Budget grab bag of spin

THERE is no denying that Treasurer Wayne Swan's first Budget is a Rudd Labor Budget.

It was delivered to the media in a cotton bag marked "MADE IN CHINA" and it was long on spin and short on substance. Forget the rhetoric about inflation being Public Enemy No. 1. It is a big-spending Budget, though there has been an attempt to disguise that fact by spreading some expensive promised programs over a few more years and claiming the reduced annual spending constitutes a "cut". Labor MPs will, however, be able to tell the True Believers that the Rudd Government is seriously into wealth redistribution - in line with Labor's antiquated policies. Some "working families" will get increased benefits at the expense of other "working families", and there is the definite stench of class warfare re-emerging from whichever dank corner of the nation it had been hiding. A good example of this is contained in two consecutive paragraphs from Swan's speech: "For too long, working families have watched the proceeds of the (resources) boom directed elsewhere, in the form of tax cuts skewed to those already doing very well. 'Tonight we tip the scales in favour of working families." "Working families", is of course the catchphrase Labor's image-makers lifted from the US, after road-testing it through numerous focus groups in Australia and finding it had a healthy resonance of the absolutely meaningless, just like an advertising jingle. Swan gives it the flogging of its life. To say he uses it ad nauseum is being too kind. In fact, Swan's "working families" will get the tax cuts in July that were promised to them last year by then treasurer Peter Costello, and those other "working families" who, according to Swan, are "already doing very well" will lose a little of the tax cut that Costello promised them. This is in line with the developing "narrative" of the Rudd Government, the so-called Robin Hood theme, steal from the rich to give to the poor. Which has about as much substance as Rudd's phoney "Anzac Day Dawn Service" narrative, the "I can't remember Scores nightclub" narrative and the "I was raised on the rear seat of a car" narrative. Soaking the rich in this instance involves raising the super-tax on luxury cars from 25 per cent to 33 per cent (though why anyone should be slugged by the Government if they manage to buy what they perceive to be a better, if more expensive product, except to appease those who hate seeing anyone enjoy the rewards of their achievements, is nothing short of the absolute classic in cloth-cap working class envy). Swan should have been reminded how "working families" prospered overall under the nearly 12 years of the former Howard government. Some figures from the Australian Tax Office might have helped him realise that, not only did the number of top-income earners increase between 1996-97 and 2005-06, but they paid more tax, they paid a greater proportion of all revenue and, further, the burden on those at the bottom of the income scale diminished commensurately. In the Howard government's first year in office, the top 5 per cent of tax earners paid an average net rate of 33 per cent, in their last full year in office, the same group paid an average tax rate of 38 per cent, for the simple reason that under progressive tax systems, the more you earn, the more you pay. Even with the cuts made to marginal tax rates, as people earned more money they were pushed into higher income brackets. Similarly, in the Howard government's first year, the top 5 per cent of income earners supplied 24.5 per cent of all tax revenue to the ATO from personal income tax, in the last year, the same group were paying 32.3 per cent of all revenue from personal income tax - for the same reason. Those being pushed into higher income tax brackets were paying more tax and bearing a greater burden of the total tax take. At the beginning of the same period, those in the bottom 5 per cent of income earners paid just 0.2 per cent of tax revenue and their average net tax rate was 4 per cent. At the end of the same period, they paid less - just 0.14 per cent of all tax revenue - and their average tax rate had fallen to 3.8 per cent. It is undeniable that the resources boom helped all "working families", with those at the bottom being lifted proportionately more than those "working families" at the top but the facts don't fit the Rudd Government's narrative. It is also undeniable that inflation - which the Reserve Bank probably attacked too late - remains the biggest threat to the nation's economic security and it is equally true that the Rudd Government's first Budget does nothing to crash tackle this threat. When things got a little heated under the previous government, 10,000 public servants were laid off in Canberra, causing the local economy to nosedive. Brutal, but it worked. What Swan has promised is to set up a series of new bodies which will do what every consumer already does - look for the cheapest prices at the grocery store and petrol pump. Despite the honeyed words, the reality is that "working families" will just have to work harder to stay on top under this Government.