It will hinder young Australians' homeownership prospects and reduce retirement savings, economist warns
Using superannuation for housing deposits would increase property prices, hinder homeownership for young Australians, reduce retirement incomes, and impose a significant long-term cost on the federal budget, according to a report from Corinna Economic Advisory authored by economist Saul Eslake (pictured above).
The independent report, commissioned by the Super Members Council, highlights how demand-side housing policies in Australia have consistently driven up house prices. Eslake warns that allowing superannuation withdrawals for housing deposits would be the most detrimental policy yet.
“We have 60 years of history, which unambiguously tells us that anything that allows Australians to pay more for housing than they otherwise could leads to more expensive housing and not more homeowners,” Eslake said. “Of all the demand-fuelling housing policies, the Coalition’s super for housing policy would be the biggest – it can only lead to higher prices.”
The Coalition’s proposed Super Home Buyer Scheme would allow individuals to withdraw up to 40% of their superannuation savings, capped at $50,000, to purchase a home. Eslake argues that this would harm younger Australians’ homeownership aspirations and undermine a key assumption in Australia’s retirement system — that most retirees will own their homes.
See LinkedIn post here.
The Corinna Economic Advisory report draws on evidence from New Zealand’s KiwiSaver scheme, which allows withdrawals for home deposits. Since its introduction, homeownership rates in New Zealand have fallen by 2.1%, with a 5.7% decline for those in their early 30s.
“New Zealand Treasury advised that the benefit of KiwiSaver would go to sellers in a supply-constrained market, and that’s exactly what has occurred,” Eslake said. “There are fewer homeowners since the scheme’s introduction, and house price spikes coincide with periods of rapid increases in KiwiSaver withdrawals.”
The report also found that KiwiSaver members have experienced lower investment returns compared to Australia’s MySuper members. Over the past decade, this difference could result in $130,000 less in retirement savings for KiwiSaver participants.
Eslake’s analysis shows that the proposed scheme would disproportionately benefit older, wealthier non-homeowners, while doing little for younger Australians. For example, a non-homeowning couple aged 35 to 44 could withdraw almost $38,500 from their superannuation, allowing them to increase their house deposit by $192,500 with borrowing. In contrast, a couple aged 25-34 could only withdraw $18,000, leading to a $90,000 higher purchase price.
In addition, 78% of single Australians aged 25 to 34 would be unable to withdraw more than $20,000 under the scheme, further limiting their purchasing power.
“It would do little for the people who are most in need of assistance to become homeowners and would do the most for those who need it least,” Eslake said. “And depending on the number of participants, the impact on prices could be even greater than first-homeowner grants.”
Eslake also noted that the scheme would lead to lower retirement savings for those who accessed it, increasing their reliance on the taxpayer-funded age pension. He concluded that boosting housing supply, particularly affordable housing, is crucial to addressing Australia’s housing affordability crisis.
“Super for housing would just make the affordability crisis worse,” he said.
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
