Millions who withdrew superannuation early spent longer unemployed, paid less: study

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Millions of Australians who withdrew their superannuation during the pandemic were on average unemployed for longer and eventually paid less, a landmark study has found.

Researchers at the Australian National University (ANU) have studied the impact of the federal government’s early withdrawal scheme, which allowed people to access up to $20,000 of their superannuation in two instalments.

The Tax and Transfer Institute was given de-identified data including incomes, welfare payments, and superannuation balances over several years including before the pandemic.

Professor Robert Breunig and his ANU colleagues focused on people who lost their job during the first four months of the pandemic.

The employment outcomes of those who withdrew their superannuation under the early access scheme were compared to those who did not.

“We found that people who withdrew from their superannuation stayed out of work about eight weeks longer than the people who chose not to withdraw,” Professor Breunig told the ABC.

“In some ways, this is not that surprising because we know that if you make out-of-work payments more generous and give people extra money they tend to use that money to wait a bit longer to find work.”

Professor Breunig said the team of researchers suspected many people may have been waiting longer to find a better paid job.

“But we did not find any evidence of that,” Professor Breunig said.

“We looked at the wages people made once they were eventually re-employed and found those who did not withdraw super and went back to work earlier had higher wages.

“It does not seem like people used that money to spend longer looking for a better job.”

Professor Breunig said while it was too early to judge the long-term impact of the scheme, there was evidence it should not be repeated.

“Even during a pandemic, giving free money to people who are not working tends to make them stay out of employment longer,” Professor Breunig said.

“Because people withdrew so much more money than the government thought, and because they stayed out of work longer which cost the government unemployment benefits, this is actually a very expensive project.

“It’s not something you would probably want to repeat.”

Treasury had initially estimated $29.5 billion would be accessed but then extended the scheme until the end of the year, in light of Victoria’s second coronavirus lockdown.

The forecast was subsequently revised up to $42 billion.

At the time, then-treasurer Josh Frydenberg defended the scheme saying it had provided security to millions of Australians in uncertain times.

“We know that almost 60 per cent of those accessing their super early have used it or plan to use it to meet essential day-to-day expenses, including paying down debts, with another 36 per cent adding the money to their savings,” he said.

By political reporter Henry Belot (Original ABC Article)