The Rudd Christmas Bonus: Populism or evidence based policy?


This government claims to be pursuing evidence based policy but this is
not obvious in much of what it is doing. Rather, it often seems to
display levels of cynical populism. This is especially the case with
the Rudd Government’s recent announcement of a $4.8 billion package for
pension relief.

Changes to the pension and benefit system are always fraught because of
the mixed views in the community about who is entitled to public
support, with politicians and lobbyists indulging in political populism
and moral panics.

Retirement income has been the focus of a major
current media campaign for an across the board $30 rise which is both
ill informed and insensitive to real needs.

It both ignores those singles with little or no extra income for whom
$30 is inadequate, and those singles with high incomes ($750 per week)
who do not need extra. The media and political pressure of this
campaign has been an obvious cause of the Rudd Government’s current
financial bonus bonanza for the deemed ‘worthy’ recipients of public

The payments leave out those categories of income support recipients who are most in need of extra money.

  • A single Newstart recipient gets much less than the widely excoriated figure of $273 for single pensioners.
  • Some independent Youth Allowance recipients on less than $175 per week will also miss out.
  • Many
    sole parents may also lose as they will only get a payment per child,
    but not for themselves. This means those with one child end up with
    $1000 which is $400 dollars less than a single pensioner.

It seems as though the politically unpopular income recipients get less
than justice would dictate, although they are most in need. At the
other end, however, there are generous payments to a noisy, but not
very needy lot, the self funded retirees who receive the Commonwealth
Seniors Heath Card. There are 320,000 Senior Health Care Card holders
who are eligible for the bonus of $1400 for singles or $2100 per
couple. Singles, for example, may earn between $40,500 and $49,999 per
annum, or have equivalent capital funds, about 4 times the income of
single unemployed people on less than $11,500 pa. And the payment is
also all tax free.
The government needs to give a serious
explanation of why it has been so generous with these relatively well
off group and so mean to the really needy.
The Australian’s
article by Mike Stekete on October 16th sums it up. “This Government,
like the Howard government, judges the unemployed to be less deserving.
Those on Newstart of $225 a week for individuals and $405 for couples
already receive about $80 less than those on pensions, when taking into
account supplements, and that gap is about to grow larger." This
attitude is reflected in the explanation offered yesterday by Families
and Community Services Minister Jenny Macklin: "We have targeted the
additional support to those people who aren’t of working age or who are
not able to work." She added that there were many older Australians,
carers and those with disabilities who were finding it very hard to
make ends meet and "of course aren’t able to seek employment".Giving a pre-Christmas bonus to stimulate the economy is hardly a disincentive to finding a job.As
the independent retirees did get this bonus for similar numbers, the
rationale behind it cannot be financial. One can only assume the
government’s rationale is the populist merits of recipients. The noise
from self-funded retirees ignores both the hidden subsidies many have
had through generous tax concessions, and the reduced tax most of them
pay on their superannuation income. If they have lost enough of their
capital or income they will be drop into eligibility for the generous
income tested pensions and further fringe benefits and bonuses.

There may be another problem in this splurge. The payments to these
affluent groups may not result in them spending their payments, and
therefore they will fail to do their public duty to increase demand.
Most will probably barely notice the extra going into their bank
accounts. Maybe some of these would like a brief moment of reflection
on whether they should donate it to someone on unemployment benefits,
or Youth Allowance. While charity would seem to be the only option for
the less popular poor, this is also less likely to work because the
recipients lack public appeal.

Surely the point of a public welfare system is that it makes decisions based on facts and not on emotional appeal.

The Harmer Review will find it difficult to make recommendations
that move outside the framework this initiative has set. They should
take a long look at basic assumptions of the welfare sector that all
pensions should move in unison, supposedly to protect the less popular
payments by tying payments to the presumably more popular aged pension.
This assumption has failed – already those who are on allowances get
much less and those on single age pensions still do not get enough.
Treating those who cannot earn extra money similarly to those who need
to be encouraged to add to their income is also a problem which needs
to be dealt with by differential payments and entitlements.

We need a system of directed additional payments to those with clearly
defined needs which do not extend to current recipients who do not need
supplementation. There are many groups with additional needs. The
Women’s Electoral Lobby’s (WEL) submissions to the Harmer Review
focused on a new form of payment for one particular group. These are
the single aged pensioners, mostly female, who live alone, are private
renters and have little or no extra income to provide necessities. WEL
proposed that this group be given $70 extra per week, an amount that
was tapered fairly steeply as it would not be a work disincentive for
this group.

This concept of specific directed payments
could be a model for assisting other groups who have little or no
additional resources.

However, payments to recipients of workforce age, and who could
earn income, require different approaches than for those who are most
unable to change their private financial circumstance. Other payments
could focus on paying for additional costs incurred by people with
disabilities. Alternatively they could be spent on specific
children/carer allowances that may not be so steeply income tested.
These types of payments would be more appropriate for those with
disabilities and carers, who similarly may have little or no other
assets or income. While this approach does add complexities, it does
ensure that differential needs are more effectively met than a
one-size-fits-all model.

This approach also allows appropriate changes for recipients most in
need without adding to the base payment that flows to relatively
affluent recipients. A discrete set of second income streams can be
tightly targeted to particular categories of recipients whose living
standards are below those our community would see as adequate.

Ideally, retirement income redesign should be based on an amalgamation
of public funds foregone in super concessions ($25 billion) and the
spending on direct retirement income ($426 billion). This would provide
a large pool of resources (more than $50 billion) to redistribute more
fairly and guarantee a decent living standard for all. However, I
suspect the Government will not be prepared to reduce inequitable super
tax concessions that assist mainly male higher income earners. Therefore targeted more generous additional payments at the bottom end are the next best option.Rises
in the basic pension are not acceptable as they will be too small. They
will also flow to higher income earners who will now get a part
pension. For these reasons I am proposing a second payment that will
last pensioners long after the Christmas decorations have been taken
down and packed away.