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Time to spend surplus: Rudd

By Online parliamentary correspondent Emma Rodgers

Posted October 13, 2008 13:29:00
Updated October 13, 2008 13:57:00

Rudd announces guarantees for all bank deposits

'Tough times have come': Kevin Rudd (AAP Image: Alan Porritt)

Prime Minister Kevin Rudd says the time has now come to use the surplus to fight the impact of the credit crisis, amid calls to stimulate the economy by boosting the aged pension.

The Government has previously stood firm against any pension increase before the next Federal Budget in May.

However, Opposition Leader Malcolm Turnbull has urged to Government to lift the pension now and a report by the Australia Institute released today says an immediate boost would stimulate the economy.

Mr Rudd says the time is right to spend surplus cash on helping the Australian economy.

"I believe that the purpose of having a surplus is to make sure you've got a buffer for the tough times - and the tough times have come," he said.

"That means making sure that you're taking necessary measures to contribute to positive economic growth in the future and help families on the way through.

"On the detail of those measures the Government will make further statements in due course."

The Federal Government has already agreed to fast-track a report into the spending of its $20 billion infrastructure fund.

Yesterday Mr Rudd warned the global economic crisis would slow growth and raise unemployment.

He also announced the Government would guarantee all bank deposits and put a further $4 billion into residential mortgage-backed securities.

Tags: business-economics-and-finance, welfare, federal-government, international-financial-crisis, australia

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Comments (96)

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Chris of QLD:

13 Oct 2008 1:56:22pm

Rudd's surplus will only be realised after 30 Jun 09, until then it is just a projection. He speaks as if it is money in the bank (pardon the reference!).

Prudence is required now, not profligate Labor pork-barrelling, which includes the seduction of pensioners with an early increase....

Just what does Rudd really mean when he says anything, if he is now going back on his position of last week on pensioners increases?

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brian:

13 Oct 2008 1:59:18pm

If you spend the surplus, you do not have a surplus. How are we going to pay all the additional unemployment benefits in the next few years.

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Patrick O'Reilly:

13 Oct 2008 2:00:41pm

The now $8Billion of tax payers money used to attempt to prop up our property market is folly. This global de-leveraging can't be stopped. Highly leveraged persons/business will be destroyed by the market. Those with savings/liquidity will benefit. This is survival of the fittest and is neccessary to teach people a valuable lesson on the dangers of credit. Any risk asset such as shares, property are going to fall in value.

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JC:

13 Oct 2008 2:09:50pm

A little while back Mr Rudd was posturing about preserving the surplus at all costs, lambasting the Coalition for blocking revenue raising measures (those new/increased taxes they didnt go to the electorate with), having to wait until an enquiry was completed for any pension increases.

We have some tough times here. And what do we get - Captain Backflip. Please. Be decisive. You're killing me!

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sally:

13 Oct 2008 2:10:38pm

Surplus, what surplus? Its October 2008, not July 2009. Someone please explain to me how, when the stock market is 30% down on October 2007, and this means company profits can also be expected to slump, when retailers are warning of a huge drop in retail spending, and hence the economy is slowing, companies are still expected to pay the same amount of tax anticipated in the 2008 budget? Either the government isn't telling us the full story and they know their revenues will be higher than previously declared, or they don't know and are kidding all of us. You can't have it both ways......

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Brent:

13 Oct 2008 2:11:21pm

Can someone please be kind enough to explain to me where the cash has gone from the banks that require the Gov to put so much cash into their coffers? I thought banks were making record profits? Lending has siezed they say, where's the money going apart from buying up smaller banks which is closing down competition? The USA has some 8000 banks I understand so with their population of 300Mil? 37 banks per million people? That's competition, and yes several more will go bust over there, 15 this year alone but many more survive.

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Karl Marx:

13 Oct 2008 2:11:24pm

Why should people save for their old age when you have the government to take care of you?

A lot of older people are asset rich and they can be flexible and move to a smaller place.

There are a lot of older voters out there and since we are aging I can predict the creation of the Seniors Party soon.

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Doh:

13 Oct 2008 2:11:47pm

I believe <empty rhetoric> that means <buzzwords>. On the detail of those measures the Government will make further statements in due course.

The Government has taken the earth shattering step of 'fast tracking' ... wait for it ... 'a report'!

The only actual announcement is with respect to guaranteeing ALL bank (and building society> deposits.

Just watch the flow of capital from low yielding but safe accounts to high yielding and now equally safe accounts.

A run on the big 4 perhaps? Or will they respond by matching the higher rates? What stops an uncrupulous bank from offering 15% government guaranteed (just like Pyramid only better).

Bah humbug!

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Billy Bob Hall:

13 Oct 2008 2:13:46pm

Typical Labor Party behavior... spend, spend, spend (on into oblivion).

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Tony:

13 Oct 2008 2:14:40pm

I would recommend a national savings plan not just for first home buyers. Look at infrastructure projects and get Mum and Dad investors into the market. What is lacking is infrastructure and the best way to get more is to give Mum and Dad investors a share of the infrastructure. A very high speed train between Sydney and Melbourne would realise huge benefits over a few years and reduce the demand for air travel. Come on Australia Think Smart and Clever.

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rob:

13 Oct 2008 2:16:37pm

Dont mind increasing the pensions, except unemployment. There's at least half a dozen lazy bums within stones throw of where I live, make no attempt to find work, do anything to avoid getting a job, sleep all day and watch TV all night.

Yeah I know there are genuine unemployed triers, but even then I've never taken a day of dole in my life, I'll happily hang up my usual suit and tie and sweep floors before I go on the bludge (not just words, I've done this between jobs and it didn't hurt at all.)

Reudec UB by 50% and give that to the oldies, no need to spend a single extra penny.

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daniel:

13 Oct 2008 2:18:02pm

I am starting a list: Column A is titled Economic Spin, as will be pedalled by our government and the media over the next 6 months. Column B is titled Economic Fact. Column B gets a tick if Item A comes to fruition. Somehow I don't think there will be many ticks in my B column. My first entry is "budget surplus".

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John:

13 Oct 2008 2:18:53pm

It is interesting that quite a bit of the surplus (more than $ 550 million) was to flow from the luxury car tax - I can't see many luxury cars getting sold anytime soon hence no $550 million of surplus. Other revenue items from the May budget are also shot to bits.

Anyway, bring it on with the spending. I've always been an old fashioned Keynesian. Also, how about a wealth tax on the likes of Turnbull et al. All his Ozemail speculative profits can be used to build a few bridges somewhere! What ever happened to Ozemail by the way?

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Andrew:

13 Oct 2008 2:19:43pm

I just hope for once the surplus is spent on someone else other than mum, dad and the kids.

I'm sick of my money constantly going to families as if that is the only type of social group in this country.

And to the inevitable argument "but my kids are the generation that will look after you when you're old" I say this: When I'm old I'd rather pay an immigrant to perform any services I require than go through a lifetime paying through the nose to raise your children.

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renn:

13 Oct 2008 2:20:40pm

The Australian economy is still growing (slowly) and if the govt. spends the surplus now who knows what will happen in the future. If there isnt any surplus when we really need it we will be in trouble. Time to hold on and see how this fiasco pans out.
Encourage people to spend responsibly and be seen as doing the same.
Encourage people not to panic and have some 'little' bit of pleasure to keep the wheels turning.
Now I hope the Australian people will see where the previous govt. were coming from!
The pensioners I'm sure will be the first to say be careful.
While I feel for the aged pensioners during these hard times this is not the first time they have had it hard. They will manage better than other generations who have not and dont know what it is to struggle.

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Robert:

13 Oct 2008 2:22:17pm

Better still, keep much of the surplus and finally get rid of Telstra. As a private sector telcom, THEY can pay for the broadband setup and taxpayers can save $4billion there.

Then rationalize the silly defense spending that goes for submarines and attack fighter jets, and only spend on defensive and surveillance boats, planes and equipment (who are we going to attack by the way? China? India?)

And how 'bout dropping the GST to 8% instead of spending the surplus? Rudd should send a study team to Canada: they dropped their GST rate and it sure boosted that economy!!

We need fresh ideas - forget Turnbull, Costello and the Liberals who are still living with the Reagan trickle-down theory of economics.

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Vladimir Lenin:

13 Oct 2008 2:23:30pm

Spending money to support non-banks(the Dodos) 4bn, aged pension 2bn, and the surplus is down to 14bn, bringing forward infrastrucure spending will cost money, saving the banks...slowing economy(less tax intake, more dole)
There is no surplus, there will be a deficit at 30-Jun-09.

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Boomer:

13 Oct 2008 2:29:55pm

Rudd's surplus is a mirage. Furthermore, we baby boomers are going to have to get organised in order to protect ourselves from the next lot coming through. The Boomer party will need to take control politically, because the current generation will fail and wilt during the forthcoming financial slump. These guys have had it handed to them on a plate so far, they have never done it tough, let alon do much at all, and hence they will not know what to do when times are hard. Boomers unite, we have earned it and we want to keep it away from their pesky little paws. Stay tuned for more on this one.

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Jack:

13 Oct 2008 2:33:20pm

Once again another change of direction after the pollsters whisper into Kev's shell-like.
This guy changes direction more often than that blowfly hanging around our kitchen.

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Brent:

13 Oct 2008 2:33:23pm

Let's force the Government to wipe taxes from bank interest saving accounts, this plus inflation is a huge disincentive and a big cause of lack of savings, makes a nonsense to complain about general "jo Blow" folks not saving. Living on credit and not savings is one of the main contributing factors in the latest crashes.

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Ricki:

13 Oct 2008 2:38:01pm

Come on Kevin...lets see serious renewable energy infrastructure.

20 billion on major solar, wind and geothermal plants would allow us to retire at least one of our coal fired electricity plants. Lets get on with it. Australia is one of the worst per capita GHG emitters!

This is a great opportunity to establish clean community power for the coming decades.

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pete:

13 Oct 2008 2:38:51pm

Let"s hope this time the disability pensioners arn"t forgotten like Howard did twice and Rudd once putting the $1500 behind old age pensioners.They always were the same until Howard dcided they were lesser than normal pensioners.

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Jake:

13 Oct 2008 2:40:01pm

It's quite amusing to note that a few weeks ago people were complaining that the government could increase pensioner's pay and that waiting till next year was a sign of the Rudd government's inefficiency to act, and now people are complaining that action is being made.

You can't have it both ways you know!

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LOZZA:

13 Oct 2008 2:44:45pm

Last week the media reports, had Rudd/Government giving the impression that Australia was in a good position, on channel 7 interview he spke as though they had been aware and planning for this over the last few months.

I think Rudd/Government have shown they can't be trusted or have no idea.

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Douglas Chalmers:

13 Oct 2008 2:47:07pm

Economist Joseph Stiglitz quoting George Bush's summation of the financial crisis, "We built too many houses...". What Australia has to recognize now is that its pretentious housing market bubble has left it in a troublesome position which is quite different from the G7 countries. Where the USA and others had a financial meltdown originating in overselling loans, we still actuallly have a serious housing shortage which we have yet to confront.

Thus the real reason for the A$20 billion budget surplus was that both the previous Howard regime and the current federal government (a) avoided expenditure on public housing and other infrastructure, and (b) avoided bringing the social security payment levels for all aged and disability pensions up to respectable OECD levels. Its easy for a government to maintain a surplus by simply leaving people to starve or to live on the streets but it is utterly reprehensible.

Increasing pension payments has still only received bland assurances but no specific actual commitments and an interim payment increase of some $30-$50 per week, at least, is appropriate. It is now vaguely understood that upgrading PENSIONS payments will provide an essential national economic stimulus as pensioners' expenditures goes almost 100% into immediate retail sales.

Some time very soon, though, the housing crisis will also have to be addressed instead of merely running after the mortgage securitization sector of the financial markets. As that is expenditure in the local economy and not dependent on imports for the lower end of the housing market, a nationwide PUBLIC HOUSING project will also provide a very timely economic stimulus and must be part of an ongoing program through the coming decade.

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Wayne:

13 Oct 2008 2:48:38pm

Crikey, I nearly choked on my caviar when I read Rudd's statement. Surely no one is going to buy this declaration by Rudd that he is now spending the surplus, are they? Anyone who understands finance knows the "surplus" is a fiction. Gawd, if he get's away with this one, the boy will be able to do anything he wants. Unbelievable.

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Time to spend surplus: Rudd

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Comments (96)

Chris of QLD:

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