When you consider that the average Australian house is worth $571,500, but the average superannuation account balance for males aged 60-65 is only $114,000, you understand that the family home is more likely to provide security in old age than the superannuation account.

Which is why Joe Hockey’s suggestion that potential first home buyers should be able to access their super to fund a deposit on that house makes a lot of sense.

Far from sabotaging Australia’s retirement incomes, it could be the single best idea this decade for making retirement more secure for millions of Australians.

Owning your own home outright eliminates rent and reduces occupancy costs to maintenance and rates. It provides an asset that can be parlayed against a nursing home place, or even sold in an emergency. Levelling the super field for rich and poor Indeed, anyone who reaches retirement age without their own house, but with a decent superannuation balance, ought to take it and buy one. The issue isn’t whether superannuation finds its way into housing, but when.

From an investment perspective housing has been a good performing asset class, and it is one to which most large superannuation funds are under-exposed. However self-funded superannuation funds are able to invest in geared real estate. So, not only does Hockey’s scheme diversify retirement investment risk for those who can’t self-manage, it also provides horizontal equity between the two types of schemes.

Housing investment also performs well because of gearing. A gearing of 80% magnifies the gain on the whole property, turning say a 5% gross return into a 25% return on equity. How many super funds boast that level of return? In a normal situation this level of gearing would be considered dangerous, but at current borrowing rates, and even only a 10% deposit, the interest on a starter house in most states would actually be less than the rent on a comparable dwelling.

Owning your own house is very tax effective, more so than superannuation. Not only are there no capital gains, but the rent saved over time is after tax and is potentially available for tax advantaged investments, like topping up superannuation at a later stage, at its pre-tax value. The share of the market of owneroccupied housing is dropping, and while this may partly reflect lifestyle choice, it also reflects the fact that while repayments are relatively speaking low, asset prices are high.

Superannuation is about security in retirement, and has to be seen in that context, not as an end in itself. Repaying a loan isn’t a problem, but getting into the market is. It takes longer to save a deposit than ever before, which is why conversations amongst parents in wealthy suburbs often turn to how much they’ve lent their kids money to buy their first house. Not much comfort for the less affluent there.

Critics worry that Australian housing is in a bubble. But current house prices are a rational reaction to low interest rates, constrained demand, available rents and a long uninterrupted expansion in gross GDP since 1993. There is no natural value of an asset, and while current prices are historically high, they appear to have reached an equilibrium which has held for 10 or so years. Without a drop in rentals or a sharp increase in interest rates, it is hard to see this changing.

Besides, we are talking a long game here with a house purchaser in their 30s probably working for another 40 or more years. Could the market go sideways that long?

Critics also charge that this will increase house prices because of supply constraints. But balanced supply is a function of population and number of occupants per dwelling, not who owns those dwellings. Unless the number of occupants per household decreases substantially as a result in the change of the type of owner it should have no long-term effect at all. There may be a temporary increase in prices, but this should be quickly cured by a corresponding drop in rents with fewer renters in the market, and an increase in supply in response to higher prices.

If planning laws are the problem, then the laws need to be changed, rather than punishing potential home owners. And if the issue is high migration levels, then the solution is even easier to implement. And while it’s a good idea, it’s not original. Other countries, such as Canada and New Zealand have similar schemes, which ought to give comfort to the treasurer that this is one argument he should be able to win.

This article was written by Graham Young, Executive Director, Australian Institute for Progress.