them in retirement and generally oppose any proposals to tap into nest eggs for other purposes, Mr Samaras explained. “For many young people, super is the only thing they have. They’re building it, they can control it, it’s going to be there when they retire and need it. Basically, they want it protected. They’re quite philosophical about super. “The message the Coalition is telegraphing to young voters is that their own super balances are massive and so this is a great idea. The reality is that the people they’re speaking to don’t have big super balances.” According to official data, the average super balances of those aged 25 to 29 are $25,910 for men and $23,429 for women. For those aged 30 to 34, the average balance is $56,344 for men and $46,289 for women. Mr Samaras said those scenarios are “quite a way” off Senator Bragg’s hypothetical scenario. “All this idea does it show how out-of-touch some in the Coalition are,” he said. Albo needs to do something. The latest Newspoll results, which put Labor and the Coalition on a neck-and-neck standing on a two-party preferred basis for the first time since the election, should serve as a wake-up call. That’s the view of Mr Samaras, who said there’s a perception among the general public that cost-of-living pressures are being overlooked. “The government needs to send a really strong message to punters that they’re in their corner,” he said. “They need to signal to people that they understand the crisis and they’re focused on trying to help. Millions of people are struggling.” It appears Senator Bragg’s proposal is not part of official Coalition policy work. The Coalition’s Treasury spokesperson Angus Taylor said that “Coalition backbenchers are entitled to hold their own views … unlike [those in] the Labor Party”. “There’s no doubt that under the Albanese Labor Government, things have gotten tough for hardworking Australian families,” Mr Taylor said. “The key to addressing this cost of living crisis is bringing inflation down. “Inflation is coming from Canberra – even the RBA Governor last week confirmed inflation is homegrown.” Senator Bragg did not initially respond to a request for comment. After this story was published, he told news.com.au: “The idea of Australians using their super to offset mortgages is well worth exploring. “Households are being squeezed with skyrocketing interest rates because of Labor’s economic ineptitude. “Since Labor came to power, we have seen 13 interest rate rises, with the Reserve Bank warning of more to come. But at the same time, Labor has proposed no meaningful cost of living relief. “Allowing Australians to use their super to offset their mortgages will have an immediate impact on easing mortgage stress. “In the absence of Labor adopting a contractionary fiscal policy, all options should be on the table. “Labor must abandon the Big Super talking points, and implement policies that help all Australians. “This proposal will benefit from further analysis which I will be pursuing.” Join the conversation. Add your comment to this story. To join the conversation, please log in. Don't have an account? Register. Join the conversation, you are commenting as Logout. Interest Rates. RBA reveals new deputy governor. A top official at the UK central bank is set to make the move to Australia and join the Reserve Bank as it battles to tame persistent price pressures. Costs. One thing Aussies ditching in droves. Cash is no longer king, a new survey has found, with less than one in 10 consumer payments made with notes and coins. Australian Economy. Stark proof Australia is totally stuffed. Just about everywhere you look, there are worsening signs that Australia is no longer the lucky country – for just about all of us.