Federal Politics

PM turns away from a taxing distraction

Julia Gillard has better things to talk about than an undecided future.

Julia Gillard set her own test for this budget when she addressed caucus on Monday. In what could be construed as a concession to her foe, Gillard told her charges that Tony Abbott had managed to narrow the political agenda over the autumn break to asylum seekers and the carbon tax.

The budget, she said, was a chance to broaden that agenda to other areas and the government's turf.

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She cited jobs, training, welfare and mental health, the key themes of last night's document.

Gillard herself helped overshadow her own budget message and keep the agenda narrow by announcing at the weekend the ''Malaysian solution''. This ensured that asylum seekers and the budget were reported in equal measure over the past few days.

Today, Abbott and his shadow treasurer, Joe Hockey, will attempt to skew the debate back towards the carbon tax by hammering their claim of past weeks that this budget will have a hole in its heart because it does not take into account effects of the carbon scheme.

''The mining tax is in the budget, the carbon tax is not,'' Hockey said yesterday, noting that both measures are slated to begin on July 1 next year.


Such bunkum.

The mining tax has been finalised, costed, negotiated and details released. The carbon tax has not. Far from it.

Hockey and Abbott are actually arguing that an uncosted, half-baked policy be included in the federal budget.

When the details are finished and announced, probably in July, there will be a statement released on its economic impacts, such as forecast effects on revenue and inflation. These will be further incorporated into the midyear economic fiscal outlook, which is the budget update to be released in about six months. It is not as though it can be hidden.

The government says the carbon scheme will be revenue neutral and Wayne Swan has said publicly it will not threaten the return to a forecast surplus of $3.5 billion in 2012-13.

In other words, from a revenue perspective, it will appear in the budget update as not much more than a rather large line item. All the money it raises will be spent on compensation.

Like its ETS predecessor, the carbon price is likely to have an impact on inflation of about 1 percentage point. These are the sorts of fluctuations that you would see in economic parameters between a budget and the midyear update without a carbon tax.

In fact, most numbers released yesterday - growth, surplus and revenue forecasts - will be different come the midyear update because the economic circumstances will be a bit different.

Abbott will not argue much with the welfare reforms or the mental health package announced last night. He has called for similar measures in both areas. He and Hockey will attack the deficit blowouts for this financial year and next, the increase in net debt, accuse the government of spending too much, and then be keen to talk about boats and the carbon tax.

Abbott and Hockey are being disingenuous by bleating about the carbon tax not being in the budget, but it is in their interest to keep the debate centred on what they regard as negative turf for the government.

Gillard's challenge today is, as she said, to broaden the debate.

It will be difficult because yesterday's budget contained few surprises. It was austere and unspectacular, as it needed to be, and even reasonably mean.

For the first time in a long time, there were real and palpable spending cuts and savings, some of which are likely to cause displeasure. But there won't be widespread anger from rent seekers or battlers.

As one of the few beneficiaries, the mental health lobby should finally be happy, and industry bodies such as the Australian Industry Group, which called for many of the training measures in the budget, will be pleased.

In reality, the government has delivered a pretty good budget.

But soon it will be back to dealing with the unsolved problems at hand.

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