New modelling commissioned by the Super Members Council has revealed that allowing young Australians to raid their superannuation for house deposits could cost taxpayers a cumulative $1 trillion, with even a capped policy of $50,000 withdrawals potentially creating a $300 billion cost to federal coffers in the coming decades.

The modelling, completed by Deloitte, shows that pension costs would climb exponentially as first home buyers start to retire with significantly less superannuation, forcing them to rely more heavily on the taxpayer-funded age pension.

To meet the rising budget costs, future governments may have to increase taxes or cut services to offset the extra fiscal pressure created by the bigger age pension outlays.

At its peak, the capped super for housing policy could cost taxpayers an extra $8 billion per year, while the latest push to uncap it would cost taxpayers an additional $25 billion annually.

Previous Super Members Council modelling also indicates that the policy would simply raise capital city house prices by $75,000, forcing future generations of young Australians to wait even longer to buy a home.

“It’s economically reckless. It sets a policy trap for young Australians because it hikes house prices and blows a Budget blackhole in the decades ahead mostly by pushing up age pension costs – which every taxpayer would pay,” said Misha Schubert, CEO of the Super Members Council.

The modelling finds that a capped super for housing deposit policy risks costing the budget more than $300 billion by the end of the century and adding an extra $320 million a year in costs by 2030, peaking at an extra $8 billion a year.

The latest uncapped policy push risks costing taxpayers around $1 trillion by the end of the century and adding an extra $2.5 billion a year to the budget by 2030, peaking at $25 billion a year towards the end of the century.

SMC analysis predicts that the current capped policy proposal would push up median house prices by 9% or $75,000 in Australia’s major capital cities, with an uncapped scheme setting off an even bigger property price hike.

The analysis also shows that a 30-year-old couple who withdrew $35,000 each from their super could retire with about $195,000 less in today’s dollars.