By Stephen Mayne

Peter Costello and John Howard shouldn’t be very happy with the newspaper reaction to their big spending budget yesterday. Not only have they been knocked off the front page of most papers by the mine rescue story, but the majority of commentators weren’t particularly impressed. Compared with last year’s high praise, this year the main cause for concern by the commentariat is the sheer scale of the spending.

“This is a gloriously irresponsible, amazingly profligate budget,” was how Alan Kohler opened his column today, although this does seem to overlook a projected record $14.8 billion surplus this year, followed by $10.8 billion in 2006-07. Increasing pressure on interest rates is the biggest downside for the government and Kohler believes “the budget has made another interest rate increase much more likely, if not inevitable”. Ouch.

The AFR’s economics editor Alan Mitchell agrees: “If the Reserve Bank sees the need for further rate rises, these will be rate rises that might have been avoided.” Sure, we’re still in surplus but the policy switch yesterday went from “mildly contractionary” to “slightly expansionary”.

Whilst Labor was claiming the government adopted its own policy at lower end of the tax scales, Mitchell still believes we need “a further major assault on the effective marginal tax rates paid by low-income earners.”

The Age’s economics editor Tim Colebatch has never been easy to please and he came out harder than most today, declaring 2006 the worst budget for their times since 1974 because it represented “John Howard vote-buying at full speed”.

Ross Gittins agreed that it looked like a pre-election budget in terms of the scale of the spending, but the targeting was about rewarding traditional coalition supporters – the well-off. His biggest criticism was “the lack of effort being put into education and skills training”.

Chanticleer also focused on supposed inequities, as the headline on the back of The AFR was “Budget unashamedly for the rich” – right on the paper’s demographic.

News Ltd’s Terry McCrann didn’t get the petrol excise relief he called for last week, but the budget was “as good” as 2005, which was decribed as the “best in 30 years”. So good, in fact, that McCrann reckons it guarantees Costello will deliver next year’s budget too because why would any Treasurer or PM quit during these amazingly good times.

Unlike The Age, The Australian splashed the budget under the headline “Manna from heaven”, but Paul Kelly believes Costello “should have been more ambitious”. The paper’s economics editor Alan Wood is normally tough on reckless spending, but his piece was headlined “Spree won’t push interest rates up”.

The Age’sStephen Bartholomeusz latched onto the super reforms as the “Next Big Thing” and seemed quite impressed, agreeing with the Treasurer on the scale of the changes by declaring them “truly radical” and approving the “cleverness”, mainly on the grounds of simplifying a hugely complex system.

The AFR’s Laura Tingle agreed, declaring “the superannuation changes are the most important reforms”.

All up, it could have been better but the Howard government will only suffer from this budget if the Reserve Bank comes straight out and lifts official interest rates – and that isn’t likely in the short term.

Peter Fray

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