Joe Hockey’s idea to allow first home buyers to use their superannuation to break into the housing market is not stupid.
Hockey has made a lot of mistakes as Treasurer but he has become the first Coalition or ALP politician to start to tackle the fundamental shift in the savings market that we are now seeing.
Most young people in Australia are finding it impossible to gain a first home. This means that when they retire the government or superannuation pension they will require will be much greater because they will have to rent a home in retirement.
Some will say that it is a good thing but we are watching a fundamental shift in the Australian landscape with huge implications for the intergenerational problem.
It’s no surprise that the organisations behind the big superannuation funds oppose the idea -- their systems are not equipped to handle it and it will reduce fees. And the architect of our superannuation, Paul Keating, not surprisingly wants to continue the system as he envisaged it.
While we will always be grateful for the vision of Paul Keating, times have now changed and we must at least consider adapting that far-sighted vision to new circumstances.
Shadow treasurer Chris Bowen came into the debate opposing the Hockey idea too quickly. Bowen needs to look more closely at the problems he will face when he becomes treasurer, which could be as soon as next year. Bowen needs to go out into the real world and mix with young couples outside of party branch meetings.
And that’s what I did last weekend. I found myself in the company of a typical first home buyer in today’s market. They are a two-income couple in their 30s who have been renting but watching on as their savings growth fails to keep pace with rising dwelling prices. They want to live relatively close to the city because that is where they work and they want to be in the catchment of a good state school -- otherwise they will have to pay private school fees.
They can just manage a house or larger apartment but they are saddled with a huge mortgage. These days no professional jobs are secure and they fear that at some time they may go down to one income for a time. They have been saving via superannuation and combined have close to $75,000 in super funds.
So why would we not say to that couple: “you can invest up to $50,000 of your superannuation in your first home. It is equity and if the house is sold you will pay superannuation tax, although if it is swapped for another house there won’t be any tax.”
We don’t want to put the housing market through the roof so we would end the geared superannuation funds going to housing as an investment.
We might even put a curb on negative gearing.
Or, how about this for an idea: If you use your superannuation fund to help buy a first home you can’t use it to gain a lump sum later in life. It must be converted to a pension. We use a carrot to change the nature of superannuation to the original Keating vision -- superannuation is there to provide a retirement income.
A whole generation of Australians could retire without a house because they are unable to get into the market. Because Treasury does incorrect sums to cost superannuation, we don’t calculate the current cost by the reduced cost superannuation delivers to future government pensions ((Treasury's hoax is tormenting the super debate, March 9).
If we have a generation of Australians without dwellings that have lowered their savings via rent we will face a much bigger government pension bill.
And sitting in the Senate is Family First’s Bob Day who is waiting for the Australian unemployment rate to get to a level where Australians are concerned about it. My guess is that we will start to worry about unemployment when it gets beyond 7 per cent, but it could be 8 to 10 per cent before we are interested in taking action.
Bob Day is one of the few members of Parliament with an integrated plan to reduce unemployment, but it’s so politically incorrect that we have to wait for much higher unemployment levels before it can be debated.
Part of the plan is to allow first home buyers access to superannuation but it goes much further and suggests much simpler apprenticeships, curbs to shift allowances and penalty rates, greater access to land -- thereby lowering the cost of housing -- and much more independent contracting.
If any government were courageous and politically incorrect enough to do such things, unemployment would fall. But its hard work to be politically incorrect, as Joe Hockey is now finding out with superannuation.