The $38 billion early superannuation withdrawal scheme added $580 million to the country’s pandemic fiscal expenditure by delaying the return of people to work, according to a new research.
The research, carried out by the Australian National University’s (ANU) professor, Robert Breunig, and his ANU colleagues compared the employment outcomes of those who withdrew their super under the scheme and those who did not.
What the researchers from ANU’s Tax and Transfer Policy Institute found was that large lump sums have had large labour market consequences that played out over an 18-month window.
Namely, the research paper concluded that those who withdrew from their super were “highly unlikely” to return to the labour market in the first three months of their spell on unemployment payments.
“We estimate that receiving a lump sum of up to $10,000 from superannuation accounts at the most acute phase of the pandemic — between April and June 2020 — resulted in a 31 per cent lower exit from the unemployment benefit system inside the first six months of spells, and 14 per cent inside a year of spell,” the paper reads.
“Receiving a second lump sum, mostly in July and August 2020, and as a labour market recovery was underway, resulted in a 33 per cent lower exit from the unemployment benefit system inside the first nine months of spells, and 14 per cent inside fifteen months of spell,” it continued.
Commenting on the findings, Professor Breunig told InvestorDaily that “withdrawing superannuation is clearly associated with longer stays on unemployment.”
“These cost the Australian government almost $600 million in extra unemployment payments,” Professor Breunig said.
“Any idea that this was a stimulus program with no budgetary impact is incorrect.”
The researchers did, however, concede that the deterrence effect was “ultimately temporary”, insofar as an 18-month window of effect can be considered temporary.
They, however, deemed the fiscal cost significant.
Namely, the cost of additional benefit payments to the approximately 162,000 withdrawers considered as part of the research was around $580 million.
Just last month, a new research from the Association of Superannuation Funds of Australia (ASFA) revealed that super funds coped well with the early release of super arrangements, but ruled the impact on young people, women, single parents and the unemployed as “detrimental”.
Australian Taxation Office (ATO) data has indicated that between 20 April 2020 and 31 December 2020, the ATO received 4.78 million applications with a total of $39.2 billion of superannuation requested for early release. The ATO approved 4.55 million applications for 3.05 million people, totalling $37.8 billion of superannuation requested for early release.
