Early access to super benefits one group. You’re probably not a part of it

If Pauline Hanson – or any other politician running for One Nation – is reading this piece, they may be the exceptions to the rule.

The party’s latest thought bubble: giving renters and mortgagees (about two-thirds of Australians) early access to their super is another attempt to win voters.

I like to think most Australians are reasonable enough to realise this policy benefits virtually no one.

It’s not the first counterproductive policy the party has brought to the table. And still, One Nation remains on Labor’s heels in the polls – sometimes even overtaking the government.

It’s pretty clear that One Nation is going by the populist playbook that seems to be working across much of the world: claiming to be going in to bat for the “battlers”.

They have, like many other populist parties and leaders around the world, been making the most of voters’ frustration over rapidly rising prices and cost of living.

Unfortunately, especially when people are having a hard time, it’s much easier for policies which seem like an immediate fix – but may actually be damaging to most people’s livelihoods – to stick.

Being able to access your superannuation early might seem like a good idea, especially if you’ve been having to make big sacrifices to get by and feel like you’ve been hard done by.

Humans tend to suffer from a cognitive bias that makes us overvalue immediate “rewards” (such as access to money) over delayed ones, even if a reward in the future is bigger.

It’s part of the reason why we have a superannuation system. By getting employers to pay 12 per cent of our salary into our superannuation fund, we’re forced to save some of our earnings for retirement.

That reduces our reliance on the age pension: a good thing, especially as our population ages. Many of us who might otherwise become reliant on government support can pay our own way through our older years.

Treasurer Jim Chalmers on Wednesday revealed that the cost of the age pension to Australian taxpayers would fall over the next 40 years despite more than 9 million of us reaching retirement age over that period.

That’s something that sets us apart from most other countries that don’t have a superannuation system and are facing ballooning pension payouts (which are increasingly putting pressure on governments’ budgets) and placing a greater burden on workers.

One Nation’s proposal isn’t to completely axe the superannuation system (even they probably realise that would lead to carnage).

Instead, the party has suggested allowing renters and mortgagees to withdraw up to 3 per – or one-quarter – of their 12 per cent superannuation contributions for up to three years. That is, rather than 12 per cent of people’s salaries being locked away in super, it would be 9 per cent.

That might not sound huge. But the power of compounding means that a small change today can lead to a big difference down the line.

For example, an Australian renter or mortgagee earning a salary of $90,000 would get access to $2300 a year by withdrawing one-quarter of their superannuation contributions. That’s $6900 over three years.

But that, according to the Super Members Council, means a 30-year-old full-time worker on roughly the same salary would end up with a super balance that is $25,000 lower by the time they retire compared with if they hadn’t withdrawn that $6900.

There’s an argument that many Australians in years to come will retire with more than enough superannuation.

Former Grattan Institute head John Daley, for example, told The Conversation this week that for most Australians, a 12 per cent contribution exceeds what is needed for an “adequate” retirement income

Basically, he argued that with the current minimum contribution rate of 12 per cent, most people would end up with a higher standard of living in retirement than before they retired – or end up leaving a substantial inheritance.

The “break even” point, he said, where Australians could maintain a similar standard of living before and after retirement, is by contributing 9 per cent in super.

Of course, it’s worth remembering that lower-income earners, and those with big gaps in their career because of responsibilities such as caregiving or child-rearing (who are still disproportionately women), may not fit Daley’s bill.

Nationally, according to the Super Members Council, the gap between women and men’s super balances, in the 60 to 64 age range, was about 25 per cent in 2023-24. A super contribution that might be “more than enough” for the “average” Australian might not be so for those who don’t have as long – or don’t earn as much – throughout their life.

The good news, of course, is that gender equality, at least, has been steadily improving, meaning women’s earnings – and therefore super balances – are catching up to those of men.

And since more Australians are making superannuation contributions from the beginning of their working life (super was made compulsory for most workers in 1992) – and at a higher rate than the 3 per cent required when the scheme began – super balances have been growing across the board.

But one of the big problems with One Nation’s policy is that it comes at a time when we’re facing high inflation. That’s not just because the amount we’re spending (or demanding) is exceeding how much our economy and businesses are capable of producing without pushing up costs.

But as the Reserve Bank has pointed out, it’s one of the reasons prices are growing faster than its 2 to 3 per cent target range.

There are already some exemptions in place for those wanting to access their superannuation early: for example, if you’re in severe financial hardship, have to pay for palliative care, or will otherwise lose your home.

But if we allow potentially up to two-thirds of Australians – many of whom are probably not in dire need of the money – to withdraw 3 per cent of superannuation contributions for the next three years, that’s not about a handful of exemptions. That’s a big amount of money.

As my colleague Shane Wright has pointed out, we’ve seen this film before. During the pandemic, the Morrison government allowed people to take up to $20,000 out of their superannuation accounts. It thought only about 1.5 million people would take up the offer. Instead, 2.6 million withdrew about $40 billion in total.

For what works out to be a measly additional $44 a week that a full-time worker could immediately get access to by digging into their super, the economic effect more broadly is troubling.

It will lead to more spending, including by relatively well-off people, which will only add to demand and therefore our price pressures. The rise in prices across the economy is already a bad outcome for everyone.

But remember: inflation tends to hurt the poorest Australians the most. Why? Because they spend bigger shares of their incomes on basic needs such as food and energy, where the sharpest price increases often happen. They also tend to have smaller savings buffers that they can lean on.

So when One Nation tries to say they’re winning the battle for the battlers, don’t believe them. The only winner from their latest superannuation policy is the party itself – if Australians fall for their latest ploy.

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Millie Muroi is the economics writer at The Sydney Morning Herald and The Age covering workplace and economics. She was formerly an economics correspondent based in Canberra’s Press Gallery and the banking writer based in Sydney.Connect via X or email.