Monday, April 27, 2009

Pensioners Before Politicians

Last week, speculation began to emerge that the much anticipated increase to the age pension may not be as much as everyone has been, well, anticipating. It all began with recognition that the level of income for pensioners, and especially single pensioners, was simply not enough to keep them out of poverty and provide for a decent standard of living. Calls for action were followed by the Harmer Review, which in turn provides part of the overall picture for the Henry Review. Out of all this emerged the idea that any increase would have to be at least around $30 per week. It was an idea that somehow turned into a widely held expectation, even though the only specific promise the Government ever made was to give pensioners “something”. So far the only thing pensioners have got from the government is anxiety.

Of course, the whole saga began well before the extent of the unfolding Great Recession became sufficiently obvious for the politicians to realize that all was not well. Having successfully raised expectations, and for that matter actively encouraging those expectations, the Government now finds itself confronting a deficit bigger than Malcolm Turnbull’s ego. As the drain on the budget got bigger and bigger, the Government did nothing to alter those expectations.

With the budget now mere weeks away, it is suddenly crunch time. Giving single aged pensioners an extra $30 a week will cost around $1.3 billion per year, and giving all pensioners and carers the same boost would be closer to $4 billion. That’s every year, and it would increase over time as more baby boomers become pensioners, even before accounting for inflation. At the same time, the once sizable budget surplus of around $20 billion has been swallowed up in the black hole of the Global Financial Crisis and transformed into a deficit which may already be as much as $50 billion. We won’t know for sure until Budget night in a couple of weeks.

In the light of the deteriorating conditions it would be no surprise if the government was looking for a way to soften its commitment to a pension increase, and last week’s speculation that perhaps the pension increase could be more modest so as to allow more support to the increasing numbers of unemployed has sent a shiver through the pensioners of Australia who have been led to believe that they will be looked after. It might be a red herring, but it might also be a genuine indication of what to expect in the Budget. Once again, there is no way to be sure until the big night itself. But the bottom line is that after all of the song and dance it would be a massive breach of faith to let the pensioners down now.

Adding insult to injury, the Independent Remuneration Tribunal has awarded federal politicians an increase to their electorate allowances amounting to $90 per week. Regardless of the reasoning and rationale for such an increase, the timing of the announcement is appalling. Here we have the pensioners not even certain of getting the miserable $30 per week, and yet the politicians are in line for $90. What’s worse is that although the allowance is supposed to cover the costs of servicing the electorate, any money not spent can be kept by the politician as income. That’s a tremendous incentive NOT to service the electorate isn’t it? Now, that’s just the electorate allowance. The decision on politicians’ base salaries is still in the works, but when that comes through it’s likely to award even more cash to the very people who are telling the rest of us that times are tough and we all have to share the burden.

The truth is that giving pensioners a fair go is going to cost a lot more than salary increases for a handful of politicians, but most Australians have no trouble working out which group deserves priority at a time like this. Denying the politicians a pay rise won’t save the world, and it won’t especially make the rest of us any better off. But it will at least mean that they too are making the sacrifices that they expect of everybody else.

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