Matters of Public Importance – Superannuation Inequality and Housing Affordability

March 18, 2015

Senator DAY (South Australia): The question implicit in this motion is whether young people should be able to access their superannuation savings in order to buy their first home. The answer is yes, but not yet. Allowing access to superannuation now to buy a home will undoubtedly add to the demand drivers associated with the housing affordability crisis. These demand drivers include record low interest rates, negative gearing, capital gains tax discounts, immigration, foreign investors et cetera. Some have argued that it has been these increased demand drivers that have caused the housing affordability crisis in Australia, when anyone with a modicum of understanding of how markets work knows that it is not increased demand that drives up prices but lack of supply.

Senators Leyonhjelm and Lambie and I co-sponsored a motion about this very issue a short time ago. Economics commentator Alan Kohler, writing in the Business Spectator, said recently: All governments must address the supply of housing, not simply put a band-aid on the ability to pay the inflated price of it. One only needs to recall the massive increase in the demand for flat screen TVs, mobile phones, laptop computers and tablets—the greatest increase in demand for products the world has ever seen—and yet prices fell.

Why? Because supply was able to meet—in fact, more than meet; it was able to exceed—demand. When it comes to housing, various pundits target the demand drivers, yet they ignore the deliberate restriction of the supply by state and territory land management agencies. This restriction of the supply of land on which to build new houses has led to skyrocketing increases in entry-level house prices, which then pushed up prices everywhere else. But don’t for a second think this was an unintended consequence. It was just the opposite. Rising house prices were an intended consequence, a very deliberate strategy by state and territory land management agencies to produce windfall profits. And who paid for these windfall profits? First home buyers, that’s who. Young South Australians like newlyweds Charlie and Libby Densley come to me all the time telling me they cannot afford to buy a house. Talk about intergenerational equity!

We all own a house; why can’t they? Once these supply side factors have been addressed, then by all means allow people—young people in particular—to use whatever resources and savings they have, including superannuation, to buy a home. As we all know, the best asset in retirement is to own your home. Most retirees these days own their homes and their cost of living is a fraction of what it will be for Libby, Charlie and those of their generation who will hit retirement with either a mortgage or a rent burden. Restrictions on housing supply have made home ownership the privilege of a few rather than the rightful expectation of the many. Not only is this economically foolish, as former modest member Bert Kelly used to say; but it is also morally wrong.

IMAGE: from story at “Home owners raid super to pay mortgage”, August 19, 2012