A new economic report is calling for an overhaul of retirement policy, including options such as superannuation being available for owner-occupied home purchases and allowing pre-tax mortgage repayments.
The report, titled The super challenge of retirement income policy
, has been published by the Committee for Economic Development of Australia (CEDA) and argues that the impact of sustained housing affordability issues are a significant issue for retirement policy.
“Two key trends, our ageing population and decreasing housing affordability, mean Australia’s retirement system structure needs a significant rethink,” CEDA chief executive, Professor the Hon. Stephen Martin said.
According to CEDA, between 1 and 1.5 million Australians live in poverty and the elderly, particularly those who do not own their home, are a major at-risk group. In fact, the overall poverty rate of older people in Australia is three times the OECD average, and one of the highest.
“Without a significant policy overhaul, that number is likely to significantly rise over the next 40 years,” Martin said.
“There has been a lot of talk and tweaking of retirement policy aimed at reducing the burden on government, but what Australia needs is a robust discussion on all the options to ensure long term Australians can retire comfortably.”
The report, which was released yesterday, recommends that first home buyers should be able to access their superannuation to purchase owner-occupied housing and that mortgage payments on the family home should be allowed to be made pre-tax.
“The system should better recognise the extent to which owner-occupied housing contributes to household wealth and retirement liveability. People who do not own homes are exposed to the high-cost rental market and risk poverty in retirement. Home ownership continues to decline among young Australians, more of whom are expected to retire without owning a home,” the report states.
“Given the importance of housing for retirement, another option would be to allow mortgage payments to be made pre-income tax. This would allow two important components of retirement savings – superannuation and the family home – to be treated the same.”
Whilst Martin says these policy recommendations come with their own issues, for example making mortgage repayments pre-tax could contribute to pushing house prices up, the “right combination of policy levers and checks and balances” will ensure they are genuine options to a growing problem.