A controversial proposal to allow young people to use their superannuation to buy a home is causing growing division in the Federal Government, with one MP labelling the proposal "mad," while a Cabinet minister is urging his colleagues to consider the idea.

Key points: Proposal would see young Australians able to dip into super payments to buy home

Proposal would see young Australians able to dip into super payments to buy home Resources Minister Matt Canavan says plan is "a legitimate idea", Treasurer Scott Morrison understood to support proposal

Resources Minister Matt Canavan says plan is "a legitimate idea", Treasurer Scott Morrison understood to support proposal But PM Malcolm Turnbull as well as ministers for Finance and Financial Services are against idea

The proposal, which could see young Australians divert compulsory super payments into a special account, is being discussed in the lead-up to the May budget.

The ABC understands Scott Morrison supports the idea, which has also been backed by former prime minister Tony Abbott, who said he had "sympathy" for those who wanted to access their retirement savings.

Resources Minister Matt Canavan has also thrown his support behind the plan and told the ABC while it is ultimately Mr Morrison's decision, his colleagues should be open-minded and "consider all these elements".

"This is, I think, a legitimate idea — it's had support from people like Paul Keating in the past, it's used in other countries, it's something we should certainly consider," Senator Canavan said.

"I agree you shouldn't be able to touch it for going overseas on a European holiday, but it seems strange that you're allowed to invest in other people's assets, in equities, in bonds, but you're not allowed to invest in your most important asset in your life which is your own home."

Liberal MP Ian Goodenough — who owns 10 properties in Canberra and Perth — also supports the proposal and said he believed it could increase homeownership with no cost to the taxpayer.

"Many young people, after 10-15 years in the workforce, would not be able to have $100,000 in cash but they certainly would have close to that with superannuation," he said.

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But Prime Minister Malcolm Turnbull described the proposal as "a thoroughly bad idea" when it was floated by former treasurer Joe Hockey in 2015.

Finance Minister Mathias Cormann has also repeatedly opposed the idea, saying it would increase demand for housing and drive prices up.

Financial Services Minister Kelly O'Dwyer is also against the idea, and one of her Nationals partyroom colleagues told the ABC the plan was "madness".

"The purpose of superannuation is for use in retirement or not," the MP said.

Former health minister Sussan Ley said young Australians needed to save their superannuation for retirement, rather than property in major cities.

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South Australian Liberal senator Anne Ruston has also warned against the proposal, saying it could have unintended consequences.

"You need to be very careful you don't pour a bucket of kerosene on a fire," she told the ABC.

Nationals MP Andrew Broad is also unhappy with the proposal, taking to Twitter to label it a "lazy response".

Cabinet divided over plan

The proposal is contentious inside Cabinet and has not been approved amid fears it would drive up house prices.

Other government ministers and MPs have also raised concerns, with some saying they had no idea why the Coalition was buying into the issue of housing affordability.

Some argued it was a state issue that had become the Commonwealth's problem, to which there was "no solution".

One MP said while they "didn't mind" the proposal, they did not understand why the Government was floating budget ideas that were yet to be settled.

Labor has warned the proposal could undermine superannuation and further increase property prices.

But Senator Canavan said there were "ways and means of ensuring that people's superannuation isn't affected over time".

He said the proposal's impact on property prices needs to be considered in a "broader context".

"There will be second-round effects of increasing demand but that's why we've got to partner with other measures as well if we're going to do something like that."