Monday, March 10, 2008

Carers, Pensioners: Kite-Flying Rumours

Having flown the kite that nothing is guaranteed, the Federal Government has this week see much media speculation about winners and losers. Kevin Rudd's and Wayne Swan's "razor gang" have been looking at ways to slash the budget.

It is right to examine HOW the budget is spent, as well as WHERE. The bottom line, so to speak, is about cutting government spending, particularly spending in the Australian economy. That such a measure was needed is indicated by Treasurer Wayne Swan's (pictured) push to increase the retained surplus from 1.2% of GDP to 1.5% of GDP. Such a measure will have an impact on inflation by reducing the money supply in the economy.

Carers and Pensioner "bonus payments" were subject to much media speculation: not much was heard from the Opposition which, in government, introduced such payments just before the 2004 election as a vote-buying exercise. Kevin Rudd has now said that no carer or pensioner will be worse off, implying that he will build the "bonus" into regular, fortnightly payments than will properly appear in the budget and forward estimates. This is more economically responsible than end-of-year splashes. However, if these groups want to have that money spare, they will need to budget, and put aside the money each payment. The trouble with this is twofold: health costs rise faster than inflation, and Australians are bad at "saving for a rainy day"!

Kevin Rudd and Wayne Swan realised they needed to find other ways to save money, so they have flown the electorally popular ideas of cutting back on politicians gold passes (25 free domestic flights per year, and the pass is earned depending on years of service and positions held.). Perhaps, just perhaps, they don't need that many, for so many years after retirement.