OK so they use their super to get into a house.
What happens when they sell the house for a big profit
and buy another for less?

Do they put the 'borrowed' super back or get a 'pension'
subsidy from the taxpayer when they retire.

My answer is
Pool all superannuation under one bank...Medibank already exists.
Sack all those thousands of blood sucking fund managers and their cronies.
Use the super to build low cost housing (sill a salable asset)
That way you
1 save money on administration costs.
2 Stimulate the building industry
3 Get people into low cost housing anyway.
4 Kill off the increasing ( to bursting point) house prices by increasing supply.

Owning a house as your super leaves too many eggs in one basket. If you are realizing your asset in its entirety (you can't just sell a room or two) what will you live on during a protracted selling period in a weak market? You'll have to stay working or accept the market price at the time. Listen to Peter Costello.

Re negative gearing, if it's taken it off rental housing it'll have to be taken it off all other asset classes to keep the investment playing field level and maintain housing supply.

Luciferase, the way of the future as I see it will either be a huge increase in reverse mortages, or the upcoming inheritors will start contributing to what will essentially be their asset.

As for your eggs in one basket comment, I think you're missing the point as the idea of using super is not to buy a house, but to provide a deposit.

My thoughts are that to qualify one can only use super to the value of 10% of the home (capped at $70,000) and the remaining 10% plus all associated costs must be provided by the buyers. This way there is no mortage insurance which means less risk. Then, if the home is either sold or leveraged against (car, boat, holiday as is too often the case) then the super component must be repaid to the fund, plus interest at CPI capitalized and can only ever be used once.

As for combined super, it's a great idea and one I have wanted since the inception of super back in the 90's. Not so much for housing but rather for infrastructure because had we done that we would have retained the likes of the CBA, Testra and Qantas to name just a few. Plus, we would now have trillions working for us and our former hard working retirerees would be on a decent pension rather than the insult of a pension they have to jump through hoops to justify because we would own everything and couldn't possibly spend the income. I would suggest that the way super has been managed has been our biggest missed opportunity in my life time.

If $14k first home owners grant can inflate house prices in Sydney, imagine what letting people use super would do. The Real estate agents and the State Governments will love this!

If you make the argument that property is a sound investment choice, so is educating yourself, so why not HECs Debt?

Eventually this all leads to buying sneakers, and homeopathy and massage out of your super. Health fund extras allow these.

BTW does anyone know if the extras part of policies in private health insurance qualify for the government 30% rebate? ie are we all paying for the mystic powers of homeopathy with our tax dollars? Or does the 30% subsidy only cover the main premium?