Beazley’s budget reply is better economics than the government’s budget, but more to the point it is better politics. Howard holds government in Australia by assembling a coalition of the well-off and the working poor. The last group tend to vote Labor, and continue to do so at a state level, but Howard has hived them off federally.
These people live in seats like Ford and Longman in Queensland where safe federal Liberal seats contain mostly safe state Labor seats.
What Beazley has to do over the next two-and-a-half years is convince them that Howard has taken them for a ride, taking their votes and cashing them in to fund favours for the the top-end of town. By rejecting the government’s tax cuts for ones which favour less well-off voters and in the process make the welfare to work transition easier, Beazley has taken the first step down the path of winning Howard’s battlers back to Labor.
He has combined this with a pitch to those people who think apprenticeships are important, by pledging more money for traineeships, and a promise to do more about infrastructure spending. Quite rightly he views a more productive economy as being one best able to meet the challenges of an aging population, and infrastructure is one key to achieving that.
Now what he needs to do is play this wedge in the context of the Treasurer’s self-indulgence in demanding the Prime Minister’s job. In the past the Liberal Party has too easily worn the mantle of being the “Born to Rule” Party. John Howard may say that he does not take the next election for granted, but the Treasurer’s attitude says just the opposite. It’s an unedifying spectacle that Howard’s battlers will not be liking.
Beazley will of course face opposition from those earning over $100,000 a year, but they have a fairly weak case. Sure, under Beazley they may not be receiving the same proportionate tax cuts as less well-off voters, but then the less well-off don’t have access to the same tax advantages that the wealthy do, such as sheltering significant amounts of income in superannuation. It’s ironic that in this country, the one group we bribe to save are actually the group who would save whether or not they were bribed at all!
Labor’s starting to look competitive again. What will the government’s answer be?
May 13, 2005 | Graham
Beazley’s first step on the way back
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I agree with this assessment. Unfortunately Kim has decided to stand up to John a little too late for my liking. The mediocre government that we have been subject to has been able to continue because John has hypnotised a group of people who are significantly worse off under his rule but seem unable to connect the dots. He cannot continue with the smoke and mirrors for ever. Lincoln was right about that.
Comment by Lynette — May 13, 2005 @ 9:48 am
Graham,
I agree with your reasoning. It says something that you can believe that Beazley has gained from this Budget when it gives away billions of dollars.
Comment by Nicholas Gruen — May 15, 2005 @ 6:14 pm
Yes I agree with this assessment. My opinion is that the budget avoided difficult choices of infrastructure spending across all spheres – not only the physical infrastructure to unblock the bottlenecks, but also the human infrastructure based on education and skills not only in trades but in the knowledge economy, and environmental infrastructure in terms of healthy and functioning ecosystems and the economic benefits they provide. The National Water initiative is a start, but that money will soon run out, and will likely be a similar application based on regional grants formula, ie, not going to where it is supposed to be going and proping up unsustainable farming practices.
Hopefully Mr Beazley recognises the need to invest in Australia not only wealthy individuals.
Comment by Tavis — May 16, 2005 @ 11:51 am
I fail to see how someone earning $100,000 is avoiding tax? 15% tax going in, 15% tax when it’s in there and normal tax rates when drawn out!
These people are net contributors to the system. Would you prefer we had more low paid workers who draw from the system?
Don’t haze your argument just because someone earns more money than you.
Alan
Comment by Alan — May 12, 2006 @ 9:44 am
Alan,
The simple riposte to your question is that no-one would put their money into complying superannuation funds if they weren’t getting a tax benefit out of it!
The more complicated answer is that 15% in is a lot less tax than the 47% plus medicare levy they would have paid on the money if it had gone to them as normal income. 15% is also less tax than they would pay on the income if they invested the money in their own name. And if they take it as an annuity at the end, 15% is probably less tax than they would pay on the income if it came from other investments.
All in all a pretty nifty tax shelter.
Comment by Graham Young — May 12, 2006 @ 10:16 am