Broadcast: 08/05/2007
Reporter: Jim Middleton
The Budget that will make or break the Howard Government in an election year that so far has belonged largely to Labor leader Kevin Rudd. In that context there had to be a tax cut, and there is. But the Treasurer himself saw a different headline. He says tomorrow's headlines should call the Budget a "strong step into the future".
Transcript
KERRY O'BRIEN: Welcome to this ABC News Budget special, combining the resources of The 7:30 Report, Lateline, and News. I'm Kerry O'Brien and for the next hour Tony Jones and I will analyse the Budget just delivered to the nation by Treasurer Peter Costello. The Budget that will make or break the Howard Government in an election year that so far has belonged largely to Labor leader Kevin Rudd. In that context of course there had to be a tax cut, and there is. But the Treasurer himself saw a different headline.
REPORTER: If somebody gave you the opportunity to write the headline on tomorrow's newspaper for this Budget, what would you say it was?
PETER COSTELLO, FEDERAL TREASURER: I would say a 'Strong step into the future'. I think it's an education Budget actually, I do.
TONY JONES: And we'll be talking with the Treasurer and the man who wants to fill his shoes in a Rudd-Labor government, Wayne Swan. And we've also assembled a panel of experts to discuss the pros and cons. First, Political Correspondent Jim Middleton with the key elements the government is depending on to turn public opinion around.
JIM MIDDLETON: John Howard warned his backbench earlier today not to expect a bounce in the polls from tonight's Budget. He was not kidding. True enough, as Peter Costello says "education does come in for special treatment" and there are tax cuts too, but they're modest in scope.
The childcare payment revamp had already been leaked and there's little new money for the environment. On its own, the Treasurer's 12th Budget is not an election winner.
At $13.6 billion, the surplus is ample. It would have been close to $4 billion more had the government not chosen to dip into the kitty to bring forward some Budget spending. This year's tax cuts do little more than return bracket creep.
From July the 1st, the threshold for the 30 cent rate will rise to $30,000 a year. That will cost $5.3 billion in 2007/8. After last year's cuts aimed at middle and high income earners, the battler is the priority with the election in sight.
A person on $30,000 a year can expect a tax cut of $21 a week, or $1,100 a year. People on average earnings, around $45,000 will have around an extra $17 a week in their pockets, or $900 a year. But at $50,000 the cut is down to $14. The better off will have to wait another year for further tax relief.
The Treasurer is promising in July 2008, the threshold for the 40 cent rate will be lifted to $80,000 and the 45 cent rate won't cut in until income reaches fully $180,000, a jump of $30,000.
PETER COSTELLO: Now, this is all about sharpening work incentives, people who are working part-time. Most people at $30,000 or less are working part-time to do additional work, to put in some more hours, to build the capacity of the Australian workforce.
JIM MIDDLETON: The focus remains on low and middle income earners when it comes to superannuation, with the government doubling its contribution for this year only. For every $1,000 paid in by a low to middle income worker, the government is putting up $3,000. That will cost just over $1 billion.
Mr Costello has also acted to address enduring small business irritation over the GST. Small businesses with turnover below $75,000 will now only have to lodge a business activity statement once a year rather than quarterly.
As expected, the government is increasing and trying to tidy up its childcare payments. Currently the money can be delayed as long as two years. In this election year however, parents will not only be reimbursed through the tax system, the childcare costs incurred in 2005/6, but will receive their rebate for the current financial year shortly after they've lodged their tax returns.
Centrelink will distribute the money either by cheque or by direct deposit into designated bank accounts. That means the average family can expect two payments of around $800, a total of $1,600 and before the election.
The childcare benefit is also on the rise, increasing by more than 10 per cent in July. The maximum rate will jump to nearly $135 a week, up by $16.40. The cost of the childcare measures? $650 million in 2007/8.
Education has provided some of the few surprises in the Budget. Mr Costello did not mention it in his speech, but the government is removing all caps on domestic, full-fee paying students.
The government is also setting up a higher-education endowment fund with $5 billion of seed money from the surplus. Income from the fund will be used to pay for university buildings and research facilities. Individuals will be able to make tax deductible donations, and get their names on the endowment when it's made to the university of their choice."
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The budget outline left me a little underwhelmed-but will it do the trick? I hope not.
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