Battlers look to tomorrow instead of spending

FROM the day he announced his economic stimulus package, Kevin Rudd has been urging families to spend, spend, spend. Yesterday, as the money began flowing into household bank accounts, the response to the Prime Minister from would-be recession busters was clear: Thanks but no thanks, we'd rather save.

Linda Petrlic shopping in Melbourne with children Montana, 5, Mikayla, 4, and Noah, 9 months. Picture: David Geraghty

FROM the day he announced his economic stimulus package, Kevin Rudd has been urging families to spend, spend, spend. Yesterday, as the money began flowing into household bank accounts, the response to the Prime Minister from would-be recession busters was clear: Thanks but no thanks, we'd rather save.

In the McMansion housing estate of Caroline Springs west of Melbourne, the Petrlic family of five is about to take receipt of $1000 for each child. Instead of splurging the $3000 bonus on the latest flat-screen TV or a tumble dryer, the Petrlics have taken the financially responsible decision to invest in their children's future.

"The money will be put aside for when the kids need it," explained Linda Petrlic as she unloaded groceries into her car with her nine-week-old son Noah and daughters Mikayla, 4, and Montana, 5.

"My husband and I were talking about this exact issue last night. We want to put the extra money in their progress saver accounts and let it grow."

In the battler hub of Blacktown in Sydney's west, a similar refrain was heard. Samantha Tripney is happy to be on the receiving end of Mr Rudd's Christmas largesse. But gratitude aside, the mother of three still thinks the Government's $10.4 billion stimulus package is reckless policy in uncertain times.

"I'm saving it for a rainy day," said Ms Tripney of her $3000 payment. "Why would you blow it? My television still works, it doesn't need upgrading.

"It's reckless to say go and spend without looking long term and to what families aren't going to be receiving next year. It just doesn't seem right."

The dilemma for the Government is acute. Families like the Petrlics and Tripneys are doing what many financial advisers would tell them to do in good times and bad.

But for a Government desperate to prop up the economy with consumer spending, it is the worst time for people to get smart with money.

The financial decisions of two families won't wreck Mr Rudd and Treasurer Wayne Swan's economic security package, but if they are representative of neighbourhood views, the Government has a problem.

Caroline Springs and parts of Blacktown fall into the federal electorates of Gorton and Chifley respectively. Together, they rank three and four nationally for electorates with recipients of Family Tax A - the vehicle for the family stimulus payments.

According to latest figures, 19,398 families are about to receive a payment in Chifley and 18,504 in Gorton.

Some financial experts yesterday endorsed the cautious approach of save-first families. The Tripneys have a combined annual income of $50,000, of which $15,000 disappears in rent and $10,000 on groceries. And the forecast is for worse times ahead.

Bruce Brammall, a senior financial adviser with Stantins Financial Services and author of Debt Man Walking, said it was prudent for struggling families to save now.

"There's a good reason they're handing this money out and it's not just because they want to prop retailers up for Christmas 2008," he said. "These packages are warnings that the economy is in for some trouble up ahead.

"As much as the Government wants you to spend that money to try to help the economy stave off recession, I don't think it's necessarily the best idea for people to spend the money."

Faced with the threat of rising unemployment, Mr Brammall said people should aim to have a cash surplus on hand. "Every suggestion is that employers will start large-scale job cuts next year, that unemployment will rise to 6.5 to 7 per cent through 2009 and possibly 2010.

"If you happen to be one of those people who loses their job ... having some savings there might help you to be able to keep the home or pay the rent."

The Petrlics are not the only family in Caroline Springs convinced of this wisdom. Mother-of-three Joane Calabretta said her payment would also be saved. "It's for my children so I am just going to put it in the bank for them to use in the future," shesaid.

Simone Azzopardi said the Rudd bonus for her children would be spent paying off bills, childcare fees and the remainder would go into the bank.

Additional reporting: Joe Kelly