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A Super Housing Scam

It should be clear that Australia's housing system is in a broken state, and this much was pointed out for years. The increase in housing prices is now 20 percentage points higher than the increase in wages in 2021. Housing has become increasingly unaffordable and renters are punished by a system that concentrates more and more housing stock in fewer hands. Has our fearsome leader suggested an increase in housing stock? A removal of negative gearing on existing properties? Or even a return to Australia's most successful policy of a Federal land tax?

Alas, no. For those who understand the modus operandi of Prime Minister Scott Morrisson, the entire ideological bent is to treat the poor as sinful and undeserving, and those with power and wealth due to heavenly grace (or at least a colonial inheritance) should change the rules so the system benefits them even further. I wish I could say this was hyperbole; it isn't. That is exactly what the super housing scam policy is about.

The policy itself consists of two main components; the first is to allow older people (aged 55 plus) to $300,000 from the sale their home into superannuation and allow seniors to hold proceeds from house sales for two years without it affecting their pension. The second is to allow first-home buyers, primarily young people, to reduce their up to $50,000 or 40% of their superannuation account to buy a home. In other words, an intergenerational transfer of wealth of the young poor to the older rich.

It is worth noting that economists, housing, and superannuation experts are all opposed to this policy. Over the past 10 years superannuation has increased by 252%, whereas housing to only 182%. The policy will, as the government's own ministers have admitted, drive up prices and, in any case, for younger Australians will unlock on average a paltry 1% of a deposit. But of course, it does satisfy the gradual destruction of superannuation; and sections of the Tory party hate superannuation almost as much as they hate Medicare.

Comparison with Labor's policy is inevitable and necessary given how many column inches the Murdoch press has provided in crowing support for the Coalition policy. By comparison, Labor's policy is pragmatic and unexciting and yet will have the desired effect of getting more people into their own home. Simply put, the Federal government will become an equity co-owner to the tune of either 40% (new structure) or 30% (existing structure) for new home buyers as long as an individual earns less than $90K or $120K as a couple. The owner can either pay out the equity contribution over time, or at sale. In either case, they get to keep their superannuation, and they get to own their own home and get out of the rental system.

If a criticism can be made of the Labor policy is the initial limit of 10,000 places. I do not see any reason for such a limit when the policy has such strong and positive effects on lower and middle-income Australians who are currently trapped in a rental system where housing is unaffordable, and certainly if Labor is elected sustained lobbying should be applied to lift this cap.

Of course, neither party is really dealing with a fundamental problem - that it is land price, not housing price that drives the lack of home affordability, and redirects what should be productive investments into monopolistic speculation of natural resource values. But economists across the political spectrum since Adam Smith have been banging on about this; why would we start listening to them now?