 Future vision ... Treasurer Peter Costello`s free-spending Budget last night contained as much policy as it did fiscal management / Gary Ramage |
- Budget sells Costello`s political vision
- Warns against `risk of losing all we`ve gained`
- Labor says Budget `fails the future test`
WITH a post-election eye to The Lodge, Peter Costello has kick-started the Coalition`s election campaign with a big-spending Budget that delivers a $31 billion tax cut to middle Australia and a radical overhaul of the universities to trump Kevin Rudd`s "education revolution".
Behind in the polls, the Government has framed the Budget to lock in its economic credentials while also enhancing Mr Costello`s claim to take over from John Howard - if the Coalition wins a fifth term in the election expected later this year.
Multimedia: Budget 2007 at a glance
Seeking to halt Labor`s surge in popularity, the Treasurer unveiled a $36 billion spending spree to address looming electoral problems, including a one-off $500 bonus for pensioners, $378 million to assist mainly elderly people with chronic dental problems, and childcare relief.
The Budget - whose coffers have been swollen by a resources boom riding Indian and Chinese demand - also included a bigger-than-expected $22 billion road and rail infrastructure package and a $1.1 billion one-off superannuation bonus for low-income workers.
Delivering his 12th and most important Budget, Mr Costello vowed it would build future economic capacity as he staked his leadership credentials on reviving the Coalition`s political fortunes with an "investing for the future" Budget.
Mr Costello offered voters a taste of his vision to build a world-class university sector, announcing a $5 billion Higher Education Endowment Fund.
Based on the same principles as the Future Fund, the university scheme will grow with further budget injections and use its investment earnings to fund new buildings on campus and boost Australia`s research efforts.
"This is the greatest ever education endowment and it will set Australia up forever," Mr Costello said.
After being criticised for delivering cuts skewed to the rich in recent budgets, this year`s reforms are slanted towards low- and middle-income workers.
They are also staggered over the course of the Budget`s forward estimates, taking the pressure off inflation and cutting the risk of another damaging election-year interest rate rise.
The tax cuts will help the Coalition win back the so-called Howard battlers who have underpinned the Government`s four election victories but have been unnerved by the Work Choices reforms.
Workers on average wages will receive a tax cut of about $16 a week, cutting in from July 1 - just months from the election.
But higher-income workers - who have more discretionary cash to spend - will have to wait another 12 months, until July 1 next year, to receive the full effect of the budget tax cuts.
The 30 per cent tax rate will also be increased to a threshold of $30,000 - up from $25,000 - while the low-income offset will rise from $600 to $750 and will begin to phase out from $30,000.
Labor last night promised to support the tax cuts but said the Government had squandered the opportunity to use a "once in a generation $300 billion mining boom to lift productivity".
"This is a clever election-year Budget - but it is a Budget that fails the future test," Opposition Treasury spokesman Wayne Swan said.
"This Budget does very little to build Australia`s future productivity. Instead, it relies on the continuation of the mining boom for our future economic prosperity."
Announcing the biggest structural change to higher education in years, the Treasurer said the endowment fund was "bold and innovative", but admitted the overall reform package would allow the universities to increase the number of full-fee-paying courses.
Moving Australia closer to a US style of privately funded institutions, the Government will also encourage rich people to provide endowments to the universities through a new system of tax deductions.
The university scheme builds on the Government`s Future Fund, which has been built up in recent years to offset the mounting future costs of public servant superannuation liabilities.
But the Government has also sought to counter Mr Rudd`s education "revolution" by announcing $3.5 billion in immediate new funding for the universites, schools and technical colleges.
In a blunt message to voters not to gamble with Labor`s leadership inexperience, Mr Costello claimed the Budget had been framed to "lock in" the progress made in slashing public debt since the Coalition came to power in 1996.
"We don`t want to lose all that we have achieved over the last 10 years. We want to lock in the gains and move forward," he told Parliament last night.
"This is a Budget to build the capacity of the economy."
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