THE impression of a newspaper artist last Wednesday may well reflect the Australian voters’ intention in the coming federal election, which could be held earlier than first anticipated.
The colourful cartoon which appeared in the Australian Financial Review shows Federal Opposition Leader Mark Latham being buried up to his neck at the foot of a tombstone with coins on his blonde-haired head and dollar notes scattered on the ground nearby.
A middle-aged man beside him is clutching some money in his palms. Looming above them in the background is Federal Treasurer Peter Costello shoving more coins and dollar notes with a spade for the man.
It is an uncanny, yet imaginative artistic impression that reveals the significance of Costello’s ninth Budget delivered in the Federal Parliament the previous evening.
In effect, it is a real challenge to the overwhelming emergence of Latham’s leadership in the Labour Party – a challenge that he will find difficult to tackle even with his political and oratorical skills.
There can be no doubt in anyone’s mind that this Budget has a A$37bil (RM96bil) vote-buying factor aimed at the middle and high-income earners and those living in the 24 marginal seats, which the Howard government desperately needs to stay in power.
It is also the government’s centrepiece of the re-election strategy cleverly designed to put pressure on Latham and bring about a confrontation with the Senate in which Prime Minister John Howard does not have the balance of power.
If the Senate refuses to approve the Budget by the end of next month, despite its seemingly unfair treatment of the lower-income workers, it will be blamed for depriving extra income for the majority of the country’s wage-earners.
It will also be blamed for not allowing workers to keep more of the extra earnings from overtime and encouraging them to improve their trade skills because the tax cuts and improved family assistance would provide incentives to work, thus helping to keep Australia’s economy strong.
In such an event, the government will almost certainly call for a double dissolution of Parliament and make another attempt to grab the balance of power in the Senate.
But are the voters prepared to give up the checks and balance in the Senate and vote differently this time?
Certainly, the Liberal-National Coalition electoral carrot hanging before the voters is tempting. They are likely to go to the polls in August instead of October or November.
Aimed specifically at the swinging voters, the Budget provides massive tax cuts over two years to middle-income earners, raising the threshold that attracts the 42% marginal tax rate from its current level of A$52,000 to A$58,001 (RM135,000 to RM150,000) from July and to A$63,001 (RM164,000) in July next year.
The bracket for top marginal rate of 47% will be lifted from A$62,500 to A$70,001 (RRN163,000 to RM182,000) in July and then to A$80,001 (RM208,000) in July next year.
Costello estimates that these tax cuts will cost the government A$14.7bil over the next four years and will mean that more than 80% of the taxpayers will pay no more than 30% or less of their earnings.
It also means that those earning between A$21,600 and A$63,000 (RM56,000 to RM164,000) a year will not face any increase in their tax rate as their income increases.
In other words, it provides an incentive for them to work overtime or encourage them to upgrade their skills and look for better jobs.
Costello describes the changes as making Australia’s tax system more internationally competitive and that it will boost incentive to work.
But the taxpayers below the average weekly full-time earnings will not benefit from the changes although the family welfare system will be improved to increase their disposable incomes.
The Family Tax Benefit system will provide an increase of A$600 (RM1,560) in their welfare payments per child to about two million families earning less than A$40,000 (RM104,000) a year and a new maternity payment of A$3,000 (RM7,800) this year, rising to A$5,000 (RM13,000) in 2008 for every mother, regardless of family income.
In the past four days, a number of women have approached their gynaecologists to delay their caesarean section to July 1 in order to get the maximum family benefits from the government.
The government will also relax the means test for the welfare payment so that it phases down more gradually as the incomes of these people rise.
Another concession is the softening of the means test of families with single income so that more mothers will be able to receive the payment while in part-time work.
The family payment costing more than A$19.2bil (RM50bil) and the tax cuts have been made possible partly through increased government revenue from corporate tax which, according to latest estimates, shows A$193.2bil (RM502bil) instead of the previously projected A$188.8bil (RM491bil).
The rise in corporate tax, despite its reduced rate to 30% from 33% last year, is due to increased company profits. Company earnings are expected to grow by 9.25% next financial year as a result of improved trade.
Contrary to common belief that a stronger Aussie dollar would impede Australia’s trade, it has, in fact, reduced the cost of imports for business while higher prices for commodities have resulted in export earnings.
Unfortunately, there is nothing much for the corporate sector in this Budget except that the 740,000 small businesses will now have to make an annual GST payment instead of quarterly payments.
As far as Australia’s net debt is concerned, it is now at low levels and is projected to fall over the forward estimates period, according to the Budget papers.
The current account deficit, however, will be increased to a record A$46bil (RM120bil) this financial year before easing to A$43.5bil (RM113bil) next year. It now averages 4% of the Gross Domestic Product.
The government has forecast the economy to grow by 3.5% in the financial year beginning July 1 with an underlying cash surplus of A$2.4bil (RM6.2bil).
To some extent, this will depend on a stronger world economy that will provide renewed external demand while the domestic demand is expected to slow down.
Nonetheless, it forecast surplus for the next three years although this will be eroded because of the tax cuts.
The bottom line is that whichever party – the Liberal-National Coalition or Labour – wins this year’s election, it will have to pay for the bonanza that the Howard government has brazenly provided in this year's Budget.
There has to be a catch-up sometime next year. Will it come in the form of increased percentage of GST? One wonders.
Jeffrey Francis is editorial consultant, Australasia-Pacific Media (e-mail: firstname.lastname@example.org)
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