John Howard’s former chief of staff and close mate Grahame Morris was at his hyperbolic best last night on the Sky News program Australian Agenda, declaring that after watching 29 budgets, this one was the “grand daddy of them all”.

And
what caused the perfect storm of tax cuts, a strong surplus, high
employment, low inflation and plenty of election spending promises
fulfilled? “Good economic management”, declared Morris, before adding
that “there is no doubt that Peter Costello will be the next Prime
Minister”.

Labor spinner Bruce Hawker was understandably subdued
debating Morris last night, but he did correctly point out that
Costello only appears assured of being the next Liberal leader.

As
for the economic management, Peter Costello and John Howard should be
congratulated for causing China’s extraordinary boom and the subsequent
surge in commodity prices, just as Bob Hawke was a genius for breaking
the drought in 1983.

HSBC chief economist and former Keating
adviser John Edwards last night declared that Peter Costello was
“lucky” and had missed an opportunity for substantial reform. The
treasurer himself was maintaining the ruse that his was a low-taxing
regime, when the figures he quoted on The 7.30 Report conveniently ignored the GST, which is projected to bring in $35 billion-plus a year.

Costello also declared yesterday that “Our fiscal policy is thrashing
the pants of the Amricans and the British.” Maybe, but you need to
remember that the top rate of British tax is 40% and it kicks in at
$84,000. In the US, the top tax rate is only 35% and you have to be
earning $US315,000 to pay that. You’ve got a long way to go, Pete.

Larger
than expected tax cuts were the overwhelming theme of today’s papers
but this ignores the fact that Federal tax revenue is still projected to grow by 14.34% to a record $214.5 billion in the two years to 2005-06.

The
tax cuts are just giving back bracket creep from over the years to a
community which has also been lumped with a new tax in the GST. The
same goes for abolishing the super surcharge and the tariff on business
inputs – both were new and unpopular taxes introduced by the Howard
Government shortly after coming to office.

SMH economics commentator Ross Gittins seemed most unimpressed on The 7.30 Reportand his column in The SMH today followed a similar theme: This
budget will go down well enough – but that’s because budgets that put
popularity ahead of responsibility always do. Until the wheels fall
off. Then it’s all tears and recriminations.”

Sky
News did a lock-up whip around of four leading political commentators
including Peter Hartcher, Laura Tingle, Dennis Shanahan and Michelle
Grattan. All seemed quite impressed, as did Kerry O’Brien and even Tony
Jones on Lateline.

In political terms, it is hard to
remember a better reaction to a budget since Paul Keating’s effort to
bring home the bacon in 1988. Surprise, surprise, that was his attempt
to launch himself at the Lodge.

The Age’sShaun Carney,
who wrote a book on Costello, observed today that the Treasurer
appeared unburdened by the knowledge this would be his last budget:
“The fact that this whole question of transition is now out in the open
appears to have taken a great weight off Costello’s shoulders, and that
sense of relief is already evident in his demeanour.”

Whilst $22
billion in tax cuts was always going to be applauded, even the welfare
reforms impressed the political commentariat. For instance, The Age’s national editor Michael Gordon
described it as “a generally well-balanced response to the combination
of record low unemployment and record numbers on disability and
sole-parent pensions.”

The Courier Mail’sCraig Johnstone
was equally effusive, opening his commentary piece as follows: “Who
said federal Budgets don’t bother with the big picture any more? Last
night’s effort heralds nothing less than a pitched struggle to shape
the nation’s destiny. If all goes according to plan, Treasurer Peter
Costello may well succeed in having history judge his (likely) last
Budget as the one that finally got serious about easing the burden on
future generations of Australians.”

One line that Costello won’t like to encourage is that he’s doing so well, there’s no need to change anything. The Australian’s
Matt Price had one of the best colour pieces today and he flirted with
that very notion: “Armed with multi-billion-dollar carrots and more
than a few pointy sticks, Costello appeared to be having the time of
his life yesterday. At risk of offending Costello’s Fiat Bambino-load
of supporters, he seemed fit and content and capable of delivering at
least four or five further budgets.”

The Australian’s economics editor Alan Wood
is the hardest to please advocate of tough economic reform. Whilst
Costello’s first budget was a reasonable effort, the only budget he
really ever strongly endorsed was Jeff Kennett’s 10 per cent cuts
across the board in May 1993. Today he offered qualified support but
called for the government to do more: “It is a budget of wasted
opportunities for more fundamental reform. It is the budget of a
government whose central political philosophy is to encourage a role
for politicians by creating a huge tax and expenditure churn, with
taxes recycled in middle-class welfare. It is a budget that doesn’t
suggest a willingness to tackle bold reform”.

However, Woodie
still declared “the Treasurer is right to claim an impressive economic
record”, so if that was the worst of it from The Australian, Costello should be smiling like a Cheshire cat this morning.

Terry McCrann couldn’t be more gushing in his praise in the Herald Sun.
“The first of Peter Costello’s double digit Budgets is his crowning –
ambition chilling – glory. It is easily the best budget we’ve had in
30 or so years. It scores a rare, unique, quadrella of sustainable
stabilising surpluses, serious semi-reforming tax cuts, sensible
spending and structural reform to fund public sector superannuation.”

The more serious economic wonks at The Financial Review are less
easily impressed. Laura Tingle asks whethere this is the ideal time for
an ambitious Treasurer to be delivering this sort of pre-election-sized
largesse. “Will anybody thank him for it? Probably not.” And Trevor
Sykes accuses the Treasurer of ignoring Australia’s booming resources
sector. “For an industry that was providing most of his largesse,
Costello was miserly towards the resource sector when handing out that
loaves and fishes last night.”

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Peter Fray
Editor-in-chief of Crikey
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