Six years ago, Australia had a $38 billion early super experiment. It didn’t go to plan

As One Nation pushes a policy that would let workers trade their retirement savings for immediate cash, Australia is already living in the aftermath of a $38 billion early superannuation withdrawal experiment that caught its architects by surprise.

Under the measure promoted by Pauline Hanson and her party, employees could redirect three percentage points of their super into take-home pay for up to three years – handing an average earner an extra $44 a week, or $2300 a year.

But experts have warned that the last time Australia opened up super, it triggered a far bigger cash rush than anyone anticipated.

When the Morrison government launched its early super release scheme to help relieve the financial uncertainty of the pandemic in 2020, officials expected 1.5 million people to withdraw around $27 billion.

Instead, ATO data shows three million Australians drained a combined $37.8 billion from their nest eggs – the second-largest stimulus measure of the lockdown era.

According to the Reserve Bank of Australia, participants in the 2020 scheme spent about 43 cents of every dollar within eight weeks, with most of it spent in the first month.

Financial adviser Sangram Rana said the immediate appeal hides a decades-long cost for struggling families.

“The cash is visible today, and the cost is invisible for 30 years,” Rana told nine.com.au.

“For a family struggling with rent, the relief is real, but so is the cost, and both numbers should be on the table before anyone is asked to choose.”

Economists remain split on how much that initial $38 billion wave fuelled the inflation crisis that followed and is still playing out today.

Public policy expert and economist Dimity Pascoe argued that pouring billions of dollars into the economy at that time had an inflationary effect.

“Injecting this spending into a supply-constrained environment no doubt compounded underlying domestic price pressures and contributed in some way to the subsequent inflation increases,” Pascoe said.

Inflation later peaked at 7.8 per cent in late 2022.

However, Australia Institute chief economist Dr Greg Jericho said the 2020 release had a minimal immediate impact on inflation.

“In 2020, inflation actually fell. This [superannuation scheme] was more about providing stimulus in a time when Australia was in danger of going into a recession,” he said.

“Unfortunately, it was a stimulus that hurt people’s long-term retirement.”

He attributed the later spike to corporate margin growth and global supply shocks.

Economists broadly agree, though, that using super for short-term relief fails to address the root causes of the cost-of-living crisis.

“The policy is basically robbing Peter to pay Peter,” Jericho said.

“While the $44 a week is attractive for someone struggling now, they are basically robbing their future self.

“The sugar hit passes, and the losses in your super will more than outweigh the money you get now.”

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Super Members Council modelling shows a median full-time worker opting into the One Nation scheme for three years stands to retire with $25,000 less.

Rana calculated that a single $10,000 withdrawal at age 30 can blow a $61,000 hole in a nest egg by age 67 under standard return assumptions.

As cost-of-living pressures mount, experts say that turning super into a political safety valve offers a false sense of security.

“The rent is still due next month,” Rana said, “and the super is gone.”