Reuters AlertNet Lite - Australia budget to up pensions, save on health-paper

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Australia budget to up pensions, save on health-paper

11 Mar 2009 22:26:36 GMT
Source: Reuters

CANBERRA, March 12 (Reuters) - Australia's government will look to cut subsidies for private medical insurance to help fund a sharp pension payment increase in its May national budget, a newspaper report said on Thursday.

A $30-a-week ($19.47) pension top-up was near certain to be announced in the May 12 budget by Treasurer Wayne Swan, costing around A$5 billion a year, the Herald Sun newspaper said, without saying where it got the information.

The government is set to target middle-class welfare to help pay for the increase, the paper said.

"Everything is on the table. Finance wants to see big savings out of health," an unnamed source told the paper.

A A$300 million-a-year subsidy for private health insurance cover could be income tested to exclude high wealth families, while nursing home fees could also be increased for people with large property portfolios or having private income.

Finance Minister Lindsay Tanner on Wednesday warned Australians to expect a tough budget, with the government having already saved about A$4 billion over the next five years by reducing wastage.

The government's updated budget forecasts, released in February, forecast underlying deficits totalling A$87 billion over the coming four years.

Australia moved a step closer to recession last week when the country reported its first economic contraction in eight years during the fourth quarter. The economy shrank by 0.5 percent, surprising economists who had tipped slight growth.

The government hopes its recently announced A$42 billion stimulus package, including cash handouts and infrastructure spending, will help the economy weather a downturn tipped to see unemployment hit 7 percent, from 4.8 percent now.

The independent central bank, which has slashed interest rates by 400 basis points since September, last week decided to hold the official cash rate at 3.25 per cent. ($1=1.54 Australian Dollars) (Reporting by Rob Taylor, editing by James Thornhill, rob.taylor@reuters.com; Reuters Messaging: rob.taylor.reuters.com@reuters.net, +612 6273 3700))

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