Drunken
Liberal students singing club songs at the Holy Grail. God help us.
Budget nights ain’t what they used to be. The brightest point was Kevin
Rudd’s tie (a rather snazzy pink and purple job, since you asking,
although I question the quality of the fabric).

It’s the morning
after the night before, so what’s the Budget wrap? Well – surprise,
surprise – it either goes too far or doesn’t go far enough. Heather
Ridout of the Australian Industry Group has given it a tick. Pete
Hendy, from ACCI, the provisional wing of the business community, says
there should have been more tax cuts. ACOSS, on the other hand, says
the tax cuts are slanted towards higher income earners and warns that
some of the poorest Australians will be worse off under the welfare to
work package.

What’s being ignored are the forecasts for fine
weather on which the Budget is based. Interest groups naturally
scramble to secure dollars for their cause, but what about the general
economics? Last year’s Budget pumped a massive amount of spending into
the economy, and so did John Howard’s various election commitments.
Last night there was more … interest rate increases, anyone?

Once
again, the Government has shied away from fundamental reform or a basic
re-examination of taxation and spending priorities, while preaching
responsibility. Ross Gittins puts it very nicely today in the Sydney Morning Herald:

This is a government suffering a very modern failing: it
can’t make itself save. Sure it has budget surpluses, but they’re a
fraction of what they could have been. It can sell off profitable
government businesses and put the proceeds in the bank, but it can’t
save much out of its regular income. And why should it? Because this
great surge in tax revenue is probably temporary. Most of it is the
effect of the world minerals boom on mining company profits, and such
booms tend not to last.

We all know if you adjust your standard
of living to fit a temporary lift in your income, pretty soon you’ll be
facing more unpleasant belt-tightening than you would if you’d been
more prudent.

Good economic management demands a willingness to
make unpopular decisions. Such decisions are usually made after
elections rather than before.

That’s what’s so disappointing about this budget…

The Age economics correspondent, Tim Colebatch, had this to say, too:

It would have done us more good had we seen fundamental tax
reform that lowered the top tax rate and paid for it by cutting out
loopholes, so more energy goes into productive work and less into
working out how to rort the tax system.

At some point, a future
Treasurer will have to tackle this. We now have a tax system that
creates instability by requiring taxpayers to subsidise the losses of
negatively geared speculators, while successful speculators pay only
half the tax on their winnings that everyone else pays on their
earnings from work. This has already profoundly changed Australia for
the worse, and next time the boom-bust cycle it invites could end in
recession. Anyone who thinks these tax breaks are better than lower tax
rates needs their economic head read.

We spend on
necessities. We also waste money spending to feel good. And in some sad
cases we spend to win friends. Politicians do that last one all the
time, but they disguise it as feel good spending our behalf. Indulgence
without guilt.

The plasma TV has become a symbol of our current
prosperity. They look good. Sleek, elegant, functional and modern. In
truth, they’re heavy, hard to hang, chew up power and the pictures get
burnt in. That makes it a perfect symbol of this Budget, too. You feel
modern and well off with a plasma, and that’s how the Government would
like us to feel. It’s how the Prime Minister and the Treasurer want the
great mass of middle Australia to be.

They’ve handed down the
sort of Budget you’d expect to see just before a poll at the very start
of the electoral cycle. Yes, it gives them room to move. If things go
wrong, if it looks as if the economy is overheating, they can screw the
lid down next year and, they hope, bounce back with a Budget full of
goodies in time for the next election.

But it’s still a Budget
that looks like a bid for popularity. Whose, of course, is the issue.
The Government wants it to benefit the Government as a whole – but the
lead-up to the Budget has been dominated by the question of who will be
the leader. That’s why this Budget goes for the feel-good factor –
token tax cuts, belt the bludgers and high sounding talk about the
future – rather than prudence and reform.

If this is Peter Costello’s bid for the top job, it’s looking increasingly like he’s already failed the leadership test.