Super lobby group has conflict of interest with first home buyers

If the federal government pays attention to Malcolm Turnbull’s recent remarks on using superannuation to fund home buyers’ house deposits it will condemn a whole generation of Australians to being renters.

Graham Young, Executive Director of the Australian Institute for Progress, said Mr Turnbull’s remarks were delivered at a conference run by Industry Super Australia, which is the lobby group for union industry super funds.

“ISA has a vested interest in maximising funds held by industry super funds. It has also proposed schemes to allow its member funds to invest in residential rental properties.

“Its interests are opposed to those of homeowners as well as private real estate investors.”

Mr Young said the biggest housing affordability issue is the deposit.

“As interest rates have gone down, house prices have gone up, leaving repayments where they have been on average since the 90s, but increasing the relative size of the deposit required.

“Australians need to save faster than they were, and they are, with almost 10% of their income going into superannuation.

“That 10% is their money, it does not belong to ISA’s members, and they ought to be able to use it to fund the most important asset for financial security in retirement – the family home.”

Mr Young said an added bonus of home ownership was that the return was higher for the owner than their own superannuation, as shown by two sets of AIP modelling (here and here).

“The only substantive criticism that Mr Turnbull makes is that this might push up the price of housing.

“Our research, which is confirmed by work from the RBA, shows that  around 70% of the increase in house prices can be explained by interest rates. The rest is determined by supply and demand factors, particularly zoning restrictions and population growth.

“If governments have appropriate planning laws then housing construction will expand to meet demand, and prices will stay moderate.

Mr Young said the corollary of Mr Turnbull’s argument is that fewer Australians with the means to buy a house would lower prices, but since 1994 homeownership has dropped  by 6.3 percentage points from 76.1% to 69.8% while house prices have risen in the same period, including just on a 200% increase since 2003.

“It’s pretty obvious that increasing the number of Australians owning and decreasing the number of Australians renting will have little impact on house prices over time.

“But it will have a huge impact on the security of Australians in retirement.”

For more information contact Graham Young on 0411 104 801 or graham.young@aip.asn.au.