Young people will bear the brunt of the Covid-19 economic crisis, Labor has said, as it estimates a 25-year-old who withdraws $20,000 from superannuation may be left up to $100,000 worse off in retirement.
The opposition is stepping up its attack on the government’s handling of the early access to superannuation scheme, which allows people dealing with the adverse economic effects of Covid-19 to withdraw up to $10,000 this financial year. People were also able to access up to $10,000 last financial year.
The shadow assistant treasurer, Stephen Jones, said instead of receiving timely government support, “young Australians have borne the brunt of this crisis and will be forced to continue to pay the cost in years to come”.
“After taking into account inflation and cost of living, a 25-year-old who withdraws $20,000 will be between $80,000 to $100,0000 worse off in retirement,” he said in a statement on Sunday.
“A 35-year-old who withdraws $20,000 will be at least $65,000 worse off. Collectively, under 35s will be at least $51bn worse off at retirement.”
Labor released these estimates a few days after it asked the auditor general to look into what it described as failures in implementation of the super early release scheme.
The superannuation early release program has already paid out $32bn from retirement savings and is set to top $42bn by December – with concerns raised by former prime minister Paul Keating and others that 590,000 accounts have been emptied to zero.
While the opposition says it supported the original intent of the scheme, it argues there have been insufficient checks on whether people accessing their super are in financial hardship, and retirement savings have also been exposed to frauds and scams.
“They’re going to look back on this and think of this superannuation policy as being as dumb as the introduction of cane toads in Australia,” Jones told reporters.
“This is a bad policy that has been poorly implemented.
Allegations of identity theft involving 150 Australians prompted the government to temporarily halt withdrawals in May after police froze $120,000 believed to have been ripped off from retirement savings.
But the government has defended the scheme. In an interview with Guardian Australia last week, the assistant minister for superannuation, Jane Hume, said people had always been able to access their superannuation in times of financial distress, and she accused Keating of being out of touch.
“[It’s] extraordinary that a man in a Zegna suit on a generous parliamentary pension can sneer at the decisions made by ordinary Australians who are facing some of the most challenging economic circumstances we’ve ever seen,” Hume said.
Labor’s figures were based on the party’s own internal modelling.
Some of the calculations are broadly similar to estimates published by the Grattan Institute last week – although the thinktank argued that much of the losses to individuals would be offset by larger government-funded pension payments.
The Grattan Institute calculated that a 35-year-old who took out the full $20,000 allowed under the early release scheme would see their total superannuation income fall by about $80,000.
But the institute said such a person’s total retirement income would fall by only $24,000 in today’s dollars – or about $900 per year – because their financial situation would trigger higher pensions.
Brendan Coates, the Grattan Institute’s household finances program director, said the government’s priority when launching the early access scheme earlier this year was to get money out the door quickly. But he said it made sense to tighten the checking of applicants’ financial hardship to ensure people were genuinely eligible.
Coates reaffirmed the Grattan Institute’s longstanding position that the amount of compulsory superannuation paid by employers should not increase further, because of the potential effect on wages.
Hume told Guardian Australia the scheduled increases in compulsory super from 9.5% to 12% were already legislated so would be “very difficult to unwind”.
While the government had “no plan” to abandon the superannuation guarantee increases, it would be “irresponsible” not to consider the impact of the trade-off between super increases and wages, she said.
The government is considering a retirement incomes review, which was submitted to the prime minister and treasurer in late July.