'Housing AND Super', not 'Housing OR Super'

Yeah, but a home is more important than super, right?

Model house with coins and a piggy bank.

Image source: Getty Images

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"Here's Phillips… he's off such a long run, he's pushing off the sightscreen…"

Yes, I'm a little fired up today.


But before that — we're doing something very cool. We're going to host a LIVE, in-person recording of our podcast, Motley Fool Money. It's going to be on the Gold Coast on the evening of Wednesday, March 27.

If you're in the area and you'd like to see us record the podcast, we'd love to see you there. Just click on this link for more information and to RSVP!


Right, now back to my full head of steam…

See, the Federal Opposition last week confirmed what had been reported just recently  – that their new policy is to allow first home buyers to use $50,000 of their Super to buy that home.

Which has been described (by others, not me) as the worst financial policy this decade.

Now, I'm not sure about that… 21st Century Australian governments haven't exactly covered themselves in glory…

But I'm not sure it's wrong, either!

How bad is it? Let me count the ways.

This policy comes fresh off the COVID-era 'help yourself to up to $20,000 of your Super', which we now know led 750,000 Australians to completely empty their Super accounts and which will, according to at least one estimate, cost the Federal Budget $85 billion in extra pensions (and other entitlements).

Not only will those people retire a LOT poorer, but that policy will cruel the federal budget, making it harder to balance the books and requiring a LOT more tax to be collected.

And I'm not Harry Hindsight on this, by the way. I called it #RetirementWrecker at the time, and I stand by it.

The problem is that, even armed with those stats – of retirements curtailed and future Budgets overburdened – the Opposition is going at it again.

Imagine someone who took $20,000 out of their Super in 2020.

Imagine that they were 27.

Imagine that the sharemarket compounds at its historic average of 9% per annum for the rest of their working lives.

By 67, using the rough 'Rule of 72', that could have compounded to an astonishing $640,000. By

And if they didn't touch that money, but used their other Super savings first? By 83, it might be worth over $2.5 million.

That $20,000 which 'didn't seem much' and 'is better in my hands than in Super' looks pretty big now, huh?

So what about the $50,000 that the Opposition is now suggesting?

Using the same maths, that might otherwise compound to $1.6m at retirement and $6.4m by 83.

(Of course these aren't predictions. No-one knows where the market is headed. But history is probably a pretty good guide. Here's the thing, though: even if you halve those numbers, it's still a very large chunk of change!)

So using $50,000 for a first home deposit doesn't just cost those people $50k.

It'll cost them much, much more than that. Which is why, as with the original Super raid, I'm breaking out the #RetirementWrecker hashtag yet again.

So, it'll wreck their Super.

But at least it'll make housing more affordable, right?

No. No, it won't.

Hot on the heels of a myriad of First Home Buyers grants which, last time I checked, haven't made housing more affordable, they reckon this one – ignore all of the other ones, this time will finally be different, honest! – will actually make housing more affordable.

If you believe that, I have a bridge to sell you.

Thing is, even my 11 year old could explain this one.

If you have a given number of properties, but you throw a larger amount of money at them, what will happen to prices?

They'd go up, wouldn't they?


So yes, buyers will have more money to throw at housing. But when they all have more money, and it's thrown at the same housing… it'll push prices up, doing… literally nothing for affordability.

But it's worse than that.

See, once one first home buyer uses their $50,000 to make an offer, or bid at auction, the other first home buyers will have no choice but to match that offer, if they want to stand a chance of getting the property.

So not only is housing no more affordable, but you've essentially just locked every first home buyer into having to use their Super, whether they want to or not!

Yeah, but a home is more important than Super, right?

I mean, that's the slogan being used, and it feels true.

The answer, again, is no.

What? You think money in a portfolio is better than a place to live? Are you mad?


Because my 'no' is actually "No, I won't be drawn into that false binary choice".

First, as we've just shown from the maths, this doesn't make housing any more affordable, so it's not solving the problem it's supposed to solve.

But also, we shouldn't make young people make that choice. In a country as wealthy as Australia, it should be 'and', not 'or'.

Past generations didn't have to make that choice.

I didn't have to make that choice.

Why on earth would we ask young people to make that choice?

They should be able to have a home AND Super. Not a home OR Super.

(Oh – and this is directed to both major parties – if your only, or major, contribution to housing affordability is to throw more money at it… then I wonder whether you actually are trying to solve housing affordability at all? You wouldn't just be trying to give the impression of doing something, would you? Would you???)

We need to make housing affordable for our young people (and not-so-young people who are trying to buy a home). There are many good options available to our politicians to do just that.

But this policy – for all of the reasons outlined above, and more – isn't one of them.

Our politicians need to stop viewing Super as a honeypot for their pet projects – or as a way to use our own money to pretend they're doing something to help! Say it with me: #HandsOffSuper

And with that off my chest… have a great week!

Fool on!

Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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