There is about $1.8 trillion in Australian super. The residential property market is worth about $5 trillion. Little surprise that many Australians are trying to tap one to pay for another. The Department of Human Services (DHS) has released its 2013-14 Annual Report. It shows the number of Australians seeking to access their superannuation early jumped 7% over the financial year to 19,286. This was the highest level since the Global Financial Crisis.
These are the two pools of capital that will do much to determine the future of the Australian financial markets. Especially when one also considers that the banks fund the mortgages for the property market and are also a target of super investors. Anyone who invests in the stock market inevitably is investing in the banks.
The conclusion? Australia does not so much ride on the sheep's back these days as sit precariously on the roof of houses. Here are the statistics:
""The Early Release of Superannuation Benefits program allows eligible people to draw on their superannuation benefits under specified compassionate grounds in a time of need.
As shown above, around three in five applications to release super early were approved by the DHS, totaling nearly $151 million and averaging $12,874 per successful applicant.
According to News Limited, which reported on the release over the weekend, much of the growth in applications to access super early went to paying-off mortgages."
There is growing pressure to allow superannuants to use super money to pay down mortgages. In one sense, this guarantees a good return. Paying down debt guarantees that the return on the "investment" is the prevailing interest rate. But it is a bad idea. It would make the focus of Australia's capital markets even more heavily concentrated on housing. The whole economy would be even more vulnerable to a drop in housing prices, which the IMF, the Bank for International Settlements and the RBA think are too high. It should not happen.