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The Coalition's super-for-housing plan would be a disaster for Orange's young adults
May 15, 2022
COMMENT
By Peter Holmes
So prime minister Scott Morrison's big play for Orange at this election is to allow the young and desperate who have been priced out of the housing market to raid up to 40 percent of their superannuation (to a maximum of $50,000) to go towards a deposit?
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If ever young people needed evidence of a government that couldn't care less about superannuation and couldn't care less about a housing market they have wilfully overheated whenever possible for decades, this is it.
Why would they care? They are the very people who have been pumping air into the housing market at every opportunity since former PM John Howard (1996-2007) had his hands on the levers.
Howard was such a wasteland of inspiration when it came to productivity, R&D and big ideas for our nation that the only way he could build "wealth" was to create new parameters that would allow housing prices to boom.
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He gave money away via grants.
He encouraged foreigners who wanted to invest.
He cut the capital gains tax, making investing in housing more profitable. [Howard thought it would lead to massive investment in companies. He was wrong.]
And while negative gearing was not Howard's fault, he didn't have the stomach for doing anything about it.
At any rate, Howard's suite of measures achieved precisely what he set out for them to do - dupe Aussies into thinking they were suddenly wealthy.
It was, of course, all smoke and mirrors that left people having to borrow more and more and more and more to try and get on the ladder.
Most politicians couldn't give a stuff whether you've been priced out of housing. Sorry, but it's true. They may cry crocodile tears, but that is all they are.
Most wouldn't lose a moment's sleep over the fact your rent might have gone up 50 percent in two years, or that you can't get ahead of spiralling prices to even get close to saving a deposit.
Even the Labor Party, which purports to represent those who are struggling to afford housing, is running scared, putting any changes to negative gearing to one side. Too difficult. They, too, couldn't give a stuff, other than a bit of tinkering about the edges.
Politicians at all tiers of government own investment properties. Lots and lots of them. Some own none, some own one, and some own dozens. These are the same people who make the rules about housing - policy, land release, the looseness (or otherwise) of lending regulations.
It is a hopeless conflict of interest.
The wealth of many of them would have skyrocketed over the past 25 years.
And what's better than wealth that comes without having to lift a finger - no bright ideas, no manufacturing of goods, no creation of jobs or new markets, no research and development. Lazy wealth, built on an illusion.
On multiple occasions along the way federal governments of both stripes have had the opportunity to change the parameters around housing to try and cool the market. Tighten lending regulations. Limit foreign ownership. Pull back on the tax breaks. They have done next to nothing.
Why? Because they don't care.
Australians are among the most indebted people in the world.
We have been conditioned to believe that property prices might steady for a short time, or even go back a bit, but that soon enough they will continue spiking north. You can't lose, right?
Banks are "too big to fail" and the CEOs of the banks know the government will back them - as did Labor PM Kevin Rudd and treasurer Wayne Swan during the GFC - no matter how irresponsible their lending. They simply can't lose.
Those who have been around a while know that there is no such thing as a bubble that just keeps on expanding forever. They all eventually pop, or - best case scenario - leak air slowly enough for the pain to be shared over several decades.
If you want evidence of how it can all go wrong, check out the Celtic Tiger crash in Ireland about 15 years ago.
Or seek out a graph of the Japanese housing market since the 1970s. See what happened before, during and after the 90s boom (tldr - massive spike, massive crash, relatively stagnant now for 30 years).
Many have been predicting the mother of all crashes for a while now. Something that will make the GFC look like a party.
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Is it coming? Economists spend years learning about numbers and they still get it wrong a lot of the time, so what chance for the rest of us? All you can use is your common sense. And common sense says we've let this go way too long.
One well-regarded veteran economist, Saul Eslake, tweeted after Morrison's announcement: "I want to scream, 'This reckless inflation of house prices must stop!' ... because that is precisely what this latest scheme will do."
By allowing desperate Australians to yank money out of their retirement superannuation so they can try and get on the property ladder, the Coalition is effectively just pumping yet more ill wind into the market. Prices will rise because of it.
It is throwing its hands up in the air and admitting it is too late to fix things. That ship has sailed. The generational divide is set in concrete. Too bad, so sad.
Conservatives backing the idea are pointing to an element of the plan that forces people who sell the house they used super to buy to return money back to their super account.
This assumes that house prices will continue to rise, and at a pace that outstrips the compounding interest attracted by super. What of divorces or other family breakups? Forced sales? And where do you live when you sell up and tip money back into super? What if you don't sell up?
In the past conservative voices including Joe Hockey, Christopher Pyne and Malcolm Turnbull have spoken out against using super for housing deposits. They knew it was dangerous.
Following Morrison's announcement of this policy at the Liberal Party launch in Queensland on Sunday, former prime minister and the architect of compulsory super in Australia Paul Keating described it as a "full frontal assault by the Liberal Party on the superannuation system".
He said Liberals "hate" superannuation and "object to working Australians having access to wealth in retirement independent of the government".
"Next it will be aged care ... or paying out HECS debt," Keating said.
Federal member for Calare, Andrew Gee, backed Morrison's proposal.
"I think anything we can do to help first home buyers get into the market is a good idea," he told The Orange News Examiner on Sunday night in a statement.
"I think many younger people will benefit from this. The way the scheme is designed means that a person’s super is harnessed to buy a first home while also protecting their long-term savings for retirement.
"People will only be able to use up to 40 per cent of their superannuation, up to a maximum of $50,000, and when the property is sold the original amount invested from their super, as well as a share of any capital gain, will go back into their super."
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