Offset home loans with superannuation, says Liberal

Sydney mortgage broker James Watson of FundingPro said he had seen evidence of Baby Boomer parents putting spare cash into their adult children’s mortgage offset accounts.

“I get asked about it nearly every week by either the parents or the children,” he said.

RBA implications

Grattan Institute economic policy director Brendan Coates said shifting super to mortgage offset accounts would “blunt” the impact of RBA rate rises, but was likely to mean the central bank would need to raise rates even higher to cut spending and reduce inflation.

“It would reduce household interest payments, meaning you would need to have higher interest rates to reduce demand and return inflation to the RBA’s target.

“Putting it in the offset account would not earn the same compounding return as inside a super fund, so the impact is lower superannuation balances at retirement.”

Mr Coates said a better idea was to allow people to “cash out” superannuation guarantee contributions above a threshold of 10 per cent of gross wages.

“The 12 per cent super guarantee rate [by 2025] paid on wages is too high,” Mr Coates said.

Political battle

The Albanese government plans to legislate a purpose for superannuation, partly out of motivation to block the Coalition from using it for housing.

“The objective of super is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way,” according to the government’s proposal.

Treasurer Jim Chalmers has said the proposed law will prevent a repeat of the “devastating” raid on retirement savings under the Coalition government during the pandemic.

More than 2.6 million Australians withdrew $38 billion from their super accounts under the Morrison government’s COVID-19 early release plan.

Labor has been vocal in its desire to harness the $3.5 trillion in super savings to invest in nation-building projects such as affordable housing and energy infrastructure.

The Coalition’s current official super-for-housing policy is to allow first home buyers to invest up to $50,000 from their super fund to buy a home.

Senator Bragg, who is a backbencher, wants the Coalition to go further.

A mortgage offset account is an everyday deposit bank account that is linked to a home loan.

Money in the offset account, such as wages and savings, offsets against the home loan and reduces the amount of interest owing on the loan.

The existing superannuation law allows people limited access to their super before the age of 60 due to financial hardship.

People can apply for one payment of up to $10,000 in 12 months if they are unable to meet reasonable and immediate living expenses.

Senator Bragg said the greatest determinant of financial security in retirement was owning a home and not paying rent, a finding of the former government’s retirement income review led by former Treasury official Mike Callaghan.

“Labor wants to seal off super and we want to deploy it for people’s housing,” Senator Bragg said.

Super Members Council executive general manager for policy Mel Birks said: “Lots of people are doing it tough right now, but workers shouldn’t be called upon to use their superannuation to fix all of society’s problems or the issues of the day.”

“Superannuation isn’t a magic wand - its sole purpose is to provide income for a dignified retirement for Australia’s workers, giving them financial freedom.”