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The toughest budget since ’97

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Courageous. Controversial. Challenging. This is the toughest budget since 1997, a high-wire gamble that will either establish the government’s economic credentials – or alienate large tracts of middle Australia.

It will alienate scores of interest groups – from motorists to the welfare lobby – and sets the scene for a ding-dong political battle over ‘trust’.

Let’s be clear here. The Coalition has broken its pre-election promise not to introduce a new tax – and that is likely to dog the Prime Minister through to the next poll, due in two years time.

The PM and Treasurer are gambling that ordinary voters will back their short-term-pain-for-long-term-gain mantra, that lies at the heart of last night’s statement.

But there is a risk – a big risk – that millions of voters will react adversely because of the impact of higher costs in health, education and fuel.

Freezing or cutting welfare payments and pensions might win applause from economists, focused on bringing Commonwealth finances into the black.

But the risk for Abbott is that he will be portrayed as an uncaring Prime Minister who has gone too far in tampering with the ethos of a fair go.

Tony Abbott
Abbott risks being portrayed as an uncaring Prime Minister

Sensibly, the government has resisted some of the more extreme reforms put forward by the Commission of Audit. The privatisation program, for instance, is fairly modest.

But the budget changes will impact on the ability of millions of families to deal with their weekly bills.

Restoring fuel indexation, for instance, will add to the costs of running the family car. The so-called Howard Battlers, those ‘swinging’ voters who pack an electoral punch in marginal seats, won’t be happy.

The parliamentary tussle will be a ripper. The budget bills will have to navigate an uncooperative and surly Senate. The initial response from the Opposition, the Greens and Clive Palmer suggest the government will struggle to get its Budget through unscathed.

The risk for Abbott is that he will be portrayed as an uncaring Prime Minister who has gone too far

Mr Abbott will have to embrace the diplomatic skills of Henry Kissinger – something he has yet to demonstrate he is capable of.

Equally, the challenge for Bill Shorten as Opposition leader is significant. Labor will have to avoid being seen as opportunistic if it wants to be credible.

Still, the government has given Labor plenty to work with.

The prospect of a rise in the GST is real with the Treasurer placing the onus on the States to push for a boost in the consumption tax.

After savaging Julia Gillard for breaking her ‘no carbon tax’ 2010 election promise, the government has abandoned its own ‘no new taxes’ promise with a ‘temporary’ 2 per cent impost on high-income earners.

Incentive payments for apprentices – worth $900 million over four years – will be scrapped with the government calling on the States to do the heavy lifting.

hockey-bug-th
Hockey received standing ovations from the Liberal Party faithful.

Budget changes will impact on the ability of millions of families to deal with their weekly bills.

While Tony Abbott and Joe Hockey were getting standing ovations from the Liberal Party faithful in Parliament House last night, opposition from many quarters was growing.

The ACTU’s Ged Kearney was flagging a ‘maintain the rage’ campaign and the prospect of a big spending advertising campaign.

One of the few ‘winners’ on the night, oddly enough, was the ABC which was spared the savage funding cuts that many feared.

The Budget might have been good news for Aunty then, but it will leave millions of ordinary punters worse off.

The government’s post-budget sale’s job will have to be far better than its pre-budget positioning. Otherwise Messrs Abbott and Hockey could be in real strife.

Steve Lewis has 22 years experience in reporting Canberra politics, and is a senior advisor with Newgate Communications. He is also co-author of the best-selling political novel, The Marmalade Files, and the forthcoming The Mandarin Code.

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