The Sydney Morning Herald etc reported yesterday that the future of the Rudd Government’s pending $31 billion tax-cut injection into the bubbling Australian economy seems certain enough:

With Labor determined to reduce spending and increase private savings in its war against inflation, the Prime Minister, Kevin Rudd, said the tax cuts would be contained in the budget in May as promised …

Which is not, we might be safe in guessing, the way the Reserve Bank would like it. Perhaps it even runs against the grain for avowed “fiscal conservative” Prime Minister Rudd, who, had he known then what he knows now of Australia’s problem with inflation and the Reserve’s determination to deal with it come hell or high unemployment, might have wished that promise of the 2007 campaign’s first week into memory rather than legislation.

But how can he? How can he even contemplate the in-between possibility of passing on the cut into unspendable superannuation? The politics are forbidding and made even trickier by the lingering ghostly presence of Paul Keating. Much as Labor might like to escape its past, it would be difficult to deflect a second round of pledged tax cuts before they became L.A.W. Once is happenstance, twice would start to look like unelectablility, whatever it might do for one’s reputation for fiscal caution.

Peter Fray

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