Thus Spake Mungo: A not-so super scheme

MungoThe most depressing aspect of the very public stoush between cabinet ministers and their claques over allowing house-hunters to access their superannuation for deposits is that it has happened at all.

And that is not just my view – you can bet it is Malcolm Turnbull’s as well, because it represents yet another failure of his leadership.

He made his opinion clear as far ago as 2015 – a thoroughly bad idea, no ifs and no buts – forget it. Of course he was not yet prime minister, and the issue was not considered a vital one – just one of the recurrent thought bubbles the libertarian right puts up when it has nothing more exciting to propose.

But now Turnbull is the leader, and unlike so many of the fervent positions he has been forced to recant to get the job, (perhaps the lunatic fringe forgot to include it in its reactionary manifesto) he appears to be holding on to it: even on part of his passage to India he made it clear that he had not changed his mind – at least, not yet. But the question is rapidly becoming yet another ideological flashpoint on the long war between the Liberal factions and despite Turnbull’s opposition it is not yet clear how it will be resolved.

It should have been killed off before it even got into the headlines, and if not then, definitely last week after a day-long session of the Expenditure Review Committee – the pre-budget razor gang. And the fact that it wasn’t shows just how precarious Turnbull’s dwindling authority has become.

Under normal circumstances the leader’s word would have been law: the prime minister may tell his colleagues that he is simply primus inter pares among his cabinet, a chairman to mediate the disputes, but in practice it is rare indeed for arguments of this kind to break into the media.

It can happen; the passionate campaign by Paul Keating to impose a consumption tax – the then treasurer’s beloved option C – bubbled along for several days, but in the end his prime minister, Bob Hawke, kyboshed it, and that was that. Hawke was genuinely attracted to the idea, but in the end it was too electorally fraught.

So Keating backed down, and in the end campaigned equally passionately against what became the GST. But Scott Morrison is quite prepared to break the unwritten rule. He wants – indeed, he desperately needs – a win to give at least some substance to what has become the key budget issue of housing policy.

Morrison’s quandary is that he is hopelessly circumscribed by the commonwealth’s ability to intervene in the area. Having dismissed the biggest lever available to Canberra, negative gearing, on the grounds that Labor thought of it first, and with the other serious tool, capital gains tax, teetering in the balance because the right hates the idea of losing that perk even more than it likes the idea of dismantling superannuation accounts, Morrison is reduced to the prospect of tinkering at the edges, a policy which even he admits is all but pointless.

He is already warning of failure, warning the public that there is no magic bullet, and the process of reform, if it comes at all, will take years – certainly well beyond the next budget and beyond. Having discouraged prospective house buyers as far as possible, he goes on to talk about the joys of renting.

This, of course, is hardly compatible with encouraging a premature grab at super; renting is always risky, a lease-to-lease proposition, and it becomes downright perilous when age catches up and retirement looms. When the job ends, the income from super and the pension is generally all that’s left to pay the landlord. If it has been spent on a concrete purchase of accommodation, well and good; but if it has just been blown on a deposit, with no real prospect of being able to pay off both the interest and the capital, it can be disastrous.

The ideological right… is now shamelessly defying Turnbull on every level. Naturally Tony Abbott is front and centre of the rebellion, with most of the usual suspects on the backbench.

The libertarians do not see that as a worry: as far as they are concerned, people are entitled to use their own money however they like, and if they stuff up, tough titty. After all, superannuation is no more than institutionalised theft – a bit like taxation, really.

But of course it is a bit more complicated than that. Super is supposed to be form of compulsory saving, which means that if it is spent prematurely, not only do the savings dissipate, but the interest on them ceases to exist. Even if super remains untouched for the full period in which it accumulates, it is still mostly considered inadequate for a comfortable to retirement, which is why Keating, who set up the system, has tirelessly argued that the rate should be increased from the current figure of 9.5 per cent to 12 per cent.

However, the current government has deferred any increase until 2025, which will be too late for yet another generation of pensioners – who will, as a result, need topping up from government coffers. This is no doubt one of Turnbull’s objections to Morrison’s pleas, and it is one which every serious economist supports.

But that means nothing to the ideological right, which is now shamelessly defying Turnbull on every level. Naturally Tony Abbott is front and centre of the rebellion, with most of the usual suspects on the backbench. But what matters is that ministers, both senior and junior, have joined the push, among them Barnaby Joyce and Matt Canavan of the Nationals and even blow-ins like Michael Sukkar among the Liberals.

For them to be airing their views in public is unconscionable, but who said anything about conscience? Others, notably Christopher Pyne, are striking back, but it has all become very messy. And just how messy has been revealed by the astonishing report that the prime minister has turned to Peter Dutton (who, perhaps surprisingly, does not favour the Morrison scheme) for support: he has ordered (or perhaps implored) his treasurer to talk to his minister for immigration and border protection, who has absolutely nothing to do with housing policy and, it can be argued, very little to do with anything these days apart from naked ambition.

Pathetic, if not farcical. Or perhaps, once again, simply depressing..

5 responses to “Thus Spake Mungo: A not-so super scheme”

  1. Hotspringer says:

    Pathetic? Depressing? Not at all – the more the scum fight among themselves, the happier I am.

  2. Ron Barnes says:

    Mungo Another very good item

  3. Jon says:

    Back of an envelope calculation – a young man, or a young couple, maybe with a couple of kids, pay roughly $500 a week rent for a decent house. Over 52 weeks that’s $26,000. Multiply that by, say, 40 years, and you get $1,040,000. That’s dead money.
    It assumes that the couple have managed to maintain employment for that period – very unlikely in any case.
    Wouldn’t it be better to allow them access to some of their super early only if they’re going to use it to put a deposit on a house? Seems crazy to expect people to live in near poverty all their working lives, wasting money on rent, just to gain access to a pot of gold when they turn 65.
    The system’s rooted!

    • Little Mung says:

      Letting first home buyers access their super for a house deposit is a thourghly bad idea. It will stimulate demand in an already overheated market, driving up prices and making housing even less affordable and have a flow on effect of pushing up rent as investors seek to make returns​ on larger initial short it hurts the very people it purports to help.

      The only winners from this policy are the people who already own property.

      Unwinding some of the tax concessions available to investors on the other hand will put downward pressure on prices helping new entrants at the expense of existing property owners.

      This conflict between the interests of those who want to become home owners and those who already are is the reason for decades of furious inactivity from both sides of politics.

  4. Petrus says:

    A good article but McCullum did miss that the release of super funds will also feed the housing price bubble in Sydney and Melbourne (and Byron Bay?). Apart from increasing the contribution rate, we certainly should not be mucking around with people’s super including by allowing its early release. The accumulated super funds are the key to ensuring we do not go down the path of unfunded pension debt as Greece did. Liberal supporters in particular should thank and support the super system – it has turned ordinary Australians into capitalists with a stake in ensuring we manage our economy in a way that is fair and encouraging for both labour and capital. One possibility though that would not undermine the integrity of compulsory super would be to allow people to draw on additional contributions to super for a home deposit.. That would come at some cost to the budget – particularly if concessional contributions like salary sacrificed contributions were included, but it would enable young working people to save for their deposit in a convenient, profitable and tax advantageous way, and in a way that would not fuel increasing house prices.

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