Source : Craig James, Chief Economist, CommSec

Budget in perspective:

Some believe that the 2014 Budget was too tough. Others believe that Aussies are complaining too much. CommSec has looked back to the Budget 40 years ago — the 1974/75 Budget — to get some perspective on pensions, payments and benefits.

Winners & losers:

It is clear that, on average, families are currently in a far better position when it comesto assistance payments than those raising children in 1974. The position of Aged Pensioners is less clear depending on age, income, assets and whether a disability exists. But lower income pensioners are arguably better off in 2014 than in 1974, especially if they own their own home. The position of theunemployed today versus 40 years ago is also less clear depending on circumstance.

What does it all mean?

Was the 2014 Budget too tough on recipients of pensions, payments or benefits? To a large extent that is a judgement call. Most believe it is right and proper for the Government to provide assistance to the aged, families and unemployed. However it is the extent of assistance provided that can be roundly debated given that there is no “right” or universally agreed formula to determine payments.

However a look back at the Federal Budget handed down 40 years ago provides an interesting perspective.Clearly these were far different times when the cost of oil was soaring with inflation lifting at a 15 per cent annual rate and wages up 19 per cent on a year earlier. But it was also a time when the Budget was broadly balanced (on consistent figures to today, actually in surplus by 1.9 per cent of GDP). And the Government was smaller with outlays and receipts around 20 per cent of GDP, down from 24-25 per cent of GDP today.

Overall, what stands out is the difference in family benefit payments today compared with 40 years ago. Todaylower income families can receive up to $172.20 a fortnight for each child aged less than 12 years whereas thechild endowment in 1974 in current dollars is $7.48 a fortnight. Families are decidedly better supported today than40 years ago, bringing into question the generosity of the payments being made.

Understandably it is far more difficult to do financial comparisons of aged pensioners and the unemployed

Comparisons: 1974 vs 2014

Follow Us Google Plus - Twitter - Facebook