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Rudd/Swan's difficulties

Comments on Paul Kelly “Abbott hits Labor's tax obsession”, 15/05/2010, http://www.theaustralian.com.au/news/opinion/abbott-hits-labors-tax-obsession/story-e6frg6zo-1225866990030

Paul, this is excellent commentary on the current state of federal politics – the Rudd government is in serious trouble in having the public to believe its narratives after so many broken promises and failures in delivery policies and the opposition leader is not playing politics by the government’s tune and understands that by keeping the focus on Rudd government’s failures, the opposition can win the election. That was exactly what Howard did in the 1996 election. Kevin Rudd’s 2007 win was largely based on a similar strategy.

The statement that “Abbott's judgment is that Kevin Rudd is faltering under pressure, that Labor has lost its strategic direction and that Wayne Swan's highly responsible budget can be discredited” is mostly correct with the exception of the last bit.

The phrase “highly responsible” may not be correct, given that the projected surplus of $1 billion in 2012-13 is solely and squarely based on so overly optimistic assumptions of the external economies, the prices of mining products and extremely high terms of trade and that everything will go by scripts.

There is every chance that that projection is false and purely a political manufacturing for media headlines and election campaign. The waste in the BER is likely to be much larger than $1 billion. The damage caused by the insulation program is likely to be of that order. Even the management fees for the Indigenous housing program are considerable.

That has not included the Rudd/Swan tricky and hidden budget blackhole yet. As both Rudd and Swan have been saying the details of the implementation of the new tax of RSPT is yet to be negotiated. What does that mean in terms of budget impact? Any changes will affect the budget bottom line, not in favour of balance or surplus, but to blow a hole to the budget. Anyone believes or argues for the otherwise is kidding themselves and others.

That is why neither Rudd nor Swan is able to convince the sceptical public to with there new tax of RSPT with the proposed benefits of lower company tax rate and increases in super guarantee contribution by employers.

The problem with Rudd is that there are few opportunities left for him to turn his political fortunes around.

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