Australian superannuation

Treasurer Joe Hockey has said that perhaps Australians should be allowed to take money out of their superannuation to buy a house.

Superficially, this is a response to the ongoing crisis of unaffordable housing in Australia. But is smokin' Joe really just trying to feed the banks? After all, with a vast new pool of money available to leand money against, bank lendings would increase further and the size of laons - and hence the price of housing - would increase even further again.

Interesting to note that the bank sector has long wanted to get control over some of the billions of dollars 'locked up' in superannuation.  This would certainly be one way of the banks gaining control of this pool of funds.

All this while bank lending practices, predatory selling schemes, and issues like negative gearing go mainly unaddressed. At least one gonvernement minister, Malcolm Turnbull, has come out in opposition to this idea.

Australia: how come we can't buy houses?

Australia current,y has the worst housing affordability of any developed country. In particular the major cities such as Sydney are plagued by continually rising housing costs, far above the rate of inflation. There has been talk of a housing bubble, where thousands if homeowners will be left with a property that is worth less than the mortgage they hold, however to date prices keep on rising.

The boom in housing costs goes back to the the introduction of  a 'first home owner's grant' more than ten years ago. Not only did this grant make it easier for people to raise the money for a house, the major banks and other lenders decided to accept this grant as 'savings' and so it was leveraged as part of a deposit, with the result that the loans made could be larger. People with larger home loans bid higher prices for housing, and the price rise cycle was established.

At the same time we have a tax system which includes negative gearing. This encourages people to invest in existing housing in order to write off interest payment against income tax. As a result, currently we have much more housing owned by landlords, and the bigger the loan, the more tax they can write off, so this price rise cycle is actually an advantage for housing owners. 

There have been many people comment that negative gearing does not create new housing, which was the rationale for its introduction some years ago. In addition it helps lock potential new home onwers out of the market. Politically however no government since Keating has had the courage to even discuss this issue for reform.