Global Financial Crisis 2008 – Article No 24
by Humphrey McQueen
Pensions
The ALP’s ditching of social equality has come back to bite it on the stimulus package. On 8 December, single pensioners will find $1400 in our bank accounts.
A survey has shown that 40% of recipients are planning not to spend the grant. Instead, we will protect ourselves against the crisis in capital accumulation turning chronic, by either saving or paying off debts. Hence, the ALP’s abandonment of social equality is frustrating the multiplier effect.
Treasury should have anticipated that result from what happened in Japan in the mid-1990s when its government tried to escape the deflationary spiral by giving cash to the poor. In an economy with almost no welfare system, even those towards the bottom tried to save the handout.
The Australian pension system is skewed towards those who have an income stream, whether from work, superannuation or as interest on investments. The base pension rate is not reduced for the first $3,500 and then by 40 cents on every additional dollar of income. Retirees taking in $35,000, and with assets of $550,000, can get a one-dollar pension. Now they also get $1400. Changes in the 2007 budget opened the sluice gates to the well-to-do to fix their finances to qualify.
The pensioners most in need are single, with no income or assets, and renting commercially. This cohort ekes out each fortnight on the basic rate. They cannot reequip themselves. Hence, the fairer and smarter policy would have been to redistribute the $5bn package towards those most in need, giving $1400 on 8 December and the same again four weeks later. More significantly, the grant must be extended to those on unemployment benefit.
Boosting rental subsidies is hazardous because those supports are gobbled up by landlords. The solution here is for the state to provide accommodation.
Governments once had an administrative excuse for not enforcing a means test, arguing that it was more expensive to apply than it cost to give the same benefit to everyone. That is not so today in regard to pensions. The computer knows what percentage of the full pension we receive and it can be programmed to deliver that fraction of the $1400 into our accounts.
Speculation continues about a $30 pension increase during next year. If the very worst happens in 2009, pensions are more likely to be cut by $30 in the first of the horror budgets.
The prospects need to be set against the history of the Commonwealth pensions. Legislative approval in 1908 but they were not paid until 1910 because of a shortage of funds. They were pittances of ten shillings when the basic wage, itself miserable enough, was 48 shillings. Nonetheless, the Auditor-General in the 1931 attacked pensions for encouraging “laziness, drink, gambling, extravagance and waste.” Later in that year, all state-sector incomes were cut by 10 percent. “Equality of sacrifice” obliged a judge on £2,500 p.a. to go without 250 of those pounds – five times more than a pensioner had got before losing two shillings out of her pound a week. The $1400 handouts follow the precedents of treating everyone the same, which is to say, unequally.
Meanwhile, the best that can be said about the ALP’s budget-buster is that lavishing a billion or two on the better-off is less repugnant than outlaying those dollars on bullets, or even on an oenology laboratory for the lout-bourgeoisie at Melbourne’s Xavier College.
Next: The Very Right-Wing Rev. Rudd