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Stephen Long analyses the Federal Budget -

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ELEANOR HALL: Now for a closer look at the economics of the Budget I am joined in the studio by our
economics correspondent, Stephen Long, who is just off the plane from Canberra.

So Stephen, given the economic changes facing the Government, is this a responsible Budget?

STEPHEN LONG: Well in a sense Eleanor it really depends on what happens in the economy in a very,
very uncertain environment.

But let's look at the criteria that was set up for this Budget. The inflation fighting Budget, well
on that criteria it hasn't really lived up to the hype. At best, it's neutral in terms of
inflation.

It won't do a lot to diminish inflation pressures in the economy. It has cut back the pace of
growth in Government spending which was running at four per cent per annum.

We're looking at just 1.1 per cent in real terms, in the coming years but it hasn't cut Government
spending and it really won't do a lot to alleviate those inflation pressures which may well
increase more than projected.

ELEANOR HALL: Well this was billed as the "Robin Hood" Budget, stealing from the rich to give to
the poor. Did it end up being a fair description?

STEPHEN LONG: Eleanor if this is the Robin Hood Budget then the Treasurer Wayne Swan is not a very
good thief. Basically, you look at the measures that are put in place to redistribute and put a
slug on those at the top end and there pretty minor. And they're very much contained.

The main cuts are for people on incomes of $150,000 a year or more who are now being means tested
for benefits such as family tax benefit part B, the baby bonus and the like. Well there's only
three per cent of employers in Australia who earn $150,000 a year or more. Middle income in
Australia is $40,000. 75 per cent of income earners get less than $75,000 a year.

So if you were going to attack middle-class welfare, you'd think if you were serious about it you
might looking a little further down the pile than $150,000. There are some interesting measures,
one that I've dubbed as the "Macquarie Bank cafeteria clause", where they're stopping people salary
sacrificing food and coffee that they buy in-house at canteens and George Gregan cafes famously at
Macquarie Bank.

But really the measures are pretty small and it won't please those who think that we saw a huge run
up of middle-class welfare under the previous government that needs to be pared back.

ELEANOR HALL: What else could have been targeted?

STEPHEN LONG: Well superannuation is a controversial area but that's really the big ticket item.
Brian Toohey made the point last night that spending on tax concessions for superannuation are now
bigger than spending on the age pension and superannuation benefits the well-to-do most.

The childcare rebate which has been increased from 30 per cent to 50 per cent in the Budget,
disproportionately benefits the well-off because they get a better tax write-off from it.

So there's a whole lot of areas where really this is still skewed towards the well-to-do, even
though Labor was at great pains to insulate the less well-off from the cuts in the budget, the cuts
to spending and to skew the tax cuts in their favour this time around.

ELEANOR HALL: To what extent was the Government hobbled by its election promises and particularly
on that $30-billion tax cuts?

STEPHEN LONG: Very much so and that's shown when you look at the way they've had to do weird stuff
basically to get the revenue savings and increase revenue. So you go through Budget paper number
two and there's 134 new savings measures, and they've had to slice and dice, nip and tuck to find
little things.

And there are doubts about to what extent some of those things will actually meet the revenue
forecasts that are being put forward by Treasury.

ELEANOR HALL: How credible are the Budget forecasts about inflation, unemployment and growth?

STEPHEN LONG: Well forecasting is always a dangerous game, I think you've heard me before quote
John Kenneth Galbraith that the purpose of economic forecasting is to make astrology look
respectable.

In this case, they're particularly rubbery because the economic outlook is so uncertain. If
inflation goes up more than expected, the Reserve Bank will crunch with higher rates and there will
be more unemployment and slower growth. If the world economy is weaker then expected we will have
more unemployment and slower growth and the inflation forecast from Treasury are a bit more rosy
then those from the Reserve Bank.

ELEANOR HALL: Stephen Long, our economics correspondent, thank you.