What a super idea, using your own cash in a crisis

Australia’s early release superannuation scheme was one of the most successful policies of the coronavirus recession. It was hotly contested by Labor and the super industry but it worked. Early super release was a success for two main reasons: firstly, it helped Australians improve their personal balance sheets and secondly, it drove engagement with super.

The policy resulted in around $38 billion being withdrawn from the $3 trillion system - less than 1 per cent of total super savings. The idea that superannuation would be quarantined from helping Australia during the biggest economic downturn in a century was nothing more than a rent seekers’ fantasy.

The average payment of $7000 supported 3.5 million Australians as a once-off. A further 1.4 million took another average payment of $8,000.

We must never forget that Labor argued the scheme would cause liquidity problems as part of their attempt to run interference for the super funds. Labor’s superannuation spokesman Stephen Jones said in March last year: “We have genuine liquidity concerns… there will be a big expectation that (the government will) have to step in and secure liquidity for any fund that finds itself in trouble.” Jones was wrong, and had apparently not considered the fact that Australians might need their own money.

Labor continued to run the lines from Industry Super Australia throughout 2020 even after ISA was publicly exposed by the Treasury as having falsely claimed a 30-year-old would be $97,000 worse off in retirement when the real number was less than half at $43,000. In doing so, Labor missed the two key takeaways. Firstly, the ability to access a small amount of their super during the coronavirus recession was a lifeline and an avenue to stay afloat.

Data from the Australian Bureau of Statistics Household Impacts of Covid-19 survey confirms this. According to the ABS, 57 percent of Australians who accessed their super early used their money to pay household bills, mortgage, rent and other debts. In addition, more than thirty-percent added to their savings. Secondly, the early release scheme broke the back of the problem which beset compulsory super since it was introduced in 1992: apathy.

By breaking the seal of preservation and allowing people to access their own money, Australians realised super wasn’t monopoly money that fell out of the sky only to be locked away and eaten by fees and junk insurance. It paid mortgages, bills and provided savings. Apathy and rigid government policy has allowed super funds to rip $32 billion out each year in fees.

Imagine that, approximately $100 billion flows into super compulsorily each year and one third comes out in fees. The benefit of this development is the trade off between superannuation and wages described by Reserve Bank Governor Lowe as “a negative effect on wages growth” is now tangibly understood. This means the debate about increasing the superannuation guarantee is now informed by the experience of the engaging early release scheme. This is good because super belongs to Australians.

Andrew Bragg is a Liberal Senator for NSW.

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