At the moment, even the dream of owning a home seems out of reach for many young Australians, with a lack of affordable housing and the economic cycle pushing prices sky high.
A political debate has swirled around a suggestion from the real estate industry this week to allow young Australians to dig into their superannuation savings for a house deposit.
For many struggling to buy their first home, the proposition sounds appealing. Yet the consequences of eating into your super decades before retirement would be dramatic while doing little to make housing more affordable.
Allowing super to be used for a deposit on a home would throw extra fuel on overheated house prices, making it even more expensive for first time home buyers.
It would also defeat the purpose for which the super system was designed. It would empty out super accounts of younger workers before the effect of compound interest has had any chance to work its magic – for example $40,000 safely invested in a super fund can turn into $140,000 over 30 to 40 years. This long term interest is what the super system relies on to deliver decent retirement incomes.
Taking $40,000 out of a twenty-something’s super for a deposit on a first home would almost completely wipe out their super and leave a large hole in their savings when they retire. A shortfall of $140,000 would mean working well past seventy to make up lost ground.
The real issue that needs to be tackled in this debate is the lack of supply of affordable housing.
There are a number of ideas to explore. If negative gearing were only available for new construction, for example, that would create an incentive to build more housing.
In a nutshell, early access to super simply goes against the fundamental objective of compulsory superannuation which is to ensure as many people as possible can enjoy a decent standard of living in retirement. Our system, one of the best in the world, has delivered a $1.7 trillion pool of national savings which is driving deeper investment in our economy and reducing our reliance on the aged pension and taxpayers.
Young people do need a leg up to get into the housing market, but the issue cannot be solved by draining their retirement savings and future investment opportunities.