Rudd's budget slugs his supporter base

Via the car concession reversal, beer and cigarette tax increases and a bank interest income reduction, Labor is filling its budget black hole with true believer dollars.

The ALP Rudd government has called on its supporter base to pay for its gross overspending and the fall in our terms of trade.

And it has ignored the Coalition’s formula to boost jobs (Abbott’s red-letter day for enterprise, August 1).

And so it's the public servants, charity workers, nurses and other lower income people who will pay the vast bulk of the car tax (unless their unions can recoup it); lower income people will pay the bulk of the cigarettes and beer taxes (my pinot was excluded); and it is small savers who could see their bank interest income slashed by more than 10 per cent as a result of the Rudd savings tax.

Australian banks may be able to pass on the bank savings tax but will be hit with higher bad debts when unemployment rises to the government forecast of 6.15 per cent, or possibly more.

Lower income people are being called on to fund the fact that government outlays have risen by about 40 per cent in the last six years when the economy advanced by only 14 per cent.

Who could have imagined that an ALP government would have attacked its own supporter base in such a vicious way? Rudd probably reasons that even though the ALP supporter base has been selected for attack they will not change their vote.

The Gillard government brutally attacked Australian small enterprise via the tax system and regulation and was able to reduce their numbers but its savaging means that the biggest employers – small business – are not generating jobs, so unemployment must rise. Accordingly, Australian unemployment is forecast to rise to 6.5 per cent. 

The ALP government plan to cut the public service is expressed as a so-called “efficiency dividend”. This is a popular technique among governments of both sides. But it is inefficient because it usually means a lot of fudging and the loss of good people.

The Coalition strategy is to transform the tax department and to slash regulations/red tape, many of which have crippled small enterprise. In the process they save $1 billion a year – $3 billion over three years. With each abandoned regulation goes the bunch of public servants who run it. That’s the right way to do it but it is much harder and, of course, it is one thing to say you will do it and another to execute what is a difficult task.

In addition, duplication with the states is another enormous area of the Coalition's spending reduction plan. Unfortunately, because they put in the regulations and boosted the spending levels the government does not have the know-how to dismantle them.

The latest budget – less than three months after the last one – shows that Treasury has lost touch with what is happening in the country. The Coalition plans to transfer some Treasury people to the western and southern suburbs of Sydney and Melbourne.

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