COVER STORY: by Peter WestmoreNews Weekly
An election winning Budget?
, May 22, 2004
The power of incumbency has rarely been better demonstrated than in Peter Costello's ninth and quite conceivably last federal budget.
The massive handouts in the form of higher family tax benefits together with changes to the tax scales were unashamedly aimed "front and centre" (in Mr Costello's own words) at families, but also clearly at families in the seats the Coalition needs to win to secure another term.
Carefully targetted, and timed perfectly to coincide with the coming election, the substantial boosts to family take-home income will prove difficult for Labor to oppose, and even more difficult to match or beat.Quick run to polls
But even more crucially in political terms, the Budget measures give Prime Minister John Howard the very attractive option of a quick run to the polls in August rather than the widely accepted October poll day.
Given the growing problems in Iraq and possible rises in US interest rates, an early poll has its appeal, and on top of the first tranche of tax cuts which arrive on July 1, $600 per child cash bonuses will arrive soon after when family tax returns are completed.
In short, incumbency gives the Coalition significant advantages over the Opposition in terms of flexibility, and the ability to deliver actual cash-in-the-hand at the time of its own choosing in the electoral cycle.
Initial responses from the Labor Party were confused, to say the least. Asked whether Labor would support or oppose the tax cuts and changes to family benefits, Opposition Treasury spokesman, Simon Crean, gave contorted and contradictory answers.
It appears Labor will support the tax cut, but would reserve the right to legislate its own amendments, but still needed time to make up its mind, and even longer to form its own alternative tax package.
Mr Crean knew that his opposite number, Peter Costello, has been politically crafty and astute in his family-first budget.
Rather than giving across-the-board tax cuts which end up delivering only a little to everyone, the Treasurer has changed the tax scales to benefit people smack bang in the $55,000-$80,000 income brackets.
It is an extraordinarily bold statement because it actually argues that 80 per cent of income earners (those earning below that amount either on low wages, government handouts or self-funded retirees) either don't need or deserve tax relief from the Government.
The only incentive in the Budget for these groups are generous new incentives to put more into superannuation, but most will still not have the spare cash to do so. Mr Crean said as much when he complained on behalf of those who would receive nothing from the Budget.
However, he also knows any alternative wider package will have to take away from those who are now looking forward to tax cuts within a few months.
The Government has clearly decided that the swinging voter, and those most vulnerable to changes in interest rates and the pressures of bringing up families are the ones that are most (politically) needy.
The Government has given substantial boosts to family support, including welcome measures to enable the second income earner the option of taking up some part-time work without punitive reductions in family benefits.
The tax cuts are also to be given in two stages (hopefully not like Paul Keating's L-A-W tax cuts which were later reneged on) which further enforces the Coalition's argument for its re-election.Is Labor stuck?
The real kick (for the Labor Party that is) is in the timing. With only two months until the first tax cuts for middle to high income families will flow from July 1, Labor has to decide quickly whether to support the measures and to what degree.
This time, Labor is being wedged on tax and family welfare and will have to concoct a remarkable package to counter Mr Costello's budget proposals.
In the meantime, Mr Costello is becoming increasingly restless in the gruelling Treasurer's post and is likely to want a change after the next election.
A Coalition loss will give him little choice - Opposition Leader or a job back in Melbourne as a highly-paid barrister.
A Coalition win, on the other hand, will give him the more attractive option of taking a different role in the government and possibly a promotion.
On first glance, Mr Costello has given himself the best possible chance of the latter.