With income-to-household debt ratios quintupling since the 1980s to 194% in 2017, it clearly takes more than turning down smashed avocado to buy your first home.
And yet our proportion of social housing, which should act as a safety net for vulnerable people, is one of the lowest in the OECD at 4.2%.
Put simply, home ownership is increasingly unattainable and in steady decline. To help, the federal government has introduced the FHSS.
At first glance the scheme seems reasonable. But it actually has a tricky design.
For a start, the maximum contribution of $30,000 per person, plus interest, may not go a long way in a capital city.
The trickiness arises because the benefits are upfront in lowering personal tax, and the balance withdrawn from the super fund will be lower than the balance withdrawn from an ordinary savings account, unless the personal tax benefit is invested.
Modelling conducted by Phil Gallagher, a former treasury official and now Industry Super Australia’s special adviser, shows that, due to contributions and withdrawal tax from the super fund, many home savers would save more with a regular savings account.
For example, a person on around $56,000 who saved $15,000 in 2017-18 and 2018-19 would save $3549 more in an ordinary savings account after the super withdrawal tax.
At this point some would argue that this doesn’t matter because returns are “guaranteed” at 4.78%pa.
They are. But those guaranteed earnings will have to come from somewhere, and it will be consumers who pay. When returns fall short, super funds will be forced to dip into individual compulsory savings, which, over the long run, will eat into retirement nest eggs.
At best, the tax benefits of the FHSS scheme are marginal. For many, the benefits are not in the amount saved inside super.
At its worst, like the previous buyer grants, the scheme, depending on its popularity, is likely to drive up demand, leaving families either more indebted or still locked out.
For Chris Brycki’s views on why the First Home Super Saver scheme is worth the effort, grab the June issue of Money, out now