Prime Minister Kevin Rudd's first Federal Budget is likely to hit the wealthy hardest and it may be just the beginning, says Monash University political analyst Dr Nick Economou.
Dr Economou said the "very wealthy" will most likely feel the greatest effects of Labor's first Budget, to be handed down next Tuesday May 13, but the Government may look to trim excess in the Australian economy further and that could involve reassessing negative gearing and first home loan subsidies.
"I do note with interest that the Government has foreshadowed reform of the taxation system or at least an inquiry into the taxation system so I think the taxpayer subsidisation of the property market might be on the agenda as well," Dr Economou told The Epoch Times.
Speaking at the New South Wales State Labor conference in Sydney last weekend Mr Rudd said the Budget will "contain difficult challenges" and "some decisions will be unpopular" but he reaffirmed his Government's commitment to help working families.
"We understand that families are under financial pressure because of rising costs of living such as mortgages, rents, groceries, petrol and childcare," he said, "but we promised to implement tax cuts. And we promised to increase childcare assistance in the Budget. And we intend to deliver on these promises."
Mr Rudd said his Government could "not ease all the pain for working families", but it would continue "fighting against the emergence of two Australias".
Along with the promised tax cuts, the coming Budget will see a cut in Government spending, Mr Rudd said, "to place downward pressure on inflation and interest rates".
Finance Minister Lindsay Tanner announced earlier this week that the Government will save $2.2 billion in the coming Budget through public sector cuts and tougher tax compliance.
The Government has since hinted that the Family Tax Benefit will be eliminated for those families whose breadwinner earned more than $250,000, that the Baby Bonus be means tested and that other tax concessions and cash payments of income earners may be cut.
Dr Economou said "tax payer subsidisation of people's property portfolios" may be another area of interest.
"I think negative gearing will be looked at and I think the first homebuyer scheme ought to be looked at."
"They won't do away with negative gearing altogether, but they will try and target it because there are examples or instances where investors can get all sorts of things written off their tax.
"If the Government could just finesse that little bit they could probably make quite substantial savings without abolishing negative gearing altogether."
While the "war on inflation" is the Government's primary focus, addressing future economic downturn has also been factored in with the Government remaining committed to a healthy surplus above its 1.5 target of gross domestic product.
"We are also committed to keeping a weather eye on unfolding global economic circumstances and maintaining a strong Budget surplus that provides flexibility to deal with any unforeseen challenges that may arise," Mr Rudd said.
Shadow Treasurer Malcolm Turnbull says global economic uncertainty is a concern, but is critical of the Government's proposal to cut spending.
"I don't think there's any economic need to cut it [Government spending]," he said on Channel Ten's Meet the Press.
Mr Turnbull believes the surplus is adequate and any cuts would contribute "additional hardship on Australian families".
Dr Economou said the talk of "fiscal nastiness" and Budget hardship from both the Government and the Opposition may be over done.
"My personal feeling is that the Rudd Government can make quite substantial cuts without actually hurting anybody that is dependent on the public sector," he said.
Excesses, as a result of Australia's booming commodities market and an overly generous former government has given the Labor Government plenty of room to move, he said.
"There has just been so much middle class and upper middle class welfare that was allowed to balloon out of control by the Coalition," Dr Economou said. "They have this massive surplus and they have heaps of public expenditure fat left over from the former Howard Government that they can trim with very little political consequences."
Feeds