Tony's turn under the fiscal spotlight

Opposition leader Tony Abbott will have to provide some answers on how he plans to run the country in his Budget response tonight. Picture: Ray Strange Source: The Courier-Mail

WHEN Opposition Leader Tony Abbott rises to give his formal reply to the Budget tonight, he will feel a greater than usual weight of expectation.

Treasurer Wayne Swan has delivered what will almost certainly be his last Budget.

Unless Labor can pull off a miraculous last minute turnaround, Abbott  is almost guaranteed to be prime minister in a few months.

But there is a lot we do not know about how Abbott would run the country.

The Budget creates a number of questions the Opposition Leader will be forced to answer.

How will he repair the Government's finances? Which spending and saving measures will he keep? Which will he ditch or change? And what other cuts or tax hikes will he use if he rejects savings in the Budget?

Swan has embarked on this line of attack on the Opposition because, let's face it, he has little ammunition left.

But Swan has a point. To be fair to the voters who the polls suggest are soon to elect him to office, Abbott should provide more detail about his plans.

So far the Opposition Leader has kept his cards pretty close to his chest. He has cast doubt over the Government's forecasts and suggested he will wait until the pre-election Budget update before finalising his figures.

Abbott has vowed though to take his time assessing the information available to him before spelling out his decisions - which makes sense given his attacks on the Government for its changing forecasts and broken promises.

Opposition Leader Tony Abbott with Joe Hockey and Jamie Briggs with The Little Book of Big Labor Waste. Picture: Gary Ramage

He has foreshadowed a commission of audit to identify areas of waste that can be cut. This is a politically risky vow given the backlash over the Costello audit in Queensland, but it's one that gives a future Coalition government some scope to come up with new savings well into its first term.

Abbott has also accused Swan of laying "booby traps" in the Budget for the next government.

By including big ticket spending plans for several years ahead on school funding, disability insurance and infrastructure Labor has done its best to insert its own agenda into the next two terms of a likely Coalition government.

An Abbott government can of course change some of these. But given its support for a disability insurance scheme and suggestions it will keep the school funding deal if a majority of states sign up, the Coalition could find itself having to justify any changes it makes to ideas that were put up in the dying months of Labor's administration.

On infrastructure, Abbott has already pledged to spend more on some road works, such as the upgrades to Brisbane's Gateway Motorway but he has cast doubt on urban rail projects, such as the city's Cross River Rail.

The Opposition Leader has not yet said whether he would adopt or reject some of the $43 billion in Budget savings, such as hits on corporate tax and cuts to family payments and the Baby Bonus, but there have been some pretty inconsistent messages coming out of his own side on some of these measures.

This pressure seems to be increasing given the political confidence in Coalition ranks.

Some in the National Party oppose cuts to the Baby Bonus, along with Abbott's own generous paid parental leave scheme, because they see the measures as discriminating against stay-at-home mums.

Tony Abbott in question time, after earlier telling the Coalition party room that MPs must be disciplined in the months leading up to the election. Picture: Gary Ramage

Others in the Liberal party are angry about the company tax hike that Abbott will impose to fund paid parental leave.

Many within the Coalition believe it is time to dump the Howard government-era payments too.

Opposition treasury spokesman Joe Hockey's declaration of an end to the "age of entitlement" leaves little doubt about his views on middle class welfare.

"Despite an ageing population and a higher standard of living than that enjoyed by our children, western democracies in particular have been reluctant to wind back universal access to payments and entitlements from the state," Hockey said in the speech to the Institute Of Economic Affairs in London last year.

"Ultimately the fiscal impact of popular programs must be brought to account no matter what the political values of the government are or how popular a spending program may be."

Even if you accept his argument that the speech was a general assessment of the fiscal challenges facing developed countries, there are clear implications for Australia's own bulging family payments system.

Abbott will no doubt try to maximise his electoral appeal in the months leading up the September 14 poll but he also needs to be careful not to raise voters' expectations only to disappoint them later.

He says he wants to run a "government which is honest and competent and straight with people".

Voters should be entitled to some of this honesty now.

Steven Scott is The Courier-Mail's national political correspondent.

Email: steven.scott@news.com.au

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Obama debuts budget in fiscal showdown

TO Republican mockery, President Barack Obama rolled out a $US3.77 trillion ($3.61 trillion) budget overnight that laid out his battle lines in a new fiscal showdown in Washington but irked some liberal allies.

Mr Obama said his blueprint for fiscal year 2014 would shield the middle class by closing tax loopholes that help the rich, would grow the economy, cut the deficit, train future American workers and protect seniors.

"For years, the debate in this town has raged between reducing our deficits at all costs and making the investments necessary to grow our economy," he said on an unseasonably warm morning in the White House Rose Garden. "This budget answers that argument, because we can do both. We can grow our economy, and shrink our deficits."

Republicans however immediately rejected Mr Obama's plans. Senate Minority Leader Mitch McConnell branded them as a "left wing wish list".

House Speaker John Boehner, who has already passed a Republican budget that slashes spending, warned that Mr Obama had already made life tough enough on the rich, adding: "we don't need to be raising taxes on the American people."

Mr Obama's spending plan for 2014 is in many ways an academic exercise, given that it has no chance of being fully enacted in stalemated Washington.

But it will stand as his entry in the latest fast-building showdown pitching the president's plan to hike taxes on the most well off against Republican plans to slash government spending with no new revenues.

"We don't view this budget as a starting point. This is an offer where the president came more than half way towards the Republicans in an attempt to get a fiscal deal," said a senior White House official.

"Are Republicans going to be willing to come to us?" the official asked, ahead of the unveiling of the budget at a time hope has faded for a "grand bargain" deal on the deficit between Mr Obama and Republicans.

The blueprint included one key concession to Republicans, which has already angered elements of Obama's liberal Democratic base.

Mr Obama signalled he is ready to modify some cherished entitlement social programs, by adjusting cost of living adjustments that could trim benefits for some senior citizens.

The move, ahead of a second dinner between Mr Obama and Republicans at the White House today, was intended to try to lure some support for cross party budget and deficit talks.

The White House is billing the budget as a document which proves that the need to cut voluminous deficits does not need to be achieved by savage cuts in government spending and social programs envisaged by Republicans.
Officials say the plan includes $US1.8 trillion of deficit reduction over 10 years and would raise $US580 billion dollars in new revenue by curbing income tax breaks for the rich, without raising rates.

It would raise the tax on a pack of cigarettes from $US1.01 to $US1.95 per pack to finance an early childhood education scheme.

The budget would also provide $US1.65 billion for the Global Fund to Fight AIDS, Tuberculosis and Malaria and $US4 billion to allow security upgrades following the attack on the US consulate in Benghazi last September.

Republicans dispute Obama's deficit reduction figures, arguing that since the budget would dispense with $US1.2 trillion in automatic spending cuts, which began in March and are known as the sequester, its real deficit reduction figure would only be $US600 billion in savings.

Among measures that had already been opposed by Republicans, the Obama budget would implement the "Buffett Rule" which would mandate that households making more than a million dollars a year pay at least 30 per cent of income in taxes.

The budget foresees a deficit of $US744 billion, or 4.4 per cent of GDP, in 2014 - down from a projected deficit of $US973 billion this year.

Officials projected that the shortfall would reach 2.8 per cent of GDP by 2016 and 1.7 per cent by 2023.

The plan assumes unemployment will average 7.2 per cent next year, down from the current 7.6 per cent.

Economic growth meanwhile is predicted to pick up to 3.2 per cent next year, from 2.3 per cent this year.

The White House says that the plan represents more than two dollars in spending cuts for every one dollar of new revenue accrued from closing tax loopholes.

It also includes $400 billion in health savings that administration officials say could be found by cracking down on fraud.

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