Andrew Bragg (NSW, Liberal Party, Shadow Assistant Minister for Home Ownership) Share this | Link to this | Hansard source

I present the interim report of the Economics References Committee on improving consumer experiences, choice and outcomes in Australia's retirement system, together with accompanying documents, and I move:

That the Senate take note of the report.

This has been a very interesting week here in the Senate. The government has chosen to seek to bring on a vote on the Help to Buy legislation. It has correctly identified that housing is the biggest issue, particularly for those under 40 in this country. But after 870 days since being announced, it seems very curious that, all of a sudden, the Help to Buy policy appears to be urgent. After the government have been in office for 2½ years, this is the only policy they have to aid first-home buyers. We read and we see that the various ministers are threatening early elections and double dissolutions. I think that really shows that the government has run out of ideas when it comes to housing.

The good news is that the Australian people will have a smorgasbord of policies to choose from at the next election. They will have a genuine smorgasbord. They will have the policies from Labor. They've run out of ideas, but they've got a couple of things rattling around in the cupboard: Help to Buy, housing targets that have failed, a housing fund that builds no houses but spends lots of money, tax cuts for foreign fund managers. That's one option. You can go for the Greens. They've got the government-owned property developer. Or you can go for the Liberals, which is going to have a range of policies, one of which already includes being allowed to take $50,000 of your own money from superannuation for a deposit for a first home, as well as other policies that are yet to be announced.

But what I want to do today is take up some time here in the Senate to let people know that we have concluded one of the reports from the retirement system review, which, on this occasion, has looked at the viability of allowing people to use their superannuation as a mortgage offset. This is not the policy of my party. This is just an idea that we have pulled apart during our committee process, and we now present that report for the Senate's consideration and for the consideration of the Australian people. The premise of this policy is to give people choice.

I'll reference the comments in question time today from the government, when they referred to the coalition's policy on the super deposit as 'raiding your super'. It's very curious. How do you raid your own money? The answer is you can't raid your own money, because it's your money by definition. Having a mortgage offset policy is really based on the idea of giving people more choice and more agency, because we believe in giving people agency, we've always believed in choice and we think that, ultimately, if you give people more options then they can make better judgements for their own personal circumstances. So this idea is not about the deposit; this is about the mortgage. It's effectively a policy for people who already have a mortgage from a bank. The basis of it is that you can offset your mortgage by using your super account, and that then reduces the amount of interest you pay and you pay off your loan faster, so you own your house faster. That's the idea.

Right now in Australia, according to the Bureau of Stats, 32 per cent of lump sums taken out of superannuation are used to pay off mortgages. So 32 per cent of the money that comes out of super is used to pay off mortgages. Many people would say, 'Well, what was the point of super?' If people are being forced to put all their money into a savings scheme for 40 years and then they're taking it out and paying off a mortgage, then what was the point? That is a very reasonable question to ask. Why would we want to have a position where we are forcing people to pay high interest to a bank whilst simultaneously forcing them to pay high fees to the super funds?

We know that the Labor Party love superannuation because this is their greatest cash cow. Last year, the super funds gave unions and co $40 million, which in campaign parlance is very significant. These are pretty much the biggest campaign funders now in Australia, and so Labor of course don't want to canvass these issues. But I think it's a very reasonable question: why would we be forcing people to pay high-interest costs to a bank but also high fees to a super fund if they wanted to offset those factors?

The Real Estate Institute did some interesting modelling for this purpose. They said that they found that a first-home-buyer couple aged 36 with a mortgage balance of $520,000 at eight per cent interest who were able to offset their mortgage with $170,000 of combined super could see their monthly repayment reduced from five grand to $3,300. That's a significant change. Now, it wouldn't change their overall repayment, but it would significantly reduce their interest costs, and therefore they would pay off more principal and pay off the loan much faster.

An actuary called Jonathan Ng did some additional actuarial modelling which showed that, if you put aside $40,000 of superannuation into an offset account, you would save 3.6 years off the mortgage and $164,000. If you were older, in your 40s or 50s, or if you combined as a couple in your 30s, and you were able to offset $160,000, then you would be able to save $458,000 over the course of the loan and reduce the duration of the loan by 9.9 years.

So, at the end of the day, if you look at the modelling here, the returns in some cases in super would be lower than the benefit of offsetting the mortgage. In other cases, the super funds might outperform that. But why wouldn't we give people the choice? If you're 45 or you're 55 and you've got a large mortgage, you've got a super balance and you want to offset your mortgage, why shouldn't you be able to do that? I think it's an entirely reasonable concept. If the data from the ABS is right—I'm sure that it is—and more and more people are going to be retiring with big mortgages and using their whole superannuation balance to pay off their mortgage, then what was the point of super in the first place?

I stress again for the record that this is not a policy of my party, but is a policy that we thought was worth pulling apart and testing through the Senate inquiry, and the actuarial modelling speaks for itself. Clearly, in certain circumstances people would be better off if they chose to do this. But I again stress that this would be an option. We on this side are in favour of giving people more choices. On the other side of this parliament, the Labor Party is more focused than ever on restricting choices that are available to the Australian people. Yet, if you go back to the early nineties and you flick through some of the newspaper articles about the early stages of superannuation, Paul Keating, at various times, canvassed the idea of allowing people to use their super for a first home, because he recognised, at that stage, that the bedrock of a safe retirement is homeownership. That is why all the countries which have schemes comparable to our superannuation system, like Singapore and New Zealand and Canada, have arrangements for people to use their own money in their pension scheme for the purposes of a first home, because the key determinant of your success in retirement is not your super balance; it is your housing status.

So this mortgage offset idea, I think, is a good idea for economic reasons but also for psychological reasons. Securing a home is a very important measure for most people, and I think that the recommendations that we've outlined in this report are very much worth the Senate's consideration in due course.

I wanted to just touch, before I close, on some of the key recommendations that we made in relation to the design of this product, because I think it is important that we consider that it wouldn't be a free-for-all. We recommended that the product would have to be designed in legislation such that you would have to effectively withdraw the money from super and put it into a special product that would be issued by an authorised deposit-taking institution, which could be a bank or a building society, and the money would have to be held in that special account to offset the mortgage interest, and that's what it would be used for. It couldn't be used for any other purpose by the individual. It could only be used by the institution to offset the mortgage, and, after the mortgage was offset, the money could be returned to the superannuation fund.

So—long story short—we think that giving people more choice is a good idea. We already have a policy which would allow people to use super for a deposit, because that recognises that it is people's own money. This is another idea that would allow people to use their own money to achieve their own financial goals faster, recognising that the data is trending in a very troubling direction. If 32 per cent of the money today that is coming out of super in lump sums is being used to pay off mortgages, then that raises the question: what was the point of super? If the point of super was to allow people to have money outside of the family home, or outside of other savings and investments, then it's not doing a very good job if most of it is being used to pay off a mortgage, and maybe it would be better if people weren't forced to pay, simultaneously, high fees to the super fund and high interest costs to a bank. So this is a good idea and worth consideration.

Debate interrupted.

Andrew McLachlan (SA, Deputy-President) Share this | Link to this | Hansard source

Before I give the call to Senator Rennick, I'll just go to Senator Shoebridge.