Basically, the Government sees us plunging into a recession and they are desperately trying to keep up appearances that they have things under control. To do this, they need to stimulate the economy, which will generate more jobs, and bring us out of recession. This is Keynsian economics, which says that to get out of a recession, you should spend, spend spend, instead of saving, which only makes the recession last longer. Adolf Hitler (who, I will add, was an abomination, a genocidal despot) must have heard about this theory, because in the years after World War 1, when Germany was in a horrible economic situation, and then received a double blow with the Great Depression, used this 'spend' theory and proved it worked. Much of their infrastructure (that was not destroyed by World War 2) is still in use today. They got Germany out of recession by pumping money into major public works, like the Autobahns, and into 'tractor factories' which were actually making army tanks. So there is a historical example that this works. However, I think just giving money away to cretins who will spend it on plasma screen televisions and Four X and Nintendo Wiis is the wrong idea. They will just piss it up against a wall, and an opportunity for great infrastructure development would be squandered. In the late forties and early fifties, we built the Snowy River Hydroelectric System, which was firstly to create jobs (and bolster our population with a new workforce from Europe) and secondly to generate the electricity we would need in New South Wales and Victoria for future population growth. So we have proved that investment in infrastructure has worked in the past. Why now, when we have a need to build more infrastructure, like power stations, new suburbs, new water systems, and other essential services, is the government squandering an opportunity by just handing out free money to people on social security payments?
I believe the money would be better spent on infrastructure we need, where it would create jobs (so people would still get the money, unemployment would go down, and the whole 'cash flow' of the economy would still work) AND create building works, like road tunnels, housing developments, new hospitals, better schools, etc, without just giving it away. Giving it away doesn't help anyone. Why should someone receive extra money just because they recieve a Centrelink payment? I am on a low income, but not quite low enough for a Centrelink payment or a health care card, and I am not eligible. I certainly don't live the high life. Giving it away will not help society. Using it to kickstart the economy from the ground up -- employment -- would be a far better idea.
In personal finance cases, yes, pay off your debts. That should be the advice that the government is giving to people. However, I am biased and I did not vote for the Labor government, because I don't like their economic credentials. So I am not surprised that they are squandering a budget surplus it took the last government a decade to save, in an effort to stave off a recession that is about five or six years overdue. Telling people to spend it all is wildly irresponsible. Sure, it will stimulate the economy, but it will also cause problems when people in droves have to turn to Centrelink or already overstretched charity groups for help because they are facing bankruptcy and cannot meet their repayments. Only recently, Wayne Swan told people that if they were in difficulty, they should approach Centrelink. Centrelink was then inundated with people looking for help, most of whome were totally ineligible. Not only does this cause further frustration for desperate Australians, it also overwhelms the already overworked staff at Centrelink, who are trying to cope with more unemployed people.
Labor is doing what they know best. Spending is the only way they know how to fix the economy. Sooner or later we'll have a huge budget deficit and they won't have any more money to spend. You are right. Urging people to spend is not in their best interest. By all means, spend a little on Christmas, but don't live outside your means. Be conservative for your own sakes.