Thursday 12 March 2009

We've been stimulated!

Today DW received some of the government's economic stimulus payments - a $950 "back-to-school" bonus for DS1, and a $900 "single income family bonus" (DW earns little taxable income working 2 days a week and making salary sacrifice contributions into her superannuation account).

This money won't have much of a stimulus effect on the Australian economy though - DS1 will use the money to help fund his annual $1000 contribution into his retirement savings account (RSA), and thereby get an additional $1500 government co-contribution into his retirement account. So this $950 of stimulus payment won't be getting spent for another 60 years or so.

And we immediately used the other $900 stimulus payment to pay off some of our non-tax-deductible home loan principal. That will help pay off our home loan a week or two earlier than otherwise, so I supposed we may spend a bit extra when the home is paid off in 20 years or so...

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Anonymous said...

When it comes to paying back the money that the government borrowed to hand out to taxpayer what do you think they will do?

Increase taxes?

How much extra tax do you think you will be paying every year in a years time? said...

The government can only pay back the debt used to fund the handouts via either a) tax increases, or b) cutting expenditure.

My guess is that they will increase some taxes on the "rich" (eg. a progressive capital gains tax rate system), allow bracket creep to increase everyone's taxes by stealth, or else cut some expenditures by more progressive targetting of welfare eg. tighten income and assets tests on Family Tax Benefits, Childcare rebates etc.

Personally I don't think I'll be paying much extra tax as I arrange my investments in a fairly tax effective manner and now have plenty of capital losses for future years. However, I may end up worse off if they recind the recent 'tax free superannuation pensions' rules as part of (yet another) rejig of the Australian retirement savings system.