Families will win enormous tax, superannuation and maternity benefits, delivering up to $117 a week in the biggest-spending budget ever, which the Treasurer, Peter Costello, hopes will encourage them to have more children.
"If you can have children it's a good thing to do - you should have one for the father, one for the mother and one for the country, if you want to fix the ageing demographic," Mr Costello said last night.
The centrepiece of the budget is John Howard's long-awaited "barbecue stopper" work and family measures. They overhaul tax, superannuation and family assistance at a cost of $37 billion over five years.
The budget offers massive family and tax benefits skewed heavily towards households with children, and is funded by record tax revenue driven by company tax windfalls.
A single person with no children earning $55,000 a year will get a $7 weekly tax cut and a dual-income family with three children on an annual income of $55,000 will get $104 more a week.
Mr Costello said the focus of the budget was reform and that it was especially aimed at making it easier for mothers wanting to return to the workforce. However, he admitted that the budget was designed partly with the election in mind.
"It is not a plan to lose the election - I don't think you can trust Mark Latham with the economy," he said.
Low-income earners benefit most from the overhaul of family tax payments and middle- and high-income earners get the biggest tax cuts.
Instead of cutting in at an annual income of $62,501, the top tax rate of 47 per cent will start at $70,000 from July 1, rising to $80,000 on July 1 next year. The income thresholds for the next-highest rate of 42 per cent have also been lifted.
"People on middle incomes should not face the top rate of income tax," Mr Costello said.
Older people are targeted in the budget with improved incentives to save for retirement, including increasing the Government's payment from $1000 to $1500 for a $1000 personal contribution and reducing the high-income earners' superannuation surcharge rate, now 14.5 per cent, progressively to 12.5 per cent in 2004-05, 10 per cent in 2005-06 and 7.5 per cent in 2006-07.
"We must start preparing for the ageing of the population," Mr Costello said. "Over the next 40 years the number of Australians of working age will grow slightly. The number of Australians over 65 will more than double."
The family measures include:
A $600 increase in the level of payment per child under family tax benefit part A. Relaxing the income test for this benefit.
A change in the income test for the single-income family benefit (family tax benefit B). A new maternity payment of $3000 for working and stay-at-home mothers that matches Labor's baby payment but increases to $5000 at a faster rate.
An increase of 40,000 child care places outside school hours and an extra 4000 family day care places.
The family benefits were "the largest package of measures ever to assist families who are juggling work and child-rearing", Mr Costello said.
As well as the tax, family and superannuation benefits, the budget remains in surplus, and $6.4 billion will be spent in 2004-05 on a range of politically sensitive measures.
This includes an additional $461 million over five years to support carers and $2.2 billion over five years for the aged-care sector, with increases for nursing home places as well as higher security measures for airports, more funding for the intelligence services and border protection.
In a possible sign that Australia could be winding down its troop deployment in Iraq next year, the budget reveals funding of $124.6 million for 2004-0,5 which drops off to $3 million in 2005-06.
The shadow treasurer, Simon Crean, said Labor would pass the budget but would seek to amend it to suit its own tax and family policies.
Mr Crean said the budget was a wasted opportunity, especially for low-paid Australians who deserved tax relief. "John Howard has left his battlers behind and dashed their expectations," he said.