Radical reforms including pre-tax mortgage payments have been proposed by the Committee for Economic Development in Australia (CEDA) to improve the sustainability of Australia’s retirement system.
Releasing a new report this week, titled The super challenge of retirement income policy, CEDA points to deteriorating housing affordability as one of the key roadblocks to Australians – now and in the future – being able to fund their retirement.
“The impact of sustained housing affordability issues is only just beginning to be recognised as a significant issue for retirement policy,” said CEDA chief executive Professor Stephen Martin.
One of the report’s authors, Dr Judith Yates, an honorary associate in economics at the University of Sydney, pointed to housing as being the cornerstone for future policy pertaining to retirement.
“Housing makes a critical contribution to sustaining the living standards of older households who are income-poor but asset-rich in retirement. Hence, the challenge of how to ensure the living standards of those who are income-poor and asset-poor must start with housing,” she wrote in the report.
As part of the report, CEDA made a number of recommendations for debate to improve the sustainability of Australia’s retirement system. A central one was the need to recognise housing as the retirement system’s fourth pillar (the existing three being a basic publicly funded pension, a private pension and voluntary savings.)
“The government should recognise the role of housing in poverty alleviation and in contributing to the objectives of providing for a decent retirement. It should allow first home buyers to access superannuation funds to purchase owner-occupied housing, and address housing affordability, including for rental and social housing,” the report said.
CEDA also proposed allowing mortgage payments on the family home to be made pre-tax as a means of encouraging more people to own the roof over their heads.
Professor Martin acknowledged that some of these recommendations could push up house prices, however he said that “with the right combination of policy levers and checks and balances, they are genuine options that should be explored given the trends we are now facing”.
Dr Yates voiced similar recommendations in June to the federal Inquiry into Home Ownership.
In her submission, she suggested a review of support to first home buyers, such as governments taking an equity share in the first property bought by new home buyers, to be repaid when the property is sold.