Life is too short to delay buying
The biggest income problem is that young families have their highest expenses during their lowest income years. We help solve this problem with parental allowances and family allowances. But the super mandatory works against that, reducing earnings in those years while reducing work earnings.
In 2020, 4.5 million people withdrew nearly $40 billion from their super under the early release program. It was clear to those millions of people that having their own money today was better for them. And
I was one of them. This money helped me buy my own house and spend more on my family. If the opportunity presented itself again, I would repeat the exercise. As I suspect millions of others would.
My parents’ generation had access to their super for a decade. I’ve seen many of this generation take huge losses on their pre-retirement super straight.
I’ve seen others take their super as a lump sum and lose it all in financial scams, including honey traps. I have seen many spend a lot to qualify for the old age pension.
Having a super seemed to offer them no protection against recourse to the old-age pension. Indeed, no one who has studied the super system thinks it will make much difference to old-age pension dependency.
I have also seen many use their super to pay off their mortgage or help their children buy a house or buy another investment property.
When you take a closer look, you see that the super is already being used to buy houses in different ways. I had always worried that using super for housing would drive up prices. But I came to see the reality is that it is already happening.
In 2020 I had a health scare with suspected bowel cancer. I was only 38, but that’s genetics. My dad had a similar scare in his early 50s. What does that have to do with super? The dead don’t need super. One in 11 men does not reach 60 and one in seven does not reach 66.
A happy life is not one where you cannot enjoy your money while you are young. It is a life in which you create great memories and social bonds in your youth that stay with you when you are old, a life in which you raise great children.
Luckily I had my bowel partially removed and I’m fine. But now more than ever, I see that the best years of my life are this one and the next. My children are only young once and if I die sooner rather than later, I want to have used my money to enjoy our time together to create the best childhood memories for them.
My personal experience drove my economic research, which culminated in a report in 2020 arguing that we should scrap the super, pay it as a salary, and let everyone gradually withdraw their money from their fund to spend as they please.
Anyone who has carefully and objectively examined the super system finds that it does not make the old age pension more viable. In fact, it makes the situation worse. The tax breaks given to supermarkets amount to nearly $40 billion a year, and nearly $30 billion a year is paid in fees. The entire age pension system costs only $45 billion a year. Without the super and its associated tax breaks, the federal government could afford higher pensions.
Super also amplifies any financial inequality that exists, be it a gender pay gap or any pay gap between workers and cities and towns. The old-age pension fills all these gaps.
Even better than the Morrison government’s super-for-housing proposal is super-for-everything – completely unraveling the super system.
That wouldn’t mean people couldn’t save. They could. Just like they did before great.
It would simply improve the budget, improve choice, improve fairness and improve the life cycle of Australian families who need their money when they are young, not when they are old.
The only mystery is why our seemingly left-wing political party seems so determined to introduce a privatized, high-cost pension system rather than strengthening the only pension system that really works – the old-age pension.
Dr Cameron Murray is a research fellow at the Henry Halloran Trust, University of Sydney.
The Opinion Bulletin is a weekly summary of viewpoints that will challenge, defend and inform your own. register here.