Australian Budget set for rough ride

Treasurer Wayne Swan. Photo / Getty Images

Treasurer Wayne Swan's Budget has been greeted by a sceptical Australia as an election sweetener a year ahead of its time.

Largely seen as an opportunity missed - albeit welcomed by many for its largesse to families and low-income workers - the Budget put the lie to Swan's earlier threats of a harsh dose of austerity.

With Prime Minister Julia Gillard and other senior ministers, Swan was out selling his strategy yesterday, pounding his success in gaining a A$1.5 billion ($1.92 billion) surplus by hauling back spending and deferring planned measures until better times.

This included dumping A$4.7 billion of promised tax cuts for business - Swan said opposition from the Greens would have killed them in Parliament - and redirecting income from the new mining tax to cost-of-living compensation for low- and middle-income earners.

The Government is hoping headlines from the surplus and handouts will catapult it over the series of political disasters that have crushed Labor to record lows in the polls, and provide a springboard for a rebound before next year's election.

But the Budget will have a rough ride in Parliament, despite pledges by the Greens and independents holding the balance of power to ensure supply bills pass.

Individual components could still be defeated, with Greens Leader Christine Milne promising close scrutiny on all measures, especially cutbacks that will prune about 3000 jobs from the public service.

Unions, while generally supportive of the Budget, have also expressed concern and anger at the axe taken to public servants.

The Opposition will continue its attacks on the Government's credibility and the carbon and mining taxes, which it promises to repeal when it wins office. Opposition Leader Tony Abbott described Swan's package as a "handout Budget" and the projected surplus as a "charade", while Shadow Treasurer Joe Hockey said it was deceitful.

"The Government claims it's getting back to surplus next financial year yet they are increasing the debt limit of the Commonwealth to A$300 billion," Hockey said.

"So they are borrowing more but they are not telling the truth about the Budget bottom line."

The Business Council of Australia said the Budget had taken some steps to strengthen Australia's economy and fiscal foundations, but had not fully grasped the opportunity to set a clear direction for the future that would build business and community confidence. "The Budget goes some of the way to achieving the key fiscal goals but more hard yards lie ahead," the council said.

Australian Chamber of Commerce and Industry chief executive Peter Anderson said the Budget was strong in its ambition to repair government finances, limited in its support for the economy and spoiled by its intention to proceed with the carbon tax and failure to deliver the promised company tax cut.

"In key areas, social policy has usurped the drive to a stronger economy," Anderson said.

But charities and community groups welcomed cost-of-living measures. "The Budget is fiscally responsible and fair overall, and it will deliver a decent chance at a decent life for more Australians," UnitingCare Australia said.