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$5bn apology for the carbon soot

Labor is trying to buy back its base the same way Howard did in 2001.

John Howard mastered the art of throwing money at people who were angry with his government.

There was no finer example than the 2001 ''golden oldies'' budget in which Howard and Peter Costello delivered a $1.5 billion surplus while ladling out cash to soothe cost-of-living anger caused by the introduction of the GST.

Elderly Australians were the angriest and that year they received $2.3 billion in tax cuts and bonuses, including a $300 cash handout that went to 2.2 million people just because they were elderly.

This budget is not dissimilar. It is about Labor trying to buy back its base, which left it primarily because of the carbon price.

The document is essentially a $5 billion apology. After sidelining Craig Thomson and Peter Slipper 10 days ago, Julia Gillard had one last box to tick - to let the mob know she was hearing their anguish over the cost of living, an anguish driven by the impending carbon tax.

Before this budget, low- and middle-income earners were already in line for $9 billion in tax cuts and $6 billion in increased pensions and other benefits, designed directly as compensation for the cost of living impact of the carbon price.


Now, the same low- and middle-income earners will also be in line for another $5 billion in cost-of-living handouts, ranging from the ''school kids bonus'', the $1.1 billion ''Supplementary Allowance'' and the $1.8 billion increase to the family tax benefit A payment.

These last two measures, are funded by the surprise decision to axe the 1 percentage point cut to company tax, which the mining tax was supposed to fund. Struggling businesses will receive a concession prize via the $700 million measure allowing them to claim current losses against past profits.

This will be attacked as a broken promise and a breach of faith with business. The whole basis of the mining tax was to spread the benefits of the boom to the non-mining sector through corporate tax relief.

But the legislation was never going to pass because the Greens and the Liberals were opposed and big business made little effort to exert pressure.

Wayne Swan was pointed yesterday when he said he remained mindful of the need to cut company tax rates but business had to become proactive about supporting ways to pay for it and mustering political support.

The symbolism of redirecting billions that were supposed to go to the big end of town through company tax cuts, towards the battlers, is the budget's most symbolic element. It matches Swan's rhetoric of this budget being ''Labor to its bootstraps''.

It also wedges Tony Abbott, who has vowed to abolish the mining tax and everything it pays for, his very reason for opposing the company tax cuts. Will he now oppose the $2.9 billion in cost-of-living measures funded by the mining tax as well as the carry-back loss claims, a policy the opposition accused Labor just this week of stealing from it?

Probably. Last night, the Coalition stopped the government tabling legislation for the school kids bonus.

This budget should be commended for turning a $44 billion deficit into a surplus, albeit a slender one, all while kickstarting such social reforms as the aged care overhaul and the national disability insurance scheme, and all the while showering the disgruntled with cash.

The cuts are large but will not be broadly unpopular.

Defence, which has had its budget trimmed by $5.4 billion, has been ripe for the picking for years. Deferring aid targets for a year has saved $2.9 billion.

Howard's 2001 budget got him back into the game and he went on to win an election later that year.

Time will tell whether this budget can save Labor.

Certainly, the government will not die wondering.