Costello's Cashback Eyes A New Election

by Ross Peake - Canberra Times

The battle for your vote in next year's election begins in earnest today as the new financial year brings tax cuts for every worker.

But will you be grateful? Certainly Peter Costello's 11th budget sank like a stone.

The Coalition expected to streak ahead after the budget's tax cuts and cash payments but voters are suggesting they want investment in the future along with instant hand-outs. The Government hopes the polls will be more favourable as it begins distributing cash from today. The money is a downpayment for your support, a bid to ensure your continuing loyalty rather than waiting until this time next year.

The Government can afford to be generous because of the rivers of gold coming from company tax.

Another reason it wants to hand out money now is to counter the national unease about its dramatic changes to industrial law.

At workplaces around the country employers have sacked workers and offered them their jobs back at a lower rate. And that's just the start of John Howard's new era of swingeing industrial-relations changes.

The workers who rallied in mass demonstrations on Wednesday are reflecting the uncertainty that has been injected into workplaces.

The Government says more jobs will be created by effectively paying workers less.

The jobless rate is now below 6 per cent, an unbelievable result compared with a decade ago, but what about living standards?

So workers have to weigh up the costs of the changes, resulting in the most important question - will it affect me? That's where the uncertainty comes in. What will your employer do?

While you are contemplating that one, Howard and Costello come along with a fistful of dollars. They say the changes mean that 80 per cent of taxpayers face a top marginal tax rate of 30 per cent or less. As promised in the last budget, workers on $30,000 a year will find $18 extra in their pay packet each week, while those on an annual salary of $80,000 will get almost $40 extra a week. Middle-income earners on an annual salary of $50,000 will receive a tax cut of just $10 a week.

The biggest winners are those earning over $100,000. The concentration of tax cuts to higher-income earners was one reason the budget bombed in the polls.

This year the Labor Party didn't threaten to block the tax cuts even though the biggest gains go to the high-income earners. That's because Kim Beazley learnt from the thrashing he got last year over his threat to block.

Federal and state MPs get an average 7 per cent pay rise today, bringing their salary to $118,950 and Howard's package exceeding $300,000 for the first time.

To counter the good news on tax, Labor's Wayne Swan is reviving his claims that Howard and Costello are running a high-taxing administration. Swan says Costello will collect an extra $253million from increased tax and charges kicking in today. He's got his job cut out to sell that line when the tax cuts starting today are worth billions.

It is not all good news today, as voluntary student unionism begins and the big stick is taken to single mothers and people with disabilities as the Government's welfare-to-work program finally begins.

The Government says forcing people to look for part-time work will help their morale and transition into the workforce. ACOSS says 160,000 new welfare recipients, mostly in the bush where there is not much work, will be put on lower payments.

Those people will ask why pollies are getting a much bigger pay rise than the national average, without having to justify it.

This far out from the election, who knows what lies ahead? There is still an outside chance Howard might decide to play golf rather than strut the world stage.

However, the road towards the election is fairly clear. Howard will campaign on the strength of the economy and the strength of his stand on national security. Kim Beazley will campaign on Howard's boots-'n'-all approach to industrial relations.

The Labor leader has grabbed attention with his promise to abolish the Government-sponsored individual contracts known as Australian Workplace Agreements. The Government says AWAs offer flexibility while the Opposition says they about pushing wages down.

Howard was in China this week, a nation of low wages and dangerous work conditions, but he had no problem conducting a long-distance war with Beazley on the value of AWAs. They clashed over whether the booming resources sector would be threatened by scrapping the contracts.

Howard picked this target because part of his trip to China was to mark the arrival of the first shipment of liquefied natural gas in a $25billion export contract.

"Labor and the unions' industrial relations changes are a dagger at the throat of the successful resource sector in this country," he said.

Howard quoted the West Australian Premier to defend his case, Beazley quoted a manager from Woodside - and so the debate continues, in a swirl of confusion and contradictory remarks.

There are several foreign-affairs headaches for Howard at the moment, but party strategists do not see them as vote changers, and Beazley does not diverge from the Government on such issues.

The strategists look to the fundamentals, such as the economy, but it's not all roses there.

While the headline news today is the tax cuts, the worry is that people are becoming too used to them. The Government's policy is to hand back money to voters so they can decide whether to spend or save. What if they don't appreciate the money or they spend it so fast the economy overheats?

Indeed, the shadow over the economy is interest rates. How many rises will kick in before the election? This week economists were speculating that the latest economic indicators suggest another hike in rates was possible. They are worried about the stimulation of $120million a week to be pumped into the economy from the tax cuts and the inflationary pressures caused by oil prices.

As interest rates and petrol prices eat up the tax cuts, the Government will counter with another round next year. There will also be goodies in the campaign to try to persuade you to stay with the ol' team rather than vote for the new broom.