THE Rudd Government has slashed the retirement hopes of millions of workers by demanding they toil harder and for longer.

The Budget delivered by Treasurer Wayne Swan revealed that the pension age for all will be increased from 65 to 67, the first major change for men in 100 years.

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The increases in six-monthly adjustments each year will be completed by 2023, and will dramatically alter how welfare is paid in this country by switching priorities from families to the elderly.

Special section: Federal Budget 2009

Only workers now over 50 can expect to knock off at 65, the age set for men since 1909.

The Government insists the increase is needed because the aged demographic is growing while the proportion of the population supporting them with their taxes is shrinking.

Mr Swan said Australians had to do their bit, and the better-off would have to do a bit more.

"That's not terribly popular from my experience in the community," Mr Swan said.

"But I believe putting those settings in place will set this country up for the future, precisely at a time that we are facing the biggest (economic) challenges for 75 years."

Current pensioners will benefit from a $32.49 weekly rise in the single rate, bringing it to about two-thirds the total for couples. The couples' rate will rise by $10.14 a week.

Money for the rises came from cutbacks to superannuation concessions, lower than expected future rises in the Family Tax Benefit, means testing of health insurance rebates, and a tightening of the income test on the pension.

Family Tax Benefit cuts

Under major changes and cuts to family benfits, from July this year low income families earning less than $42,000 a year who get family tax benfit A will lose $18 a year - for each child aged under 12, and $26 a year for each child aged 13-15-years-old.

Wealthy families earning more than $112,000 a year will lose on average $16 a week per child - $832 a year - for the next three years, as the Government freezes the upper income level at which families can claim FTB-A.

Families with a stay-at-home parent claiming family tax benefit B and families claiming the baby bonus will also be hit, with the income test on both payments frozen at $150,000 for three years.

The changes to both family tax benefits will save the Government $2.4 billion over four years.

From July 1 2010 the Government will introduce a three-tier system, so that higher income earners receive less "carrot" and more "stick" to be insured.

Singles earning more than $75,000 and families earning more than $150,000 will receive only a 20 per cent private health insurance rebate, down from the current 30 per cent.

Health insurance premiums rise

As a result health insurance premiums will rise $130 a year for singles and $260 a year for families.

In tier two, singles earning more than $90,000 a year and families earning more than $180,000 will get only a 10 per cent rebate, increasing their health insurance costs by $520 a year for families and $260 a year for singles.

In tier three, singles earning more than $120,000 a year and families earning more than $240,000 will lose their 30 per cent rebate entirely, costing families $780 a year and singles $390.



The major pledge of the Budget was to protect jobs from the recession by launching a national public works program - and Sydney has been snubbed.

The program covers roads, rail and ports, education, and health and hospitals, and is aimed at supporting 15,000 jobs.

But of the $14.45 billion to be spent, just $2.9 billion will be in NSW. The proposed $9 billion West Metro project will get just $91 million for preparation.

NSW infrastructure boost

However, Napean Hospital will get $100 million, the Hunter Expressway will get $1.45 billion and the Kempsey Bypass $618 million.

The 2009-10 Budget will hit a $57.6 billion shortfall and the economy will go backwards by 1.5 per cent, although it is projected to pick up quickly inn 2010-11.

Treasurer Swan defended the Government strategy of two stimulus packages in December and febnruary, followed by the big capital works spending in the Budget.

He said last night the economic slowdown would have been four times as bad without the stimulus.

"Without our efforts to stimulate the economy, unemployment would reach double digits and up to 210,000 more jobs would have been lost," he said.

"The 8.5 per cent peak in unemployment would have been 10 per cent if we did what Malcolm Turnbull and the Liberals are suggesting : just to sit, and to wait, and to see."

Find our full Budget '09 coverage here

Originally published as Swan Budget cuts welfare, slashes hopes