Tuesday, May 13, 2008

Budget 2008 - part 1

One of the first items from K-Rudd's first budget to reach the news was the health insurance changes.

It turns out that the public health system is getting a funding increase to the tune of $1bil. As usual, there is no discussion if this will do anything positive or create more bureaucrats, administrators and paper-shufflers. As usual, there is no discussion about the already bloated budget and whether it has been productive to shovel money to public health.

An interesting change, because it is actually a good one, was to raise the threshold of the Medicare surcharge from $50,000 to $100,000 for individual,s. Previously under Howard, there was a carrot and a stick approach to private health insurance. You would get the stick of an extra 1% tax on your income if it was over $50,000 and you didn't have private health cover.

So if you earned $60k and didn't take private health, you would be stung with an extra $600 in tax. This acts as a big incentive for people who earn over $50k to take out health insurance.

You would also get the carrot of a 30% rebate on the premium. Which still stands.

Rudd has lessened the stick by putting the income threshold where the surcharge kicks in up to $100,000.

So in the sense that less government meddling is a good thing, then this is an improvement. It will however push more people out of private and back to the crumbling public system where service is rationed out to those who can wait and hang on for months on end.

The problem with Rudd is that he is trying to engineer a better carrot and a better stick, but the approach is still a blunt instrument - government. It is a one-size-fits-all approach to a complex industry which should be coordinated by individual needs.

The governemnt ought to remove all carrots and all sticks. Not just for private, but for public. If I want to opt out of the public system and keep the medicare levy (1.5% of my income), then that should be my choice.

Rudd also plans to continue the $5000 baby bonus. The most misguided and hare-brained intrusion of government into the family home and people's private lives in a long long while.