Scott Morrison and Josh Frydenberg arrive at a press conference to announce the superannuation withdrawal policy in 2020. The true cost of the program will not be known for 30 years.Credit:Alex Ellinghausen
The researchers found that the almost 2 million people who withdrew the full $20,000 have left a $120,000 (in today’s dollars) hole in their future super. If you index that $120,000 simply to the expected inflation rate,in 30 years time that’s more than $250,000.
The paper was put together in part to tease out the theory known in economics as “present bias”. In layman’s terms,this is how humans tend to want a small,immediate reward rather than wait for a larger future one.
It’s one of the reasons for Australia’s superannuation system. We are forced to save almost 12 per cent of income because,left to our own devices,most of us would spend the cash now.
The superannuation withdrawal policy delivered a near-perfect confirmation of the theory.
People made a beeline for the nearest ATM to withdraw more than $1000 – even as businesses moved to contactless payment systems.
The next most common use of the cash was a bet on the horses or through an online gambling account.
While it was evident early on that people had drained their super accounts,the research connects that money to what it was used for and which communities were most likely to use the program.
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One of the most frightening figures of the study shows the communities who used their super the most were in low-income suburbs and regional centres,including many with substantial Indigenous populations,already facing small retirement balances.
The true cost of this policy won’t be felt for another three decades as people in their 30s retire and discover they have far less in their super (and governments will have to cover a greater call on the age pension).
The current royal commission into the robo-debt scandal is,based on the terrifying evidence delivered so far,likely to recommend major changes to the way the federal public service operates.
But there are even larger questions – how our governments operate,how they communicate,how they deal with generational crises – that need to be addressed by a royal commission into COVID.
The work of Hamilton,Sainsbury and Liu is further evidence,if any were needed,that such an inquiry needs to start as soon as humanly possible.
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