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Along with the large number of special interest groups and community sectors the government has infuriated with its tough budget, it's also set itself on a trajectory for an unholy row with one group it should reasonably have expected to stay onside.

That's former defence personnel on service pensions who, like all other Centrelink pensioners, will have the rate of increase of their payments reduced from September 2017.

Well that's the plan announced on budget night and given the government's numerous woes in getting its budget through the Senate, this may never happen.

Here's how it works.

Twice a year each, in March and September, all social security pensions - including the age pension, service pension, disability support pension and carer payment - are increased in line with a complex formula.

According to a useful explanation by the federal parliamentary library, that's indexed to the higher of the consumer price index (CPI) or the pensioner and beneficiary living cost index (PBLCI), benchmarked against a set percentage of male total average weekly earnings (MTAWE). That means it's compared against the latest figure for MTAWE and if lower, adjusted upwards. Got it?

Pensions have been indexed twice yearly since Malcolm Fraser was PM, initially according to CPI, but linked to MTAWE under Bob Hawke and fiddled with by every succeeding government. The current regime dates back to Kevin Rudd, version one.

CPI is relatively easily understood as it's calculated on price changes of a basket of common household goods, typical of what the average punter buys at Coles or Woolworths each week.

Wages have generally increased faster than inflation, now around three per cent, making the uplift according to PBLCI and MTAWE a bit higher.

What this means is more money for pensioners to live on as prices rise. Successive governments have gleefully announcing these routine increases as examples of their magnanimity. In March Veterans Affairs Minister Michael Ronaldson announced more than 272,000 veterans, their partners, war widows and widowers would receive increased pensions.

For a single pensioner that meant $842.80 a fortnight, an increase of $15.70, and for a couple $1270.60 a fortnight, an increase of $23.80.

Indexing just by CPI would mean slightly smaller increases - maybe only a few dollars less per week but still a big deal for those who rely on these payments to survive.

For the government, small sums paid regularly to a large number of people forever add up to seriously big money. This budget measure would save around $450 million over five years and billions in the long run - from the government's viewpoint a useful contribution to reducing ever rising welfare costs.

The rate of indexation changes from September 2017. It would have happened sooner had the government not promised during the election campaign there would be no changes to pensions during this term of government.

Post-budget night, one prominent economic commentator noted that he could scarcely believe the government was picking a fight with the grey lobby.

In all the shenanigans over the new Senate and repeal of the carbon tax, this issue hasn't yet resonated - although Labor has nibbled away at the government which has made itself a large and inviting target.

That's because the coalition in opposition declared loudly and repeatedly that CPI was insufficient to index payments to former defence personnel.

Here's Tony Abbott at the 2012 RSL Conference:

"If it's inadequate just to lift Centrelink pensions by the consumer price index, it's even less fair to apply solely that index to those who have risked their lives for our country. Loyalty goes both ways."

The occasion was his announcement that a future coalition government would lift indexation of payments from two old defence superannuation schemes - Defence Forces Retirement Benefit (DFRB) and Defence Force Retirement and Death Benefit (DFRDB) - from CPI to the higher of CPI, PBLCI and MTAWE.

This had been long sought by retired defence personnel and their lobby groups, but repeatedly rejected by former Labor and coalition governments.

Courting the veteran vote, the coalition jumped on board and even Labor belatedly proposed a similar but less generous scheme. The new coalition government made good on its election promise, speedily passing necessary legislation and giving those receiving these payments what they'd demanded.

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