Sydney view: Howard goes for Australia's hearts, minds and pockets

By GILES PARKINSON*

Prime Minister John Howard and Treasurer Peter Costello have no doubt where they think the next federal election will be won or lost.

"Costello's grey budget," "Golden Oldies gamble," "Playing the seniors card," "Howard's election punt," "The cheque's in the mail" and "Ironing out the wrinkles" were the headlines greeting Costello's sixth Budget yesterday morning.

The Liberal-led Coalition has seemingly given up on small business and gone straight for the hearts, minds and pockets of ageing Australia. It has offered a $300 one-off pensioner payment, tax cuts for self-funded retirees backdated to July 1 last year, and wider access to the Seniors Card, the telephone allowance and other welfare payments.

For small business, once the natural constituency of the Howard Government, there is precious little in the Budget at all. The Government has already had to do a double take on measures associated with the introduction of the GST, but these have been temporary solutions that failed to appease a group that feels deserted by the Government it elected.

Now for the over-55s. Costello defended the measures - an extra $1 billion to $2.3 billion, depending on how you count them - as prudent. It was not, he insisted, an election Budget. His dress and his demeanour sought to underline the point, and the guise of fiscal responsibility will be the Coalition's chief imprimatur in the coming campaign.

Others choose to disagree. There's a common view among economic commentators that the Howard Government has transformed itself into a big-taxing, big-spending institution.

Indeed, by some estimates Howard and Costello have stripped about $10 billion out of future surpluses to garner their re-election campaign. The air of fiscal responsibility slips quickly beneath accusations of a simple vote grab.

The real strength of the Budget, however, may lie in its ability to sideline any spending promises by the Labor Party. The projected cash surpluses in coming years are tight. There is little room for Kim Beazley or Simon Crean to pitch spending or tax initiatives of their own to marginal electorates. But if Costello's hunch is right, and the Government is able to rake in a greater share of the black economy than it currently projects, he may find room for a few rabbits of his own as he plots his transition from patient sidekick to the Prime Minister's office.

And the Coalition still has Telstra in its pocket. The prospect of another $40 billion windfall to wipe out the Government's remaining debt could be a tantalising carrot for voters.

* Giles Parkinson is editor of AFR.com