Interview with Sarah Ferguson on 7.30

E&OE....

Sarah Ferguson:

Senator Bragg, welcome to 7.30.

Senator Bragg:

Hi, Sarah.

Sarah Ferguson:

If I could start with the politics, does Angus Taylor endorse your proposal for superannuation as Coalition policy?

Senator Bragg:

Well, there is no policy today because we are embarking on a debate to better align the retirement and the housing systems, because we don't want to become a nation of retired renters. Now, there's nothing wrong with renting, but I'm worried it's going to become compulsory under Labor's terrible housing and superannuation policies.

Sarah Ferguson:

So does the leader, does Angus Taylor want you to be out and about talking about this policy now?

Senator Bragg:

Of course, but we are completely aligned on the idea that this is not a final policy. This is a debate that the country should have. Now, Jim Chalmers just wants to raise donations off the back of scare campaigns, and I think that the government and the parliament should be better than that. We should be able to debate whether or not these systems are properly aligned to make sure that we can maximise home ownership prospects.

Sarah Ferguson:

And just one more on this subject, obviously, as you understand, timing is everything in politics. Is your timing good by being out front on this issue before your Coalition colleagues have settled their policy?

Senator Bragg:

Well, we need to make sure that the debate doesn't get away from us, because you've got some parties out there with policies that wouldn't solve the problem. You need to be able to argue the facts, and the facts are that 32% of lump sums from super last year were used to pay off mortgages. That's a huge number, and we're going to become a nation of almost 1 million retired renters over the next few years, and I want to stop that from happening.

Sarah Ferguson:

Let's talk about the idea that you have, which is, as I understand it, to use super as collateral for a housing loan. How would that work?

Senator Bragg:

Well, it's one of many options that are under consideration. It's not a policy, but it's certainly an idea. Now, in relation to collateral, you could use some of your money to ultimately reduce the amount of money you need for a first-home deposit, or you could use some of the money in cash in super to offset the amount of mortgage you might have to pay in terms of the interest. So what we're seeing now is high inflation, high interest rates, people paying a lot of interest on their mortgage. So I think a lot of people would be interested in these ideas being further considered.

Sarah Ferguson:

So as I understand it, you're still talking about allowing people to take cash out of their super, therefore preventing it from compounding over the years. So that, plus using super as collateral - they're both still your policy ideas?

Senator Bragg:

Well, these are all models that have been canvassed by Senate inquiries in the past, and in the last two elections the Liberal Party and the Coalition have had policies about cashing out certain parts of your superannuation. And I make the point that if people have cashed out and put it into property, they're probably going to be performing quite well.

Sarah Ferguson:

Is that right, though? Are you suggesting that from this point forward, money extracted from super compounding at the rate that it does would be the same as putting it into housing?

Senator Bragg:

Well, the compounding effect occurs inside and outside of super. I mean, the Labor Party is obsessed with putting every last dollar into superannuation, which is why it's destroyed negative gearing, investments outside of super, it doesn't want SMSFs to borrow to invest into housing. They hate the idea of individuals investing. But if you invest as an individual in housing or stocks or other things, you can get a good return. Super isn't the only way you can save for retirement, and in fact, we have a three pillars policy which includes the Age Pension and private savings, including housing. And the key test of your success in retirement is your housing status, it's not your superannuation balance.

Sarah Ferguson:

At the same time, you're not denying the effect of that compound over years. Let's say a 25-year-old—this is Treasury figures—a 25-year-old who starts out in super on $55,000 a year, by the time that person retires, they've got $2.3 million in their super fund, most of which has come from super investments, not from their own contributions.

Senator Bragg:

Well, of course, and compounding is wonderful, and that's why investing into things is a good idea, and there are many ways you can invest.

Sarah Ferguson:

Right, but you want to stick with this idea of using collateral. Let me just ask you a question about how it might work. If someone were to default on their loan, does that mean the bank would get their hands on that person's super that they've used as collateral?

Senator Bragg:

Well, if people were to use their own money to bring together a deposit, they are generally in Australia unlikely to default. I'd say that the bigger question is, what happens with the people who use the 5% deposit scheme to get a 95% mortgage? What happens when they're in negative equity, and there'd be quite a few Australians in negative equity today? So I think it's a remote possibility, and I think that...

Sarah Ferguson:

And yet it's part of what you're proposing, that is someone using collateral. So I think it's reasonable to expect you to have an answer on that. If someone defaults on their loan using the system that you're proposing, does the bank then get that person's super?

Senator Bragg:

Well, of course, because you couldn't have the good without the bad. I think that's a pretty open-and-shut case there. But I make the point that the 95% mortgages the Government is peddling are much more likely to put people into negative equity, and I'd say that we're probably seeing that right now, and I look forward to pursuing this at Senate Estimates next month.

Sarah Ferguson:

Now, isn't it the case that every measure to enable people to borrow more money in this extremely tight and difficult market causes prices to go up? Your side of politics was very critical of the government, as you've just been, of the Government's deposit scheme when it came out. Won't this have a similar effect?

Senator Bragg:

Look, I think you know, Sarah, that the key to solving the housing crisis is supply-side economics, and that's why we need to have a housing boom. But there is a case to better calibrate retirement and housing policy on the demand side to ensure that we don't end up with those 1 million retired renters that we're projected to have by 2032. And I think if people have a large or a reasonable amount of super, but they can't afford to buy a house in retirement, then I don't think that's a good outcome for those people. And so that's why we're proposing to have this sensible debate about looking at these different options, because we are well paid to be representatives of the people, and I think these are the sort of debates people want us to be having in Canberra.

Sarah Ferguson:

So just to come back to that question, if I may doesn't a measure like this that enables borrowing juice the housing market in exactly the way you accuse the Government of doing with that scheme?

Senator Bragg:

Well, it's people's own money. If people want to use their own money to bring together a deposit, that's their money. It belongs to them.

Sarah Ferguson:

I'm just asking you a question. If you change the system to enable people to use super as collateral, will that contribute to price rises?

Senator Bragg:

I think it would be immaterial in the scheme of an $11 or $12 trillion housing market.

Sarah Ferguson:

So just to understand where this sits then, just to come back to the political question, how much support do you have from your colleagues for advancing this? We understand that the Coalition obviously took policy twice to an election, it was rejected. Indeed, we may be in different times, but to be clear, how much support is there for your policy right now amongst your colleagues?

Senator Bragg:

Well, these are not our policies today, as I was quite clear in making out today in the speech, Sarah. These are important debates to have because we want to prioritise home ownership. We think that's key to the economic and psychological success of Australia. And as for how you could recalibrate the retirement and the housing policies, that's a debate we're having, and we think it's an important debate because we don't want to become a nation where people are forced to rent in retirement. That's not a good outcome for them, it's not a good outcome for the country.

Sarah Ferguson:

Senator Bragg, thank you very much indeed for joining us.

Senator Bragg:

Thanks, Sarah.

[Ends]

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