This is the time of year when the fawning pre-Budget profiles of the Treasurer start to appear – and who can beat a brown-noser with the skill and subtlety of Glenn Milne. His emetic efforts in the News Limited Sundays were gems of the genre.
Milne was very right on one point, though. “Costello, right now, is nowhere near the Government’s major points of vulnerability: the AWB inquiry and industrial relations reform. Both Howard and his favourite, Alexander Downer, are vulnerable on AWB…”
If the Prime Minister was to fall under a bus – or down a Cole hole – his loyal deputy would be ready to serve. But just how able is he?
Milne praised the Treasurer’s economic record – unemployment, interest rates and this fascinating fact:
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In the coming weeks running down to the Budget, the Commonwealth under Costello’s watch is expected to finally pay off the $96 billion in government debt inherited from Labor at the time of Howard’s election in 1996.
It will be the first time since 1913 that government debt will be net positive – 1913, when the Australian Government first went to London’s bond market to fund the nascent Royal Australian Navy…
It sounds impressive – but is it? How much of this has happened on Costello’s watch, as opposed to happening thanks to Costello’s deeds. The economic good times began under Labor in the early 1990s. And even that debt repayment doesn’t seem that significant when you remember that we are being taxed more. If a mate paid off their mortgage thanks to mummy and daddy and then boasted of their hard work, we wouldn’t view that kindly.
The tax and welfare churn continues – and looks like continuing as Costello finalises the Budget. The Fairfax broadsheets today carry details of the Hendy/Warburton tax paper:
Commissioned by the Treasurer, Peter Costello, it suggests any change to the top marginal rate in next month’s budget should be modest, with most relief given by lifting the thresholds at which higher tax rates kick in…
It is understood they conclude that the top marginal rate – which is 48.5 per cent when the Medicare levy is added – is just 1.8 percentage points above the average of developed economies. This is a much narrower gap than the Government’s critics have asserted…
The Canberra Times poses two tests for real tax reform today:
One goal is to get the economy working more efficiently. Advocates of a cut to the top tax rates say high-income earners will work longer or harder if their taxes are lowered. Yet the evidence from the Melbourne Institute and overseas researchers suggests that the people who would respond most strongly to a cut in their effective tax rates are not executives, but mothers on welfare and family payments who face effective marginal tax rates of more than 60 per cent.
Another goal for tax reform is to make the system simpler and fairer. This means that whatever form it takes, and wherever you get it from, income should be taxed in the same way. The greatest source of unfairness and complexity in our tax system is the loopholes and shelters that have accumulated over the years.
The Fairfax reports suggest all we can expect in the Budget is fiddling with thresholds. Once again, Peter Costello looks like the great tinkerer rather than the great reformer. And even that might be generous.
This is seen as John Howard’s Government. He has ownership of its policy claims. Costello has little in the way of personal policy initiatives – let alone achievements – he can point to.
Even though he’s a just heartbeat away from the top job and about to deliver a record eleventh Budget, all we really know about Peter Costello is that he wants to be prime minister. If his wish comes true – for whatever reason – it seems he will stay in the shadow of John Howard.