Treasurer Joe Hockey has suggested first home buyers should be able to dip into their superannuation to purchase a first home. It comes after Senator Nick Xenophon was ridiculed in August 2014 (‘Why Australia has one of the world’s largest housing bubbles’) proposing the same idea to a Senate Economics References Committee hearing in Adelaide. Multiple experts came forward suggesting Xenophon’s idea would only increase house prices and further exasperate the problem.
In the weeks following, Finance Minister Mathias Cormann ruled the ludicrous idea out. (‘Mathias Cormann warns super not the key to housing’)
In response to Hockey’s imprudent plan, announced yesterday, shadow Treasurer Chris Bowen said “His [Hockey’s] plan would have the likely effect of not only undermining retirement incomes but also driving housing prices up further and making it harder for first home buyers.”
This view is shared by John Daley from the Grattan Institute, “It won’t improve the problem around supply. If supply remains constant and you effectively increase the amount that people can pay then prices will go up. This is economics 101.”
Chief economist of Bank of America Merrill Lynch, Saul Eslake said “Anything that allows people to spend more on housing than they otherwise would in a supply constrained market will result in more expensive housing and nothing else.”
“It’s exactly the same principle as first home owner grants and stamp duty concessions”
If Mr Hockey is genuinely serious about addressing housing affordability, he should be concentrating on removing current market distortions such as negative gearing and limited recourse borrowing by SMSFs, rather than trying to create new distortions.
Please spare a thought for the council of financial regulators – The Reserve Bank of Australia (RBA), The Australian Prudential Regulation Authority (APRA), The Australian Securities and Investments Commission (ASIC) and The Treasury who are trying to control the overheated market at a time when Hockey wants to throw petrol on it. Ludicrous.
» Joe Hockey raises prospect of first home buyers using super to enter property market – The Age, 6th March 2015.
» Joe Hockey flags opening up super funds for houses, job training – The Sydney Morning Herald, 7th March 2015.
» Mathias Cormann warns super ‘not the key to housing’ – The Australian, 30th September 2014.
» Nick Xenophon internationally ridiculed for plan to buy first homes with superannuation – Who crashed the economy, 9th August 2014.