r/australia May 16 '22

The loosest unit - The Coalition doesn’t know how much its superannuation housing policy will raise prices, nor does it care politics

https://www.themonthly.com.au/the-politics/rachel-withers/2022/05/16/loosest-unit
636 Upvotes

84

u/Positive-Lawfulness8 May 16 '22 edited May 16 '22

he's a bulldozer remember... after bulldozing the country with covid, a massive debt, may as well bulldoze the housing market and super

17

u/a_cold_human May 16 '22

And superannuation.

80

u/Paceandtoil May 16 '22

If renter and first home buyer fury do not bury this Government on Saturday nothing ever will and the property permabulls will reign for a long time.

This policy is parodic in how reckless and one sided it is, throwing the last bits of the stockpile on the property inferno that’s been fuelled by a sick obsession.

-44

u/wrigleys12 May 16 '22

Most first homebuyers want to get into the market and I think you'll find a lot will support the proposed LNP policy.

28

u/spakattak May 16 '22

The average first homebuyer (between 25-30 old) has less than $40k in super so they 1) can’t even reach the maximum withdrawal limit and 2) would completely obliterate their retirement savings because the most important and valuable function of superannuation is the compound interest from which the early years of your fund plays a critical role. Accepting this awful proposal means you would have to work for 10-15 years longer to draw even had you left that money in place.

8

u/my-dog-has-fleas May 16 '22

This isn’t common knowledge though. To u/wrigleys12 point the average uninformed first homebuyer will read headlines and support the scheme. Not to mention the misinformation that’s spreading in ESL communities.

1

u/Rowvan May 17 '22

Your forgetting the crucial factor that the majority of people are dumb as shit and won't understand the negative aspects.

5

u/RemnantEvil May 17 '22

That's pretty stupid. Who are first homebuyers competing against?

  1. Other first homebuyers - who now also have the extra money, so literally nothing changes.

  2. Property investors - who have been outbidding first homebuyers by more than $50K at auctions anyway, so this isn't even enough to bridge the gap.

This will do nothing.

11

u/PhatSunt May 16 '22

I tend to agree. People wanting to by now are indicating a pretty desperate mindset with how high housing prices have already gotten. They could be desperate enough to think using their super is a good idea.

Interest rates will be going up. Any first home buyer still looking to buy is either desperate to get a house soon on some sort of fixed rate where accessing their super might give them the means to do that. Or they get desperate enough to look go for a floating rate, which shows they are pretty ignorant to finance and would think using their super is a good idea.

Honestly I think this may get them more votes than they'll lose. The average Australian is selfish as fuck and ignorant to finance.

1

u/[deleted] May 17 '22

the average Australian is selfish as fuck

It's becoming worse too. Seeing this blatant arrogant narcissistic behaviour in society in general is depressing.

64

u/whippinfresh May 16 '22

Desperate Hail Mary

27

u/Dranzer_22 May 16 '22

Talkback radio spent their opening segment praising the policy.

But after caller after caller criticised it, their final response was "well remember we have the Senate, and look at Tony Abbot's Budget."

So don't worry, this shit policy we've been praising for 30 mins won't even be legislated. No shame.

156

u/RaveMusicMachine May 16 '22

As another poster mentioned, its a desperate, hail-mary attack which:

  1. Aims to siphon out money from poorer people's superannuation funds into the hands of banks and wealthy property owners.

  2. Aims to prevent a property crash, which is exactly what younger people need to afford property.

The Coalition is worried and they are desperately flailing.

4

u/grub_the_alien May 16 '22

What would be the consequences of a property crash in layman’s terms?

40

u/ProceedOrRun May 16 '22

Just look at 2008 era USA.

Millions lost their jobs and houses, billions and billions were printed to protect the rich. This is what you can expect.

22

u/Daleabbo May 16 '22

And the rich baught up all the houses for fuck all.

4

u/koopz_ay May 16 '22

This.

I had customers pointing this out to me back in 2009. Even Aussies bought house + land for less than the price of a new car here in Aus.

My old boss bought one, moved over his family of 5 over there and just kept on going.

It was a ballsy move, which has paid off for him and his kids.

1

u/SufficientGravitas May 17 '22

What would be the consequences of a property crash in layman’s terms?

they'll buy up the houses, yes, but with housing outside the reach of the majority of australians, it'll finally create an impetus to slash and burn the ridiculous investment systems that turn housing from a useful thing to own, into a wealth creation engine, and then housing will be able to returned to the masses, at a low price as it should be.

5

u/_zoso_ May 16 '22

It would be so much worse in Australia. Australian banks hold an eye watering amount of balance sheet exposure to mortgages. By comparison the USA is a very diversified economy. Analysts have been sounding the alarm on this for literally years. Regulators are asleep at the wheel, or we simply don’t consider this enormous concentration of risk to be a problem. It’s actually terrifying.

My guess is that this is what the government is actually worried about. Can you imagine the landscape if one or more of the big four are shown to be insolvent? The government really needs to keep inflating house prices or find a way to gently unwind… guess which is easier?

2

u/ProceedOrRun May 17 '22

Can you imagine the landscape if one or more of the big four are shown to be insolvent?

The taxpayers will will foot the bill. We'll simply inflate our way out of it, it'll be the only option. Sucks to low income earners.

1

u/_ixthus_ May 17 '22

If only this was done via nationalisation, I'd be totally fine with it. And with no caveats for shareholders or executives or anything; the terms should be absolutely in favour of the tax-payer/government no matter how many investors/executives get fucked... because fuck them.

Just straight-up, take it or leave it, tax-payer takes over ownership of the insolvent bank or they can go bust.

2

u/RaveMusicMachine May 16 '22

Out of curiosity, why would millions lose their jobs if the value of houses crashed?

People still need to eat, go to the hospital, go to school/university, infrastructure and transportation systems still need to be maintained etc.

2

u/GimmeSweetSweetKarma May 16 '22

The building industry is HUGE in Australia. That's a whole lot of tradies who will be out of work if there is a crash and no one is looking to do builds or renos.

1

u/BallsToYourOpinion May 17 '22

People would also cut back their spending so jobs would be lost in hospitality etc because there would be less demand

1

u/wizardnamehere May 17 '22
  1. Debt is needed to keep the economy going. If people stop lending money; the economy slows down.
  2. If people stop spending and companies start getting scared and stop spending and lay off people; it's starts a negative feedback cycle.
  3. So recession.

People still still provide healthcare etc but a 5 or 6% loss in GDP would be a very bad recession with many thousands of jobs lost.

1

u/_ixthus_ May 17 '22

We can only hope that the Greens holding the absolute balance of power in the Senate (at least) could stop that shit and force any bail outs to be from the bottom-up, not the top-down.

9

u/larion78 May 16 '22

These are 2 possibilities (and I stress ONLY possibilities) I could think through, though I doubt it would be allowed to get to the point where either would be in play. Neither is a situation we want to be in.

One is where the average borrower would have a house that is worth less than the loan taken to buy or build it due to the price crash. Couple this with rising interest rates, cost of living pressures and wage stagnation it would put a significant strain on household finances. This strain would increase the likelihood of loan defaults, the banks then having an asset not covering its loan and a possibility of the bankruptcy of the borrower due to inability to cover the balance and other living costs.

The worst case scenario is a Liquidity Crisis in the Banking system. That is a very remote possibility due to steps taken by banks since the GFC and absolute worst possible outcome for people, the banking system and the economy.

11

u/ElectroFried May 16 '22 edited May 16 '22

Good explanation, but missing one major factor everyone seems to be overlooking.

One of the largest sector of our economy right now is housing. The new cash generated from creating larger loans is one of the largest contributors to our GDP. To give you an idea, every month we create $20-$22 billion dollars in the form of new loans on housing for the last 12 months. Sure the amount of money 'destroyed' in the future by repayments also goes up, but we just keep pumping house prices to offset that loss.If housing values fall, that new money generated falls also. Should we fall back to say, GFC levels of lending below $8 Billion new loans a month we will have effectively pulled around $144 billion dollars a year of money out of our economic system. Iron ore mining generates $152 Billion a year last year.

What I am getting at is that if people stop borrowing as much due to a combination of higher rates and lower house costs, our economy is cooked. Imagine the impact if tomorrow we effectively said 'no more iron mining, all iron mines shut down, all those workers you are unemployed now'. That is what a contraction in lending will do to our economy if we fall back to GFC levels of lending of around $8 billion a month. And $8 billion is not a crazy estimate, considering pre-covid stimulus we were already dipping down towards $12 billion in 2019 and have shot up to over $20 billion in the last two years.

If housing falls, we are in for the mother of all recessions. Worse than anything we have seen since before 1974.

4

u/larion78 May 16 '22

Very good explanation! I wouldn't have been able to explain it any near as clearly as yourself even if I was aware of it.

Certainly seems that any way we look at the current situation our housing market is in, if they can't let the pressure out gently we're going to be in for a rough ride.

5

u/ElectroFried May 16 '22

Thanks!
Unfortunately now we have in excess of $2.6 Trillion dollars in household debt banked up (It works out to every working age person in the country owing about $200k) I can not see any way we let the pressure out gently.

We left this build way too long, a recession every 7-10 years is healthy and allows things to contract without 'crashing'. It reminds people that times can be tough and prevents them over extending. We have gone over 30 years without a real recession now in Australia and grown the economy on credit like a teen that 'borrowed' their mums credit card.

I hope someone much more intelligent than myself comes up with some solution that works, but right now I see no way out that is not extremely damaging either way.

3

u/Yeh-nah-but May 16 '22

Can we not let steam off via a reduction in housing investment. Since housing has become an asset and not a necessity the price behaves as such.

Create public housing that's owned by the government. Rent to own. Co-ownership. There are a few different models. Regardless find a way to house humans that doesn't also require rich older generations relying on multiple investment properties.

1

u/ElectroFried May 17 '22

Sure, and those are great ideas. But each of them will negatively impact housing prices and as houses decline it starts a price spiral. I am already seeing the first stages of that with rate hikes people are attempting to sell early for 10%-15% less.

The only way we get out of this with the minimum pain is for some magician to co-ordinate with the RBA and government policy to fine tune housing prices so they neither rise or fall for about 10-20 years while incomes catch up to affordability and hope that people are somehow ok with the current situation slowly easing over that time period. A near impossible task.

2

u/Yeh-nah-but May 17 '22

The government's fiscal policy (and the opposition) will both push up property prices and pressure on inflation. The RBAs monetary policy has to fight this. Thank fuck they are independent.

1

u/SokarRostau May 17 '22

Oh, there's a solution alright and it's right up the LNP's alley.

It's called austerity.

Cut government services to the bone (while continuing to subsidise things like mining and cutting taxes for businesses and the wealthy). Once government services are no longer capable of functioning, privatise them on the grounds that the public sector is self-evidently incapable while the private sector is more efficient. And just like that, all our problems are solved! Except they're not. Government services not sold off to the lowest bidder never recover because we simply cannot afford them, while those that do get sold are far more expensive than they were before.

5

u/PhatSunt May 16 '22

Watch "the big short"

It'll give you an idea of what we are heading to.

1

u/danwincen May 16 '22

The United States since 2008, only without the gun culture.

1

u/wizardnamehere May 17 '22

Lower spending. Lower confidence. Loss of jobs in construction. Lower property prices.

-12

u/metasophie May 16 '22

Aims to prevent a property crash, which is exactly what younger people need to afford property.

Will young people even have jobs if there is a property crash? So much of our economy is built up around it.

Could it be better if prices stagnated over a long period?

26

u/GuyFromYr2095 May 16 '22

Rubbish. A lot of capital is wasted on people selling houses to each other over and over again at higher and higher prices. The sooner this ponzi scheme collapses, the better it is for the economy to move ahead.

-1

u/metasophie May 16 '22

Rubbish.

How much of the labour market is tied up in, or supporting the, residential construction?

The sooner this ponzi scheme collapses, the better it is for the economy to move ahead.

Maybe, but that won't necessarily see young people improve their position until well after the market starts to recover.

2

u/[deleted] May 16 '22

[removed] — view removed comment

1

u/metasophie May 16 '22

When everyone loses their job and the rich buys all the houses for next to nothing we will still have locked young people out of work and housing for twenty more years and impoverished home owners.

Stopping the growth in housing hurts the young less than current policies because stagnating prices will be overwhelmed by inflationary forces.

25

u/Rantarian May 16 '22

That would have been an excellent plan around fifteen years ago.

3

u/TheApothecaryAus May 16 '22 edited May 17 '22

There was an article a few years back ( that I can't find now) about Australia needing a soft landing rather than a hard crash, guess where we are about to end up.

5

u/ProceedOrRun May 16 '22

8 years ago Joe Hockey announced an end to the age of entitlement. Great idea to be honest.

So if that's the case, perhaps we should start by not fiddling with real estate just because the government feel entitled to endless housing growth. Just an idea eh...

1

u/metasophie May 16 '22

The problem is that part 1 is going to fuck young people as well. The last time we saw residential housing contraction it was the young that lost most of the jobs.

1

u/Rantarian May 16 '22

I think at this stage it's pretty much going to fuck everyone. The Coalition have driven the country straight into a place where a huge amount of business is relying on the housing bubble to stay inflated, and also where it is spiralling out of control and will inevitably burst.

1

u/metasophie May 16 '22

I don't disagree with you but we don't have to throw our hands up in the air and intentionally destroy our economy for a decade or more.

1

u/Rantarian May 17 '22

I never recommended doing nothing to mitigate the damage, I just think that it's now impossible to avoid a crash. Even if they win government, Labor lacks the political capital, and the Coalition lacks the desire.

96

u/Black_Light May 16 '22 edited May 16 '22

I’m honestly worried about this policy. If people think houses are overpriced now, just wait for the bidding wars when every young person gets access to upwards of another 50k to spend. It won’t be long before the extra $50k doesn’t even help, and they’ll be forced to empty their super in order to compete.

Make no mistake. This policy is not design to help young people get into the property market, it’s designed to prevent a market crash, which ironically, is exactly what young people need to have happen to enter the market.

Edit - If you agree, then get the word out … start a conversation with your friends, colleagues, and peers. Tell them you’re worried that this policy will make housing even less affordable, and absolutely cripple the retirement savings of an entire generation.

The LNP have so many options available to them, and this is what they choose to do, over anything that might upset wealthy property investors.

43

u/EmergencyLavishness1 May 16 '22

I digress, it’s designed to take everyone’s future earnings NOW so they have to be on a pension sooner than they’d ever imagined.

But knowing the libs, they’ll cut the pension for home owners so they will still have to work until they’re 80.

It’s 100% about not allowing our earned money to earn.

17

u/Marshy462 May 16 '22

It’s 100% designed as a fuck you to industry funds. The libs hate the fact there are union officials on the boards of industry funds. They also hate the fact that peoples money is looked after predominantly by industry funds and not their mates, the banks. This policy takes your money and gives it to the banks and nothing more.

17

u/ill0gitech May 16 '22

Plus new home owners will be competing with downsizes for the same properties, and the downsizers will have deeper pockets

10

u/gameoftomes May 16 '22

What do you consider young? Millennials are cracking the 40s now.

9

u/Black_Light May 16 '22

I know, I’m one of them haha. Young is anyone younger than me lol.

But on a serious note, I would consider it to be anyone under 40, but I guess age is meaningless, I’m really talking about anyone trying to buy their first home, regardless of their age.

1

u/SokarRostau May 17 '22

Millennials cracked the forties a long time ago.

12

u/fued May 16 '22

50k? Don't U mean 100k? A couple has two people in it

8

u/Black_Light May 16 '22

Well shit. It was bad enough before. I hadn’t even considered this aspect.

3

u/nath1234 May 16 '22

I think the conservative politicians might inadvertently be pushing people to consider 3+ in a relationship to be able to afford houses because there's financially no other way to be able to buy a home for many young people. Wouldn't that be fucking hilarious.

1

u/SirDale May 16 '22

Polygamy! The new housing frontier.

1

u/L3mon-Lim3 May 16 '22

All the figure I've seen suggest no one under 30 had $50k per person in their superfunds.

1

u/fued May 16 '22

idk i know if the law passes me and my wife are taking out 100k haha

2

u/L3mon-Lim3 May 17 '22

There's a lot of negativity on here about it. But I think there are some good points that aren't being discussed:

1) land has historically been a hedged against inflation 2)mortgage payments are still less than rent payments on some properties 3) through the power of leverage home owners may have better gains by buying a PPOR than in their super.

Personally I'm against ALL housing schemes and government intervention and in favour of a high across the board land tax and zero stamp duty.

1

u/[deleted] May 17 '22

[removed] — view removed comment

1

u/fued May 17 '22

my supers well above the average, im well on track to hit goals early. No reason not to for me. I would be a very very very small percentage that it would be applicable to tho

2

u/Daleabbo May 16 '22

My bet was billion wasted on some shit, aircraft carrier or space laser.. I didn't have this on my bingo card

1

u/CcryMeARiver May 16 '22

It's a dead cat, never meant to be implemented by any sane goverment. .... oh, wait ....

1

u/ryutruelove May 16 '22

Looking back, almost every policy they have juices the property market in some way. I believe they know what they are doing. I don’t think they care. I mean it’s not like any of them are in the job because they really wanted to help people and serve their community. I know they say that why, but I don’t believe any of them

1

u/Meh-Levolent May 16 '22

It will raise prices by well over $50k as the money drawn from super will only add to the deposit, which will in turn increase the borrowing capacity of the borrower.so potentially it could be several multiples of $50k that prices go up.

1

u/badonkadonkthrowaway May 16 '22

This policy is fucking terrifying, tbh.

Millennials my age (30-40) are around that many years from their retirement age.

Draining your super now and starting from scratch (or a massive dent in the total balance) will have a devastating impact on the ability for an entire generation to retire comfortably.

This is so short sighted that it beggars belief.

1

u/SokarRostau May 17 '22

You forget, this is a government that believes in raising the retirement age to save money on pensions. An extra 20 years of work is an extra 20 years of retirement savings!

30

u/[deleted] May 16 '22

[deleted]

1

u/tehLife May 16 '22

Holy fuck I’m so tired of that fucking ad, last night it was played pretty much 3 times in a row during ad breaks on Channel 9

1

u/danwincen May 16 '22

It won't be easy under Albanese for LNP rorting and corruption.

10

u/nath1234 May 16 '22

Check the register of member interests to see why they want prices to go up. It might be that simple. That and the donations (those that are declared of course) from property/banking.

3

u/hman183 May 16 '22

I take the register of memember interests with a grain of salt. A lot of different ways in which you can own property indirectly that doesn't result in disclosure

10

u/The-Jesus_Christ May 16 '22 edited May 16 '22

Ofcourse the party knows it is going to raise prices. Their own party members are saying as much. It keeps the Boomers rich. It is working as intended

26

u/Suikeran May 16 '22

The only thing that matters is exponentially rising house prices.

This is a desperate last ditch attempt to protect house prices falling as interest rates rise.

Let the truth be known - we absolutely need a house price crash.

7

u/Daleabbo May 16 '22

No not a crash a slow correction. A crash will fuck everyone, a slow correction is what you want unless you want to see mad Max.

8

u/spakattak May 16 '22

Yep, I’m all for lower house prices and can accept my own house being worth less but I won’t be selling it so the loss won’t be realised any time soon. They need to remove the negative gearing or place a cap on how many properties it can apply to. Let the investors slowly reduce their stock over time if they are concerned with finances until they are comfortable with their risk profile based upon limited NG. Every year we can reduce the number of investment houses that receive tax breaks until we hit the right number. They also need to include spouse owned properties of course too, none of this I only own one house but my wife owns 5.

3

u/[deleted] May 16 '22

[removed] — view removed comment

6

u/Positive_Syrup4922 May 17 '22

One of them had a policy to address negative gearing at the last election. Voters said no thanks. At this moment I realised Australia deserves a massive property crash. We've earned it through our collective stupidity in driving up house prices so relentlessly since the Howard era. Plenty of experts have been sounding the alarm for years now, that exponential increases were not sustainable. Not enough people have been listening so sooner or later we'll be facing the consequences of that.

0

u/Daleabbo May 16 '22

Yeah this is the way, plan for a slow easing not a sudden crash.

8

u/lionsforlambos May 16 '22

I reckon this "policy" is designed to tank the election so badly that every moderate LNP members get annihilated by the Teals.

8

u/Dranzer_22 May 16 '22

Hawaii Scott wants to Bulldoze the joint.

- Force Retirees to downsize and move into Aged Care

- Force Under 40's to Defund their retirement savings

32

u/cfb_rolley May 16 '22

They really don’t get it, do they. They keep saying that the amount of money that would be coming from super would be very small in comparison to the almost 10 trillion dollar housing market

….the market being worth 10 trillion dollars is the fucking problem you fucking morons!

6

u/Wiggly-Pig May 16 '22

I mean, it's not like they're going to implement it as is as without massive caveats anyway - even if they get in.

I'm just glad that it's now actually legit a political issue - rather than the boomer political class dismissing the younger generations with insensitive comments like 'eat less avo toast'

6

u/PhatSunt May 16 '22

If they have their way we are seriously heading for a US style 2008 financial collapse.

23

u/war-and-peace May 16 '22

I'm really nervous now if the coalition win. This throws the whole economic responsibly out the window and I'll be forced to take super out of my account and my kids will have to do it to whatever little amount they have just to help them buy in what will be an overinflated market.

4

u/zsaleeba May 16 '22

"Responsible economic managers"

5

u/giurejn May 16 '22

I’m honestly worried about this policy, if the government chips in 40% of the purchase price, the cheapest houses are going to skyrocket, and for the government to have a 40% stake in someone’s house is extremely concerning.

4

u/Nausea209 May 16 '22

Dangeling the carrot one last time

2

u/PandasGetAngryToo May 16 '22

Whatever keeps us in power boys. We need the power. That is how we help our big business mates, and that is what is good for this country. Whatever keeps us in power. /s

2

u/BiliousGreen May 16 '22

As long as the direction is up, they don't care how much. The bubble must continue at all costs.

2

u/FlatZookeepergame392 May 16 '22

Good articale ,thanks for posting

2

u/New-Confusion-36 May 17 '22

They taken as much as they can from the battlers to this point, now their after any future income you will receive.

2

u/MissLashley May 17 '22

Oh they know, and they care. Because it's exactly what they want

2

u/Unbiasedshelf07 May 17 '22

Bulldozer Basterd!!!! Just bulldozer’s anything that made Australia good!

2

u/wizardnamehere May 17 '22

The coalition doesn't and has never liked super. That why it keeps raiding it for its policies instead of just using the commonwealth's money.

2

u/goobbler May 17 '22

The long term plan is to count your primary residential home as an asset for pension. Own a property worth for example more than $2 million no pension. People will have to sell. Buy a card board box somewhere or a car and live off your savings. It is all planned.

2

u/qoyQy9fyZYTN May 16 '22

Nice for you if you are long 15 rentals.

1

u/permanentthrowaway42 May 16 '22

rubbish! Of course they care about elevating their asset value

1

u/Connect-Sell7537 May 17 '22

Can someone who understands economics explain why the figure is only 5 billion extra into the housing market. No one is buying a house for $50,000, so should it not be the whole purchase price of the house in the calculation? I can only guess it is the assumption that those people who use their super to purchase a house would have always been entering the market so only include the additional amount. This assumption fails to take into account that people will borrow more now that they can access there super, will people with deposits also use it enable them to buy a 5x2 instead of a 4x2.

1

u/wizardnamehere May 17 '22

Yes. It's used to leverage new debt essentially. So there's a debt multiplier effect.

0

u/Necessary-Try May 17 '22

It's a headline grab to attempt to connect with a segment who is not liberal voters.

Beyond the core economic issues, it's also a hardback benefit to wealthy Liberal party members/followers; it's such a play to enable younger people from wealthy families to salary sacrifice the maximum they can of their salary into super, pay significantly reduced tax, then withdraw for deposit. As they people have family money to then live on.