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picture of Professor Mirko Bagaric

Professor Mirko Bagaric

A proposal first publicly mooted by Deakin University Professor and Dean of Law Mirko Bagaric four years ago to enable first home buyers to dip into their superannuation to buy their first home is now receiving support by the Federal Government: see, Using super for first home 'good' idea: PM.

Originally published in The Daily Telegraph on 30 December 2010.

Nest egg could be super for homebuyers

First-homebuyers should be permitted to access their superannuation. That's a policy the Federal Government must introduce in light of changing economic realities.

House prices increased 9.4 per cent over the past year - the most in any advanced economy. Why? Size and emotion, in part. We have the biggest residences (even ahead of the US) and we place more importance on home ownership than the rest of the world.

Studies show homeowners are happier than renters, no matter the size of the mortgage. The problem is gaining access to the market.

An answer may be found in superannuation. It is repugnant that adult Australians should be forced by government regulation to lock away 9 per cent of their earnings until retirement.

Forget about retiring comfortably on the super nest egg. It is a myth. Australia's superannuation experiment is fast turning into Australia's biggest ever government-orchestrated rort.

The non-return on our superannuation is so appalling that, if it wasn't government mandated, it would be investigated by ASIC and the ACCC for misleading and deceptive conduct.

Anyone who has money in super is going backwards financially. The only people prospering are fund managers and large companies whose share price is artificially driven up because of an absence of vehicles in which to invest. The best guide to future performance of an investment product is previous sustained performance.

According to nearly a century's worth of data, property increases 11.6 per cent per year -- nearly three times the return on super.

Tax benefits associated with superannuation don't come close to evening the comparison.

The data is clear: You will have more resources at retirement if you plough your extra hard-earned into your mortgage than into the lap of a hungry fund manager. Home ownership is not only often a superior investment choice to superannuation, but also confers a psychological benefit and sense of security that is absent from superannuation investment.

It is simple: Owning a house makes people happy; putting money into superannuation makes you poor and the superannuation industry rich.

Moreover, workers have the right to enjoy the fruits of their labour and should not be forced to defer their spending and wellbeing. Coercive laws are only legitimate where the government can demonstrate that it will encourage compliance with fundamental moral norms that affect the wellbeing of others, or where they promote the welfare of each individual. This test has not been satisfied in relation to compulsory superannuation.

Allowing first-home aspirants to apply their superannuation towards buying a home will have the effect of increasing home prices (in the same way as did the first-homebuyers' grant).

However, first-homebuyers represent only a small portion of all property purchasers and hence the increase will be significantly less than the extra purchasing power of first-homebuyers.

For them, housing will become a whole lot more affordable. Of course they may elect to keep their money in superannuation.

In any event, in a supposedly free market like Australia, they must be given the choice.