Treasurer Joe Hockey has suggested that people should be able to use their super savings as a "shock absorber" over their lives, because it is their savings so "arguably they should be able to access" them.
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Mr Hockey is continuing to promote the idea that young people could use their superannuation savings to buy their first home or pay for job re-training, despite warnings from former prime minister Paul Keating and former treasurer Peter Costello this week that the super system should not be tinkered with in this way.
Mr Costello criticised Mr Hockey's suggestion on Tuesday night, telling the ABC's 7.30 program that the idea had been around for decades.
"Every generation thinks it invented the wheel," Mr Costello said.
"We went through all of this back in the mid-90s. We had a look at it. We decided - because we thought superannuation should be for retirement savings - we decided not to allow superannuation to be available for housing.
"This government's going to look at it again: fair enough, things may have changed. But I think they will come to the same conclusion as we did: that if you wanted to top up people's retirement, if you wanted to save the government money - and it has that dual purpose - then you probably won't allow people to draw down on it for housing."
But Mr Hockey said on Wednesday he was very concerned about housing affordability for young people, and perhaps superannuation savings could be used to solve the problem.
He also said that, with life expectancy likely to increase substantially over coming decades, Australians ought to start thinking about potential alternative roles that the superannuation system could play.
"When I speak with young people, particularly young people, and also their parents and grandparents … they're very frustrated," Mr Hockey said.
"Back in the mid-80s the cost of a home to the average household income was around 2.7 to 2.8, now it's about 4.1 … so it is getting harder for people to be able to buy their first home".
He added it was difficult for young people to save for a deposit worth 5 and 10 per cent of a home, while university loans were adding to individuals' debt burden and making it harder to save.
"Super may well act as a shock absorber for various periods during peoples' lives, because that is their savings that arguably they should be able to access," he said.
Kevin Davis, a panel member of the Abbott government's financial system inquiry, said if super could be accessed to buy first homes it would contradict the point of compulsory super.
"If we were in a perfect world there would be nothing wrong with people using super for housing because it is a different form of asset allocation. But we are not in that world: people are not the rational economic beings and markets are not perfect. And therefore, we have superannuation to try to overcome problems that arise from people's short-sightedness.
"So while I can see a logical argument for while you could let people use the money for housing it is inconsistent with the reason why we have compulsory super."
Mr Davis also said that should Mr Hockey's suggestion be implemented, it would need to be accompanied by a raft of other changes, including to tax policy.
"If you were to allow people to use super for housing you would have to look at things like should we still allow tax free capital gains on the family home or should the family homer still be exempt in the means test in the aged pension," he said.
There are so many interlinked parts that even if you came to the view that it was just a form of asset allocation there are so many tax and other distortions I think it makes it impossible."
