Will the Budget be a runaway success? Tax cuts all round and friendlier super tax treatment?

The Government should be careful with the rhetoric. The worst thing to do in marketing is to make claims about a product – and for there to be a big gap between the promise and the reality. The consumer simply won’t trust the next message you pitch.

A healthy surplus – and Budget largesse – combined with back-slapping and self congratulation creates the impression that the Government is swimming in money.

Sure, it might be a beautiful set of figures – but it’s going to grate with people who don’t see any of it ending up in their pockets. Or don’t think it will make a difference in their daily lives.

On Budget night Peter Costello was at pains to make it clear that personal taxpayers were getting a break thanks to the strong and steady stream of company taxation.

But people who don’t feel any better off – far removed from Canberra – won’t appreciate the details. Very few people plough through the Budget papers. Hence the strong reception to Kim Beazley’s attack on the Government’s “triple whammy” of higher interest rates, extreme industrial relations changes and petrol price increases.

And the Government knows this. Take Finance Minister Nick Minchin’s comments on petrol prices on Channel 10’s Meet the Press yesterday.

“What we have done is reduce the tax burden on ordinary Australians, increased the family allowances to help them pay for these price increases in petrol,” he said. “The average family on $40,000 a year is going to be $40 a week better off, not $10 a week better off as a result of this Budget.”

John Howard and Peter Costello used virtually every interview last week to insist the Budget’s $37 billion in income tax cuts is not inflationary – a sign of sensitivity to hip pocket issues.

Indeed, it could be argued that one of the reasons the Government is eschewing substantive tax reform is so it can trickle out small tax cuts every year in place of wage rises. Their effect is significantly less inflationary. But small tax cuts do nothing to ease the squeeze. They hoax the folks.

Take this year’s Budget. For all the hype, people earning between $40,000 and $60,000 will get around $510 a year under the cuts – $10 a week. That’s not enough to cover the recent mortgage rate rise, let alone make up for increased fuel costs.

John Howard and Peter Costello haven’t used Paul Keating hyperbole yet – but when looking at beautiful sets of figures beauty, as always, is in the eye of the beholder.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey

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