Super for housing could torpedo every worker’s savings

Industry Super Australia

A Coalition proposal to bust open superannuation could leave every worker tens of thousands worse off, even if they don’t access the scheme, new Industry Super Australia analysis shows.

Under the scheme, funds would be forced to carry more cash – a lower performing asset – this means every Australian with a super fund could have less at retirement.

A 30-year-old on the median wage with a $20,000 starting balance could be between $14,700-$29,100 worse off at retirement, regardless of whether they accessed the scheme or not (today’s dollars).

The increased liquidity requirements would lead to less investment in long-term growth-oriented assets.

ISA modelling shows the liquidity requirements mean annual returns across investment portfolios could fall 10-20 basis points, depending on the demographics of the fund and existing asset allocations.

The Prime Minister compared the Coalition’s scheme with New Zealand’s super system – that allows super for housing – but most New Zealanders gets 1% less per year than Australians.

KiwiSaver balanced option returns delivered around 1.0% per annum less than Australian balanced MySuper products over 5 and 10 years and held around 13.5% less in growth assets than Australian counterparts (see table 1 below).

The New Zealand Retirement Commission has confirmed part of the reason for KiwiSaver’s poor performance can ‘likely be linked to first home deposit withdrawals’. The KiwiSaver experience also confirms funds need to carry more liquidity partly to meet withdrawals for housing deposits, making returns unfavourable to the best Australian industry funds.

If take-up in Australia mirrored New Zealand, funds would have to process almost 250,000 applications for super withdrawals each year for first home buyers, and if average withdrawals were $37,500, total funds released would be equal to $9.4 billion per annum.

As first home buyers make up a third of all purchasers this flood of extra money can only jack up house prices – as government minister Jane Hume has admitted – making housing affordability worse.

Price surges would quickly gobble up any extra money first home buyers could take out of super, as ISA analysis shows the nation’s five major capital city median property prices could jump by between 8-16%.

Comments attributable to Industry Super Australia Chief Executive Bernie Dean:

“Even those Australians that don’t use their super to buy a house will be left tens of thousands of dollars worse off because of the government’s scheme.”

“New Zealand might beat us at rugby, but Australia is better at growing workers’ retirement savings.”

“Not only will throwing super into the housing market jack up prices and make houses less affordable, but all Australian workers will also be worse off because of lower investment returns.”

“Super is meant to be for people’s retirement, not supercharging house prices and pushing the home ownership dream further away.”

Table 1 – Australian MySuper vs New Zealand’s Kiwisaver (median)

















Growth Asset %




Source: Superratings March 2021 KiwiSaver crediting rate and MySuper crediting rate balanced options

Methodology notes:

· In the year to June 30 2021 NZ had 35,130 first home finance commitments coupled with 54,000 first home withdrawals from KiwiSaver accounts a ratio of 1.54 withdrawals for each FHB finance commitment. In Australia there were 162,579 FHB finance commitments in 2021 and with the same take-up as NZ we could expect 249,907 super withdrawals. The range of total withdrawals would be in the range $6.25 to $12.5bn depending on whether each application was for $25,000 or the full $50,000 (midpoint $9.4bn).

Media contact: James Dowling 0429 437 851 [email protected]

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