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Crikey Daily Email

13 May 2008





Dear Sole Subscriber,

Well, it was the most leaked, most spun budget in history but Wayne Swan got through his first big test today.

And how couldn't you with the rivers of yuan pouring into Canberra from the commodities boom, far out-weighing the impacts of the global credit crisis?

We saw several different shades of Labor today. Lindsay Tanner held the show together with some solid cuts, winding back the excesses of the final Howard years. But they were clever cuts, spread across plenty of small fry programs, while sparing key constituencies like carers and the aged, and targeting the wealthy with means-testing and the winding-back of executive tax expenditures.

But then there was Anthony Albanese channelling Rex Connor and dreaming of a $400 billion nation building infrastructure bonanza. Are we cutting or spending, fighting inflation or triggering a construction boom?

Today was a hotchpotch of Labor managerialism, ideology and pragmatic politics. All up, Labor got the job done but it won't get much easier than Budget 2008.
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Budget 08
1 . The first Swan budget -- how it rates
2 . No rabbits, but some quality spin
3 . Kohler: The Budget that Tanner built
4 . Gottliebsen: Labor's attack on tall poppies
5 . Gazing into the economic crystal ball
6 . How wrong will Treasury be this year?
7 . The cuts: more a messy shave than a massacre
8 . Did the credit-crunch hit revenue? Don't believe it for a second
9 . 15 minutes, 13 questions: inside the Swan press conference
10 . Swan’s press conference hand-pass to Albanese
11 . Doing the budget security crawl
12 . The budget paper storm
13 . First Dog on the Moon Budget Video
14 . The commentariat: early reactions to the Budget

Budget 08
1 . The first Swan budget -- how it rates
Canberra correspondent Bernard Keane writes:



The first Swan Budget does not take the promised meat-axe to Government spending but may be nearly enough to convince the Reserve Bank it is serious about restraining demand. Despite the big $21.7b surplus, this Budget spreads the pain across as many people and as few headlines as possible, but manages to slow the remorseless growth in Government spending since 2004.

Swan’s strategy has been simple: additional spending has been more than offset by a long list of small savings across a range of Commonwealth programs, while on the revenue side, a concerted attack on tax expenditures and some increased taxes and charges, along with the expected increase in company taxes from the resources boom, has pushed the surplus into near-record territory without the pain of slashing major programs.



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Let’s not forget that the Government was hell-bent on meeting all its election commitments in this Budget, and it has done so. But in meeting those commitments, the Budget commits to substantial extra spending in 2008-09 -- the tax cuts, the carers’ bonus, more health care funding, $400m for computers in schools, $340m for the Child Care Tax Rebate, $230m for vocational training and for Skilling Australia. But this is offset by some substantial savings and a host of smaller cuts, together totalling more than $7b next year.

Some of these are ongoing reductions -- the means-testing of family benefits ($113m pa and rising) and Baby Bonus ($100m pa). Others big savings are the cancellation of the Opel project ($630m), the public sector efficiency dividend ($410m), the cancellation of the Access Card and the scaleback of operations in Iraq (both $300m) and savings from increasing the Medicare surcharge threshold ($230m) are some of the big ticket savings, in addition to a number of delayed expenses.

But the real cuts are in the minutiae of the agency expense measures across the breadth of Government activities. The majority are relatively small programs where the pain will be muted due to the size of the sectors involved. The Advancing Australia and National Food Industry Strategy programs in AFFA. Advertising cuts. The previous Government’s PC filters program. Apprenticeship schemes. The Realising Our Potential education programs. Green vouchers for schools. A delay in the start of digital radio.

All these have kept real growth in spending to 1.1%. I despondently predicted 2.8% last week so have to acknowledge a solid effort, although it’s not in the league of Peter Costello’s first two budgets. Problematically, however, spending is forecast to rise back to 4% next year. While this partly reflects the impact of pushing a number of big expenditures in 2009-10 – spending falls back in 2.1-2.2% in the out-years – it suggests that Lindsay Tanner’s razor gang needs to keep chipping away at the Howard legacy of profligacy.

On the revenue side, a range of tax concessions and rebates will be removed in areas such as crude oil excise, FBT exemptions, depreciation and capital protected borrowings. Together with the alcopops excise increase, the luxury car tax increase, and an old-fashioned rise in the passenger movement charge, this will yield an extra $2.4b next year and more in outyears. However, that is dwarfed by the $8.8b increase in forecast revenue growth achieved in spite of the collapse of capital gains tax revenue.

The vast surplus racked up by Swan and Tanner will be directed into three new funds – a new infrastructure fund to invest in road, rail, ports and broadband, worth $20b over two years, an extension of the Higher Education Endowment Fund into a new $11bEducation Investment Fund, and a $10b Health and Hospital fund, all to be managed by the Future Fund. A COAG Reform Fund (more correctly, a State Bribes Fund) will also be set up to channel reform-related payments to the States.

These will not be interest-only funds, according to Swan – they are designed to be fully expended if the appropriate projects consume the available funds, but his wording clearly indicated an expectation they’d be around for at least the nedxt six years.

This isn’t the savage attack on spending promised by the Government over summer. It’s a solid start – nearly enough to keep the Reserve Bank at bay. The question will be whether Lindsay Tanner can convince his Cabinet colleagues to keep it going next year.


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2 . No rabbits, but some quality spin
Bernard Keane writes



No rabbits out of the hat, the Treasurer warned – but he still managed an upside surprise on the surplus, and performed better on Government spending than many of us had expected. I guess that means we’ve been expertly spun.


This budget skilfully manages the competing goals of the Government arising from both its political and economic circumstances. Firstly – and this is easily glossed over, because it has been repeated endlessly by Rudd and Swan – it makes this Government the first in generations to keep its election promises. There’s no political upside to this. You don’t get kudos from the electorate for doing what you’re supposed to do. But there's plenty of downside if they hadn’t. The mistrust and casuistry with which most people, even those who voted for him, eventually associated with John Howard had its origins in non-core promises and the 1996-97 Budget.


Secondly, it slows spending growth. Swan has called it a “mild tightening” – a poor choice of words, because it’s not quite correct, and doesn’t fit with the rest of his rhetoric about serious spending cuts. The reduction in real spending growth to 1.1% from the 5%+ growth of Costello’s last Budget may not be enough for the Reserve Bank, but its sufficient for it to be portrayed as economically responsible and a massive contrast with the previous Government. At his press conference, Swan explicitly rejected the need for bigger spending cuts – claiming he’d got the balance right between the boom generated by the resources sector and the pressures emerging from the international credit crunch.


But Swan has been particularly clever in the way he has slowed spending, confining the really big, headline-yielding cuts to the Government’s preferred territory of middle-class welfare, from where they can watch Malcolm Turnbull defend baby bonus payments to millionaires, and going for a vast number of smaller cuts, knocking off or delaying individual programs in nearly every agency. These individually yield only millions or tens of millions but collectively account for the bulk of the ongoing spending cuts. There will be howls of anguish from many sectors, but nothing like the anger occasioned by speculation about the carers’ payments back in February, or the threatened cutbacks to aged care funding.


Third, $21.7b and 1.8% of GDP will satisfy many, though certainly not all, of the surplus fetishists. Moreover, it’s been achieved by a canny combination of “justified” tax hikes like on alcopops (targeting binge drinkers) and luxury cars (soak the rich) and knocking off a range of tax expenditures in areas like Fringe Benefits Tax and tax rebates and concessions - most employed by high-income earners, and too detailed to generate real political heat anyway.


Finally, it provides the first real substance to the Rudd narrative of a long-term economic focus. Swan went out of his way, early in his press conference, to attack the short-termism of the previous Government, and watch for Swan and Rudd to push their long-term focus hard in the selling of the Budget. The establishment of infrastructure, education and health and hospital funds, while a convenient way of justifying hanging onto taxpayers’ money, gives a clear sense of nation-building intent over the course of several Parliamentary terms.


What’s not so clear is how the billions put into these funds can be spent in the next four years without adding to inflation, but that’s a problem for the next Budget and the next term.


As an economic policy document, the budget is nearly good enough. But politically, it’s very, very smart – and of a piece with the deft political salesmanship we’ve seen from the Rudd Government so far.

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3 . Kohler: The Budget that Tanner built
Business Spectator's Alan Kohler writes



This is more Lindsay Tanner’s budget than Wayne Swan’s or Kevin Rudd’s.

There are no new spending measures, only new savings, and remarkably the Finance Minister has found $2 billion more in savings than Swan and Rudd are spending.

The first Swan/Tanner budget actually reconciles the irreconcilable: the need for fiscal restraint to fight inflation while fulfilling the Government’s election promises and not crunching the economy so hard that it risks exacerbating the coming slowdown.

And it had been done simply by carving into middle-class welfare and cutting out the fat left by John Howard’s profligacy.

When the former Treasurer Peter Costello said at a remarkable doorstop press conference this morning that Wayne Swan is the luckiest new Treasurer in history, he was absolutely right – but not for the reason he meant. It’s because there was so much fat left in Government expenditures that could be painlessly cut away.

The Government, meanwhile, is playing down the centrepiece of its first budget. It is not mentioned at all in Wayne Swan’s budget speech; he just sums up all the nice things that have previously been announced.



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The core of the budget – what it’s really all about - is contained at the back of budget paper No.2 - from page 361 to p.427. Here you will find 66 pages detailing 134 new savings measures, on top of the 46 cuts announced during the election campaign, totalling $1.6 billion in 2008-09.

The new savings total $5.7 billion in 2008-09, 11 dozen of them – big ones, small ones: nip cut slash.

The big picture of this budget is that the Rudd Government has announced $5.3 billion worth of new spending for 2008-09 leading up to it, and has now announced savings of $7.3 billion, increasing the surplus by $2 billion.

In addition to that there are a total of $5.4 billion in unexpected increases in tax receipts and other windfalls since the pre-election fiscal outlook (PEFO) that was issued by Treasury during the election campaign last year.

As a result the $14.3 billion surplus forecast in the PEFO has now turned into a $21.7 billion surplus ($14.3 billion plus $2 billion plus $5.4 billion).

So whereas the Howard Government spent every cent of the commodities boom windfall, the new Government has so far put it all into the bank, and added another $2 billion to it by cancelling some of its predecessor’s spending.

Even Kevin Rudd’s tax cuts actually represent a saving. The PEFO surplus estimate of $14.3 billion included the tax cuts announced by Howard Government; Rudd announced identical tax cuts but dropped them after 2009-10 for people earning more than $180,000.

That produces no savings in 2008-09 against PEFO, but provides $5.3 billion in savings over the following three years.

One of the big savings measures is a bit of a fiddle though. The cancellation of the $959 million “Australia Connected” fund that was awarded to Singtel Optus and Elders has been counted as a saving, but the $4.7 billion National Broadband Network amount that replaces it is not counted as an expense because it hasn’t been spent yet and is not detailed in the forward estimates.

But on the whole this budget is a remarkable achievement. The Government’s net financial worth goes from -$25.8 billion to -$3.6 billion in one year, with the unfunded superannuation liability of $112 billion now almost entirely offset by investments.

Sometime in 2009-10 the Government will have a positive net worth, probably for the first time.

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4 . Gottliebsen: Labor's attack on tall poppies
Business Spectator's Robert Gottliebsen writes:

Treasurer Wayne Swan and Finance Minister Lindsay Tanner have unveiled a secret weapon to maul the finances of higher income families – and all in the name of tax "fairness". And their 2008 attack is only the first round because I fear there is more to come.

A large number of middle income families negatively gear property or shares and/or salary sacrifice into superannuation or into reportable fringe benefits with two objectives in mind. The first is to save tax and second to enable their families to receive education, and other allowances. It is also sometimes used to lower dependency payments. Losses on investments can have a similar effect

The tax deductibility of negative gearing and salary sacrifice has not been touched in the budget but from July 1 2009, in assessing means-tested income, the amounts salary sacrificed, the negative gearing benefits, the fringe benefits and the investment losses will all be added onto income. And so the new income test for the family tax benefits is to be calculated on the increased income. The same applies to education and many other allowances.

The caps on family benefits are stated as being subject to a $150,000 "income" limit, but for people with less than three children the cut off point is less than that and will be less again once the new definitions are used.

From July 1 2009, the medical benefit surcharge thresholds of $100,000 for singles and $150,000 for couples will be defined using the new calculations of income – effectively for many people the thresholds will be lowered.

There are other attacks on middle income Australia including subjecting "meal card" arrangements to FBT (where the employer pays for meals consumed by the employee on the premises as part of a salary package) and removing FBT exemption for work related items mainly used for private purposes such as laptops plus other FBT tightening moves. All of these items will cause major reviews of many current salary packages.

The second round of middle income blows will start with school fees. Middle income families in Victoria are going to be hit with much higher private school fees as a result as the big teacher pay rises in the state system spread to private schools, especially as there does not seem to be any provision in the budget for increased help to private schools to help pay for the rises. Those teacher pay rises are certain to quickly spread to other states and will present a major impost on those sending their children to private schools. This will multiply the effect of the reduction in Government help.

Once income for social services is reduced by these items then every budget from now on will have speculation that negative gearing and salary sacrificing will be curbed in calculating income.

And as it happens, claiming tax deductions in excess of income (negative gearing) to buy shares and now residential houses has not been very profitable in the last 12 months, given the fall in asset values. (And as I will explain in another article later this evening, the Rudd government is trying to increase the supply of low cost homes.)

Given that tax rates have been reduced, the tax reduction manoeuvres will become less popular among middle income earners.

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5 . Gazing into the economic crystal ball
Bernard Keane writes:



According to the Budget, 2008-09 will be the sort of soft landing the country’s economic establishment aimed for and utterly missed in the late 1980s.


Real GDP growth is forecast to fall to 2.75%, led by household investment – expected to soften – and business investment, which will continue to grow at Paul Keating-type gangbuster rates, while Australia’s terms of trade will grow at an historic 16% in 2008-09. The only risk appears to be the assumption that recovery from the drought will generate substantial farm income growth, but exports are forecast to grow 6%.


The weaker economy will see lower employment growth, with unemployment rising to 4.75%, moderated by a slight fall in the participation rate, and a slight fall in both headline and underlying inflation back to 3.25%, benefitting from steady wage growth of 4.4%, the same as this year.

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6 . How wrong will Treasury be this year?
Stephen Mayne writes:






Treasury Secretary Ken Henry turned up at Wayne Swan’s press conference to check out how his new boss performed.


Relations between Treasury and Peter Costello soured badly in recent years and Swan is said to be getting on well with the boffins as the bean counters assume a more powerful position in the Rudd Government.

Swan was so keen to talk down the revenue boom from China, so you have to wonder how the latest Treasury forecasts will stack up.

After all, Treasury has an appalling overall record in predicting the budget surpluses in recent years which is best demonstrated by this table tracking the 11 most recently completed financial years:





If Treasury continues its 11-year average of under-cooking the budget outcome by $4.47 billion, today’s $21.7 billion surplus prediction for 2008-09 will actually finish up at $26.17 billion.


That would go some way towards satisfying Labor’s nation building dreams, but you shouldn’t forget that our federal government is only just moving into a positive net worth position.


China, the country which is driving our record revenues, has $US1.8 trillion of foreign reserves, so Australia’s balance sheet remains pathetically weak by global standards.

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7 . The cuts: more a messy shave than a massacre
Canberra correspondent Bernard Keane writes:



Wayne Swan is boasting of $33.3b in savings over four years, including $7.3b in 2008-09.

It’s not all real, but a lot of it is. For a start, there’s a number of non-savings in this – expenditure that’s been pushed into 2009-10 or beyond, but which will happen anyway, at least on current forecasts. The reallocation of the Higher Education Endowment Fund moves $304m into 2009-10. Funding for the National Party boondoggle the inland rail link is likewise deferred into 2009-10. Then there’s a bunch of one-offs that only yield savings next year or for a couple of years tops. The cancellation of the OPEL broadband contract yields $960m over three years. Bring troops back from Iraq saves $305m. A change in GST payment arrangements provides a quarter of a billion, mainly next year.

Then you get the “more by good luck than good management” windfall-type savings. $330m from delays (are there ever not delays?) in defence projects. Faulty projections in eligibility for Parenting Payments provides more than $300m. Lower drug sales means savings on the PBS.

A rough calculation suggests about $3b of Swan’s $7b in savings have come from faux-savings, one-offs or dumb luck. But that’s all fair enough. That happens in Budgets.

The serious ongoing savings make up the remainder of the cuts – about $4b. This isn’t so much a meataxe as a messy shave. But it’s real blood, and we haven’t seen it spilt like this for a decade. These cuts are in the Budget Papers under the dour heading “Responsible Economic Management.” Here are just some programs that are now ex-programs, or at least have undergone a radical downsizing:


- Partner Services Pension payments
- Asia-Pacific Partnership on Clean Development and Climate
- Australian Industry Productivity Centres
- Commercial Ready
- Global Opportunities Program
- Growing Regions Program
- Regional Partnerships Program
- Sustainable Regions (following the example of the Howard Government’s first Budget, the Government has released a Rural and Regional Budget Statement proudly boasting of its commitment to Regional Australia while slaughtering regional programs)
- Chronic dental treatment
- Tasmanian Health Service Infrastructure program
- General Practice Immunisation Service Payments
- MRI – improved access
- Clinical training for enrolled nurses
- Green Vouchers for Schools
- Community Water Grants
- Realising Our Potential program
- Australian Technical Colleges


There are plenty more of these – spread across each and every agency, some worth a few million, some in the tens of millions. They’re the fruit of the Razor Gang’s efforts, going line by line through the spending inherited from the Howard Government. There’s billions more there to go through, and Wayne Swan tonight committed to continuing the rolling ERC process. The pain may not be over yet.


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8 . Did the credit-crunch hit revenue? Don't believe it for a second
Stephen Mayne writes:



In assessing the taxation revenue story of this budget let’s first recap what actually happened in years gone by, excluding GST revenue which Labor has commendably put back into the figures this year. Here are the actual federal tax revenue figures over the past four completed financial years:


2003-04: $175 billion

2004-05: $194 billion (up $19 billion or 10.85%)

2005-06: $206.8 billion (up $12.8 billion or 6.6%)

2006-07: $221.3 billion (up $14.5 billion or 7%)


Peter Costello’s last budget tipped federal tax revenue of $231.1 billion in 2007-08, a rise of $10 billion or just 2.2%.


After all those election promises and talk of the credit crunch hitting revenue, Treasury is now forecasting 2007-08 revenue of $242 billion, so Wayne Swan’s claims of a credit crunch hitting revenue are pure bunkum, even though he was presenting slides to this effect during his press conference.


Treasury admits the China-driven terms of trade boom have alone lifted company tax receipts by $10.7 billion over the five years to 2008-09. The impact is also substantial with individual tax payments soaring by $48 billion to $126.7 billion over the same period as near full employment and soaring mining industry wages overload the tills in Canberra.


Another way to demonstrate this point about the mining boom being bigger than the credit crunch is to look back at what was predicted about 2008-09 tax revenue in the forward estimates over the last three years:

Previous predictions of 2008-09 tax revenue


2005-06: $230.1 billion

2006-07: $236.7 billion

2007-08: $244.1 billion

2008-09: $252.1 billion


If revenue really has been savaged, how on earth is 2008-09 tax revenue predicted to be $8 billion more in today’s figures than those presented by Treasury and Peter Costello 12 months ago?


Swan admitted the 20% improvement in Australia’s terms of trade over the past year was unprecedented so he should stop trying to downplay the revenue implications. At this level, Peter Costello was right this morning about how easy this budget was to deliver.

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9 . 15 minutes, 13 questions: inside the Swan press conference
Stephen Mayne writes:



With more than 100 of the best and brightest political and business commentators in the country crammed into committee room 2R1 for Wayne Swan’s big lock-up press conference, you would expect this to be the highlight of the 6-hour lock-up with plenty of time allocated for questions.


Alas, the 4pm start was delayed until 4.32pm and then Swan opened up with an 18-minute presentation hammering the key points of responsible spending, nation building, inflation fighting and fairness.


The 550 media types in the lock-up only managed to collectively ask the new Treasurer 13 questions over 15 minutes and the way they rolled out provides some insight into the big issues emerging:


Michelle Grattan, The Age: undaunted by Peter Costello’s morning dig to get a new prescription for her glasses, Gratts was perched in the centre of the front row and opened the batting with a pretty tame question about getting tough on welfare by lowering the Family Tax B income test threshold from a mooted pre-budget $250,000, to a tougher $150,000 which Swan gloated would save $543 million over four years.

Matthew Franklin, The Australian: Have you delivered on every promise and which was the toughest cut? Swanny offered up Family Tax B which just shows how there really weren’t any true cuts worthy of Rudd’s election campaign claim about “taking the meat axe to spending”.

Stephen Long, ABC: The toughest question on whether the cuts really stacked up when spending was still projected to rise in real terms and was nothing like the opening budgets from Keating and Costello. Swan characterised the cuts as “a mild tightening”, a line he will come to regret over time.

Bloke sitting next to Annabel Crabb: a parochial question (one of the 31 locked up Canberra Times hacks perhaps?) on job cuts in Canberra. Swan played down fears, especially earlier beat-ups on a Centrelink purge. He’s certainly no Jeff Kennett, who punted almost 100,000 public sector workers over seven years.

Bloke standing next to Malcolm Farr: How does it feel for a Labor man to be forecasting increases in unemployment? Again, no troubles pointing to slowing global growth and John Howard’s surging official interest rates legacy.

Clinton Porteous, The Courier-Mail: what do you say to poor families on $150,000 who will be worse off? Swanny batted this away by pointing to the size of previous “tax cuts for the rich”.

Steve Lewis, News Ltd tabloids: why introduce the politics of envy by slugging the rich? Swan simply pointed to some FBT rorts getting stamped out, while labeling the whole budget “tough but fair”.

Dana Robertson, Lateline: how do we all benefit from this skilled migration? A reference to the coming infrastructure spending boom and Swanny simply defended the need for skilled migration. Too easy. However, it certainly looks inflationary in the middle of a commodities boom.

Andrew Probyn, The West Australian: got probably the best pre-budget scoop with the $20 billion Building Australia Fund, but his dopey editor buried it on page 4. Wanted to know why the spending would draw down on the capital of the funds rather than just the earnings, as Peter Costello did with his higher education fund. Swan just went into big spending nation building Labor auto-pilot and lamented the Howard government’s chronic under-investment in education.
Dennis Shanahan, The Australian: will these funds be a locked box? Nope, we’re looking for the right projects to spend it on but this will be over at least six years.
Alison Carabine, Fairfax Radio: the most aggressively posed question but simply asked when we will get some concrete results from all this spending. Swan talked up the bring forward on several big infrastructure projects.
Peter Hartcher, The SMH: if this is only a mild tightening, are you leaving all the heavy lifting to the Reserve Bank? Swanny just talked up the spending cuts, but this “mild tightening” line will haunt the government’s attempts to project toughness.
Mark Reilly, Seven Network: after promising questions on petrol and supermarket prices in his Weekend Sunrise Reilly Diary, he duly came through and Swan dodged it by just pointing to the supermarket inquiry and petrol commissioner.

With that Swan was gone, without the likes of Laurie Oakes, Paul Kelly, Barrie Cassidy, Kerry O’Brien, Tony Jones, John Durie or Jack Waterford getting a chance to fire in a question. Their voices simply weren’t loud enough.


In future years, a better system would be for all the major outlets to be allocated a question, along with various press gallery doyens. If Question Time in the house lasts for an hour, surely a Treasurer can handle a similar exercise on budget day, as it would only represent 16.6% of the lock-up time.

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10 . Swan’s press conference hand-pass to Albanese
Stephen Mayne writes:



After just 13 questions over 15 minutes in his press conference, Wayne Swan handed over to Anthony Albanese, thereby triggering a mass exodus from the press conference.


After about 10 minutes of Albo doing his best Rex Connor impersonation, Gough Whitlam’s former press secretary Kerry O’Brien interrupted to declare that he would have to leave, so, could the big spending Lefty explain how a $400 billion infrastructure wish list could be fulfilled by a $20 billion fund that would only become available in 2009-10?


Albo used the phrase “urgent but considered” and simply re-affirmed the enormity of this coming infrastructure bonanza and Labor’s role as the party of nation building. In terms of the funding, Labor will use a combination of private sector spending, public private partnerships and straight federal spending, especially on projects in some cities to tackle urban congestion.

He also stressed that the budget had brought forward a number of infrastructure spending programs such as studies on the Ipswich Motorway, the M5 East duplication in Sydney and the Western Metro rail project in Sydney.


The number continued to dwindle as Albo droned on, so I threw a question at him with just seven journalists in the room about the reasons for abandoning full funding of the Future Fund in preference of all these other funds. After all, Kevin Rudd believed in fully funded super when he ran Queensland.


Albo simply denied this, when the Future Fund does currently remain more than $50 billion short of its needs as all these other funds are unveiled.

When a journalist asked about rail services in Albury at 5.32pm, it really was time to scarper. The whole Albo exercise was clearly designed to provide Swan with a quick exit from his press conference whilst emphasising that this is an infrastructure budget. We’ll see if it has worked in the morning papers.

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11 . Doing the budget security crawl
Stephen Mayne writes:







Anyone who thought excessive security paranoia died with the Howard Government should think again based on today’s 80-minute wait to get 550 hacks into the budget lock-up.


We turned up right on 1.30pm and there were already about 300 journalists queued up and proceeding at a pace that would make Qantas proud.


Bernard Keane joined the queue and made it through the miserable two security screens an hour later, whilst I insisted on being last and finally joined the throng at 2.50pm.


Memo to Wayne Swan: open the doors at 12.30am next year and then distribute the budget papers at 1.30pm.


The delay turned out to be a boon because it presented a unique opportunity to film many of the doyens and dropkicks of the Australian media. Check out the Crikey video we’ve put together in tomorrow's edition.


The likes of Seven’s Mark Reilly and SMH pictorial editor Mike Bowers were happy to perform for our cameras but those ABC types really are paranoid as we were knocked back by Kerry O’Brien, Lateline Business presenter Ali Moore and The 7.30 Report’s Heather Ewart.


The nation’s leading editors were the most camera shy. The Australian’s Mark Whittacker and The AFR’s Glen Burge offered their backs on sighting our camera, whilst we got a rather dirty scowl from Piers Akerman as he chatted away to Tim Blair and his long-suffering Daily Telegraph editor Dave Pemberthy, who was the only editor who fronted Swan’s press conference a couple of hours later.


With Swan not set to perform for the cameras at his press conference until 4pm, it was largely the snappers and TV crews who brought up the rear, along with Kerry O’Brien and Terry McCrann who clearly needs less time in political captivity than everyone else to produce his pearls for 2 million readers of the News Ltd tabloids.


The security gates were clearly turned up to maximum as many hacks, including Bernard, had to do a Michael Somare for the government and take off their shoes. On getting through the gates, a youthful Treasury official offered up a Liberal blue bag festooned with “Budget 08-09”, the southern cross, the Australian government crest and the URL, www.budget.gov.au.



The only thing confiscated was the mobile phone and on arriving inside committee room 1R1, which often hosts Senate Estimates hearings, a cheerful Treasury official offered up the full 40 megabyte budget on a memory stick and we knuckled down for an afternoon of information overload.


Our room included many of the gallery tiddlers. To the immediate right was legal newsletter CCH with Bloomberg to the left and the likes of AAP also in the room.


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12 . The budget paper storm
Stephen Mayne writes:



For the 100-plus News Ltd hacks in the lock-up, there was no shortage of reading material to share around, but for our two-man operation, it was information overload.


Treasury’s blue bag handout contained 11 blue documents including the following:


13 page Budget Speech
Glossy 42 page budget overview in A4 size
Budget Paper No 1 outlining the strategy and outlook
The 440 page Budget Paper No 2 laying out all the line items
145 pages of Budget Paper No 3 on “Australia’s Federal Relations”
114 pages of Budget Paper No 4 on “agency resourcing”
A 47 page statement from Jenny Macklin called “closing the gap between indigenous and non-indigenous Australian” – something you didn’t see from the Howard Government.
A 56 page “education revolution” statement from Julia Gillard which was anything but
A 37 page “strengthening rural and regional Australia” statement from Anthony Albanese
A 69 page statement from Stephen Smith called “Australia’s international development assistance program”
43 pages from Penny Wong on “Climate change, the economy, the environment”.

But standing out from the crowd was the big A4 lime green 32 page “Working Families Support Package”.


If all that wasn’t enough, we got another 19 separate press releases from Treasury itself.


To be brutally honest, barely any of this was consumed before we trotted down for the big Wayne Swan press conference, scheduled for 4pm.

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13 . First Dog on the Moon Budget Video



Want to watch Wayne Swan deliver the Budget as a sock puppet? Watch on friends.



Send your tips to [email protected] , submit them anonymously here or SMS tips and photos to 0427 TIP OFF.

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14 . The commentariat: early reactions to the Budget



An hour since the journalists were unleashed from the Budget Lockdown, and the early reactions are trickling in. Here's an early roundup.

Shaun Carney, The Age: "Those who were hoping for a major redirection of the economic and social course of this country under a new government will be disappointed. This budget reflects the gradualist nature of the Prime Minister, the Treasurer and most of the Government's leading figures. It's fair to say that the budget represents a tentative step towards a very mild form of modern social democracy, built on many of the precepts of the previous government, such as personal choice when it comes to the public/private split in health and education."

Paul Kelly, The Australian: "The budget reality dismisses the phoney symbolism of recent days. It is not a Robin Hood budget. It is not an attack on middle class welfare. It does not involve a major dismantling of Howard government programs. This trade off between beating inflation and backing working families will make or break this budget. It is highly optimistic. It is faithful to Labor's political pledges but tests the economic proposition that working families can be compensated at length from the inflation struggle."

Samantha Maiden, The Australian: Wayne Swan’s budget razor for families enjoying middle-class welfare, including the baby bonus, isn’t quite as sharp as it sounds. While the decision to ban the lump sum for the baby bonus and introduce a $150,000 means-test for both the bonus and family tax benefits is likely to capture the headlines, it also remains a small proportion of the $33 billion in savings measures the Rudd Government has announced. A tightening of exemptions for fringe benefits taxes, new taxes on crude oil condensate that will deliver a massive $3.5 billion over four years, increases to taxes on alcopops and a previously announced decision by Labor to slash tax cuts for people earning more than $180,000 delivers the lion’s share of the extra cash.

Colin Brinsden, The Daily Telegraph: The Rudd government's first budget is like going to the dentist. There has to be pain now or the future health of the economy is at risk. And like any dentistry, it comes at a price. Rich families, or those on $150,000 or above, will not like the decision to means test the baby bonus and the family tax benefit part B. The luxury car tax will increase to 33 per cent from 25 per cent and a loophole that governs the taxation of executive share schemes will also be closed. Twelve hundred public servants' jobs are also at risk as part of $33 billion worth of cuts in government spending.

Mark Hawthorne, Courier Mail: WEALTHY families are the losers under the first Labor federal budget in 13 years, with means testing and a tax crackdown helping to build a record surplus and three major new funds for future investment.

Scott Murdoch, The Sydney Morning Herald: Labor has delivered a moderate budget that it hopes will "build the nation" by dedicating spending on health care, welfare and infrastructure while winding back the direct benefits to the nation's well-paid. The first Labor budget in 13 years has maintained the tax cuts promised during the election and will now means-test welfare and the controversial baby-bonus which rises to $5000 from June.

The Daily Telegraph: "The opposition will no doubt point out that groceries and petrol will be no cheaper tomorrow morning than they were before the budget was handed down tonight. But it will be hard for them to punch holes in a budget which delivers a record $21.7 billion surplus - well above most predictions - and still cuts government spending."

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