to take pressure off interest rates,

Treasurer Wayne Swan claimed yesterday

that inflicting more pain in

the budget would have stopped the

economy in its tracks.

''You shouldn't confuse tough

with stupid,'' Mr Swan told the

annual post-budget Press Club

lunch in Canberra.

''If we took some of the advice we

are being given to cut spending and

to rein-in demand we could slam

the economy into a wall,'' he said.

''We've got very uncertain international

environments, slowing

growth, and we've got higher domestic

inflation. Each of those things

mean that we have to strike a

balance, and the balance that we

have struck is we believe the right

one for the long-term health of the

country.''

But private sector economists

disagreed. Most who were

contacted yesterday said they

believed the budget cuts were too

mild to take pressure off interest

rates.

The ANZ Bank's chief economist

Saul Eslake said, ''The budget won't

add to upward pressure, but nor can

it really be said that it exerts

maximum downwards pressure.''

Chief equities economist at Commonwealth

Securities, Craig James,

said,''Interest rate hikes remain an

open question ... Over this year and

next, decisions made by the Government

in the budget will actually be

stimulating, not constraining the

economy.''

Chris Richardson of Access

Economics said that if the Treasurer

wanted to notably reduce the

ongoing inflation risk he should

have cut another $3 billion out of

spending in the coming financial

year. ''That is not an easy thing to

do, cutting spending does involve

pain,'' he conceded. ''But it is pain

that is going to be felt anyway, either

in mortgage rates or in the decisions

of this Government.''

Opposition Leader Brendan Nelson

and treasury spokesman Malcolm

Turnbull hammered the Government

over extra taxes on cars

and alcohol, and predictions that

134,000 people will become unemployed

over the next financial year.

They also criticised the decision

to means test the baby bonus,

saying it was designed to make a

political ''us and them'' point.

''If your household earns in the

six months after your baby [is born]

one dollar more than $75,000 then

you don't get any part, not even a

fraction, of the baby bonus,''

MrTurnbull said.

''I don't think people in those

circumstances regard themselves as

multimillionaires or 'the rich' but

that's where they've set it and it will

save very little money in the scheme

of the budget ... It's Labor playing

wedge politics, the politics of envy,

and that's the political decision, not

an economic one.''

Mr Rudd said he made no apology

for the means testing, saying a

couple earning $150,000 was ''probably

at the point at which it ceases

to be responsible for government to

continue to pay''.

''We say you've gotta draw the

line somewhere,'' Mr Rudd said.

''We think this is the right line and

we'll be indexing it into the future.''

Mr Swan said the Liberal Party

had lost its way on the economy and

had become the party of welfare for

millionaires.