rich person knows that if you can’t win friends through charm or
kindness, you can always try to buy them. And that’s what Peter
Costello is trying to do in last night’s remarkable budget of $6.4
billion in tax cuts. With reductions in the top tax rates coupled,
finally, with a major overhaul of the tax brackets, the Treasurer is
trying to purchase the popularity to become Prime Minister. And let’s
face it, he needs all the help he can get.

Most of the money
will go to the wealthy in true Bush style, and this will help build the
Coalition’s support base of middle-class, “aspirational” voters ahead
of the next election. Seeing the rich have even more money to splash
around will give them that much more to aspire to.

For most
middle-income families, though, the tax cuts should just about cover
the interest rates that they elected the Howard Government to keep low.
Until all of that spending boosts inflation, of course, and the Reserve
Bank raises them again.

Last year’s instalment was acclaimed
with Keating’s phrase as the “budget that brought home the bacon” –
that would ease an ambitious Treasurer into the Lodge. But that didn’t
work out, so this year’s budget also brings home the pork. There’s more
money for defence, security, roads, and health. And if you want to know
just how generous the Treasurer is feeling, he’s even given the ABC an
extra $88.2 million. Richard Alston will be choking on his breakfast
cereal this morning.

It turns out a funny thing happens when
you increase taxes and slash spending for a decade. Suddenly, you
discover you have too much money. Some analysts might wish the
Government would invest wisely for the future by restoring some of the
money it slashed from education, or lessen the ever-widening gap
between rich and poor. But that’s too much to ask of the Howard
Government. So it’s probably better that the money be given back to the
electorate than pumped into more government advertising. Even another
$40m campaign isn’t going to make WorkChoices popular.

has also tactically sweetened the tax deal for superannuation payouts,
but even that’s not going to convince John Howard to retire. Not when
there’s such an electoral bounty on offer from all these tax cuts. The
Treasurer should get right back to work today planning his 12th, 13th
and 14th budgets.

Read more Chaser economic commentary here.

Peter Fray

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