Michael Pascoe writes:

What nonsense is the Federal Treasurer
playing at, warning that the billions rolling into government coffers could
suddenly disappear in extra expenses?

It looks far more political than economic.
Malcolm Turnbull has had very good year – much better I suspect than anyone
thought he would manage. The investment banker continues to apply the heat to
the Treasurer and has won every encounter, leaving Costello playing catch-up
despite all the Treasurer resources at his disposal.

With the 2005-06 surplus up $2.6 billion to $11.5 billion and surpluses of some $10 billion plus expected for
the next three years, Dollar Sweetie’s “watch the spending” warning looks more
like an attempt to stall for time than a genuine worry.

When Howard and Costello do sit down to run
their political numbers over the economic figures, odds are they will miss what
is needed and instead throw some cash at the loudest voices.

Where the tax cuts should go won’t win them
any votes and won’t immediately do much for the business lobby. The only thing
going for it is that Malcolm Turnbull won’t be able to argue very hard against
it either.

What I’m alluding to was buried in the
final paragraph of Alan Mitchell’s commentary in this morning’s AFR:

If money is to be splurged on yet more
non-election-year give-aways, it should be mainly directed at the bottom end of
the income scale, where it can make a real difference to labour force
participation.

No, it’s not sexy, it won’t please the
middle class voters who keep Howard in power – but it’s where the reform is
needed most and where the effective marginal tax rate is massive. If the
government is at all genuine about labor market reform and getting people into
work, that’s where the spend should go.

Bet it doesn’t.