Kevin Rudd's $950 payments to be blown on pokies, plasmas, economists warn

Kevin Rudd's $950 payments to be blown on pokies, plasmas, economists warn
By Cathy Alexander and Colin Brinsden
AAP
February 10, 2009

    * Economists raise concerns about handouts
    * "Will be spent on plasma TVs, pokies"
    * Tax cuts or a GST holiday a better idea

Australian Legal Law

ECONOMISTS have raised concerns the Federal Government's cash handouts to millions of people will be blown on pokies and plasma televisions.

The Government wants to give payments of up to $950 to individuals as part of its $42 billion economic rescue package.

But economists have told a Senate inquiry that $42 billion is too much money, and the handouts would be wasted.

Reserve Bank board member Warwick McKibbin called for the payments to be scrapped.

"A cash payment ... only has the potential to temporarily stimulate demand and has no long-run benefits to the economy," Professor McKibbin told the inquiry last night.

He said it would be better to bring forward tax cuts or temporarily cut the GST.

Professor McKibbin, who said his remarks reflected his own views and not those of the Reserve Bank, said the $42 billion package was "too large".

Sinclair Davidson, professor of economics at RMIT, slammed the handouts.

"Do we believe that Australians have not been borrowing and spending enough on alcohol, pokies and tobacco, and that there aren't enough plasma televisions around?" he asked the inquiry.

"This particular package has got a very low bang for buck, and there are certainly (a) substantial amount of bucks involved in the project."

Prof Davidson said tax cuts or a "GST holiday" would be a better way to stimulate the economy.

The opposition will vote against the plan, so the Government needs the support of the Greens and two cross-bench senators to get it through the Senate.

Ominously for the Government, cross-bench senators aired a litany of concerns about the cash hand-outs at the inquiry, which is due to wrap up today.

Family First senator Steve Fielding raised the case of a doctor earning $300,000 a year who did not think his family should reap thousands of dollars from the package.

"There's a lot of people that are contacting me saying they don't actually need the money, they'll take it but they don't need it," Senator Fielding told the inquiry.

"There's something wrong here, there's something horribly wrong".

The Greens took aim at the fact that people earning more than $80,000 would get a payment, saying it seemed like every player would win a prize.

Richard Evans, executive director of the Australian Retailers' Association (ARA), said much of the last round of cash hand-outs was used to pay off debt.

"Indeed, there is something uncomfortable to us about taxpayer funds being used to reduce credit card debt," he told the inquiry.

The ARA is recommending a voucher system, redeemable at retail outlets.

Accountants told the inquiry that bringing forward tax cuts would be a better way to boost consumption.

The Senate inquiry is due to hand down its findings tomorrow night, and the Senate to vote on the stimulus package on Thursday night.