Letting young people dip into their superannuation to fund house deposits would increase buying power and drive house prices higher, the independent economist has warned.
Independent economist Saul Eslake says Liberal backbenchers advocating a plan to allow young people to use their superannuation as a home deposit would only drive up house prices.
Mr Eslake said the scheme showed the government had learned nothing from the history of political interventions in the Australian housing market.
Backbench Liberals Craig Kelly and Tony Abbott have voiced support for the idea, as the Turnbull Government works on the design of a housing affordability package expected in the May budget.
Mr Kelly said the idea had a “lot of merit” and believed “many of [his] Coalition colleagues” might support the scheme.
He said he did not support a three-year limit on the amount of super that could be diverted, nor an age limit on who could access it.
“We should always push for home ownership rates to be increasing, but we’ve seen in recent years they’ve been on the decrease,” he told ABC Radio.
But Mr Eslake, a vice-chancellor’s fellow at the University of Tasmania, said the scheme would do nothing to improve home ownership rates.
“History shows that anything which allows Australians to spend more on housing than they otherwise would … results not in more Australians owning houses, but rather in the houses which Australians already own becoming more expensive,” he said.
That is because the market adjusts to the increased buying power of consumers and prices rise commensurately, he said.
Mr Eslake said Australian politicians had experimented with demand-side interventions for 50 years without success.
Cash handouts and tax concessions, including first-home-buyers grants and stamp duty concessions, had done nothing to prevent a decline in home ownership, he said.
“It’s hard to think of any area of government policy which has been pursued for so long in the face of such incontrovertible evidence that it doesn’t work," Mr Eslake said.
Last month Treasurer Scott Morrison said there was “no proposal” to allow retirement funds to be used on house deposits, but has not explicitly ruled out the idea.
Sky News has reported it understands the Turnbull Government will not include the scheme in the upcoming Budget.
Prime Minister Malcolm Turnbull was quoted in Fairfax Media last year describing it as a “thoroughly bad idea”, a sentiment Mr Eslake agreed with.
"I think it is, as the prime minister said... a thoroughly bad idea," he said.
"Its effect will largely be to put further upward pressure on home prices to the detriment of almost all of those who are still looking to buy their home.”
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