Barnaby Joyce defends One Nation superannuation early access plan despite inflation warnings

Barnaby Joyce has insisted inflation caused by One Nation's proposed superannuation early access scheme would be "undetectable", despite warnings it would create a sugar hit for Australians while making the cost-of-living crisis worse in the long-term.

Under the proposal, Australians with a mortgage or paying rent would be given a choice to divert a portion of their superannuation to their take-home pay for up to three years under a One Nation proposal.

The full 12 per cent compulsory super contribution would still be paid by employers, but 3 per cent would be paid directly to the person by the super fund if they opted in.

The payments would also remain subject to the concessional tax rate of 15 per cent, rather than the higher personal income tax rate.

One Nation leader Pauline Hanson said the average full-time worker earning about $90,500 would get an extra $2,300 in their pocket each year.

That works out to about $44 a week, which Senator Hanson said would provide "breathing room".

"For a working couple earning $168,000 between them, it is about $4,300 a year after tax, or $82 a week, back in the family budget," she said.

The senator said anyone would be allowed to apply to alleviate cost of living pressures, because it was "their money".

Judo Bank chief economic advisor Warren Hogan said the proposal would provide short-term relief for Australians but raise the cost of living over the long-term.

"It ultimately makes the problem worse. We need to bring demand in the economy down to take pressure of the supply side in our economy to allow price pressures to ease."

The Reserve Bank has increased interest rates three consecutive times this year in an attempt to curb inflation.

Mr Hogan said under the guardrails set out in the policy, almost two-thirds of adult Australians would be eligible.

"An initiative like this will put money in people's pockets at an average of 50 or 60 bucks a week, and that money multiplied over half the population, probably, will be a significant stimulus and make the inflation problem worse," he said.

But Mr Joyce insisted the inflationary impact would be "incredibly small".

"If the money is going to your house payments it's still the same," he said.

Industry peak body Association of Superannuation Funds of Australia (ASFA) labelled the proposal "economically disastrous" and said it would push up inflation while making people poorer in retirement.

"This proposal would not alleviate the cost of living. It would drive the cost of living higher," CEO Mary Delahunty said.

"Allowing people to take out three per cent is the thin end of the wedge that could erode one of the greatest policy success stories this country has."

Plan would erode retirement nest egg

Health Minister Mark Butler labelled the proposal an "absolutely terrible plan" and pointed to the Morrison government's experiment allowing people to access more of their super during the COVID-19 pandemic, which left some with a depleted nest egg.

"It's going to make a huge difference, a bad difference to their retirement decades down the track," he said.

Analysis from the Super Members Council showed a typical 30-year-old full-time worker who withdraws superannuation under the early access policy for three years would be about $25,000 worse off at retirement.

Over the full three years that person would get about $6,900 in their pocket, but miss out on more than $18,000 in compounding interest by retirement.

But Senator Hanson said she would prefer Australians to access their super early if they were "on the cusp of losing their home" or "out on the street".

"I would rather see them get that help and assistance they need now, not later in life," she said.

Australians are already allowed to access their superannuation before retirement for several reasons, including financial or medical hardship.

Deputy Liberal leader Jane Hume dismissed the proposal as nothing more than a "headline" and said One Nation had questions to answer about how the policy would interact with a person's super balance or their concessional caps.

"This so far is nothing more than a headline. It hasn't really been explained," she said.

Nationals MP David Littleproud said there was a serious risk of "unintended consequences" of the proposal, including the potential for higher inflation.

"When you've got inflation out of control at the moment, and you fuel that with putting more money into the economy, the unintended consequence is that inflation will go up and interest rates will go up," he said.

One Nation MP Barnaby Joyce defended the policy and claimed the current system for early access, where the person must prove they are experiencing hardship, was "incredibly convoluted".

Asked whether One Nation should spell out to people that taking money out of their super now would affect their balance in the future, Mr Joyce said, "people are competent enough to work that out for themselves".

"People aren't stupid," he said.

"There's no point telling a family they'll be better off in retirement if they can't afford the mortgage or their rent payment today," he said.

Minister for Social Services Tanya Plibersek said One Nation was attempting to "raid" Australians' super instead of facilitating a real pay increase.

She said people who opted in to the plan would be "thousands of dollars worse off in retirement".