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Swan's clever middle class bribe

Federal Treasurer Wayne Swan handed down his fifth federal budget last night.

Federal Treasurer Wayne Swan handed down his fifth federal budget last night. Photo: Penny Bradfield

Wayne Swan gets credit for a clever bribe.

As with John Howard, he has opted to boost middle-class welfare as a way of winning votes.

The blunt political tactic behind this budget is to frame a hand-out that should be harder to block in Parliament.

Instead of a one-off sugar hit, however, Swan is distributing largess for each year that Labor remains in power and the first instalment lands just before the (scheduled) date of the next election.

But this involves another broken promise, one that will resonate through the community as business complains loudly about the loss of its promised tax cut.

''Working families'' are the winners, as always, in this ''fair go'' budget.

The biggest loser is the public servant who loses his or her job, with as many as 1500 Canberra-based positions to go in the next financial year alone. This is going to have an inordinate impact on Canberra's economy, reminiscent of Howard's first term.

The intangible element in this budget is the impact on growth from the savings.

The Treasurer's pitch is that returning to surplus gives the Reserve Bank scope to reduce interest rates. However, a decision to cut rates would occur if the bank believed the economy was sluggish and needed encouragement.

While this sends a mixed message, selective cuts such as putting off future Defence spending should have minimum impact.

In a very short-sighted move, the amount of money allowed to be put into superannuation will be halved, from $50,000 this financial year to $25,000 from July 1.

Along with business leaders, the complaints today will come from those states and territories having their GST cut.

As a political strategy, giving up on the tax cuts for companies might make sense when you're bashing your head against a parliamentary wall.

The Greens form a brick in the wall, but you won't hear much about their efforts to stymie the flow of revenue from the mining tax.

Labor's rhetoric is focused on the Coalition for its threatened obstructionism. Tony Abbott was never going to support the company tax cuts despite Liberal philosophy because an incoming Coalition government is committed to rescinding the mining tax, which was to fund the reduction in the company tax rate.

Abandoning the company tax cut is a low blow to the business community, made to garner votes in the suburbs, not the boardrooms.

Today Swan has written his preferred headline - The Battlers' budget. Its mission is to share the proceeds of the mining boom more fairly with all Australians. ''This Labor government knows that for many Australians this feels like someone else's mining boom,'' he told Parliament.

The government's exceptionally poor poll ratings reflect Julia Gillard's broken promise on the carbon tax and Abbott's successful campaign to steer debate on that tax away from environmental gain to economic pain.

Every time Labor boasts about its compensation for the carbon tax, voters are reminded why they are getting the extra $10 a week - to cover the hike in the cost of living as large companies pass on the cost of the carbon tax to consumers.

The de facto compensation will now be more than doubled for some, with many families receiving an extra $600 a year in the new giveaway. Assuming, that is, the parliamentary strategy at the core of this turnaround works.

The return to surplus is a modern day miracle, defying the global trend - and hopefully will be sustainable.

Australians will not know for some time whether the overarching strategy of returning the budget to surplus works.

Despite the rhetoric, Swan has not delivered a surplus - he has projected one. Labor's wafer-thin promised surplus will not be achieved until the accounts are in for 2012-13.

It is true that Australia ''walks tall'' in comparison to the train wreck in Greece, but the danger for Australia is that Europe will slow our economy, despite the enormous revenue from the resources boom.

If that occurs, another round of creative accounting will be needed in the mid-year budget update to achieve a surplus because Gillard cannot afford another fail.

Read other opinions from Fairfax's political experts:

 

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