Cash and sex scandal over MP clouds crucial Budget message

Australian Prime Minister Julia Gillard and senior ministers will today swamp morning television, current affairs radio and talkback programmes in a bid to fix the nation's attention on last night's Budget.

But its message of a return to surplus and a "battlers"' mix of measures to help low and middle-income families, the aged, disabled and small business has already been caught in the clutter of renewed scandal.

In a continuation of the long, unfolding nightmare of political disaster that has trapped Gillard and her fragile minority Government since the 2010 election, the industrial watchdog Fair Work Australia chose the eve of the Budget to release its findings on the allegations surrounding New Zealand-born MP Craig Thomson.

The report, handed to a Senate committee and made public under parliamentary privilege, said Thomson had misused union finds to pay A$6000 ($7353) for prostitutes, more than A$73,000 on dining and entertainment, and more than A$250,000 to fund his campaign for Parliament.

Fair Work Australia said Thomson, who was national secretary of the Health Services Union at the time, had also provided false or misleading information about A$103,000 in unauthorised cash withdrawals, and has launched civil action against him in the Federal Court.

The findings were earlier handed to police in New South Wales and Victoria.

Thomson said the Fair Work inquiry was a "joke from start to finish", maintained his innocence and said he was confident he would be able to prove the allegations were "totally without foundation".

Thomson has been suspended from the Labor Party and began sitting yesterday as an independent in a bid to distance the embattled Government from the scandal.

Neither the report nor civil action - even if successful - can force him from Parliament and he has pledged to continue supporting Labor, preserving the wafer-thin majority that Gillard maintains with the backing of Greens and other independents.

The Government has rejected Opposition calls for it to disown Thomson's "tainted" vote.

But the scandal, and the allegations of sexual harassment and fraud that have forced Speaker Peter Slipper to step aside, pushed the traditional free kick the media gives the Budget ahead of its release into the background.

Further clouds scudded across Treasurer Wayne Swan's horizon with the statement Slipper was to make ahead of the Budget last night, before handing the Speaker's chair to Labor MP Anna Burke.

Polls continue to track directly towards a Labor disaster at next year's election, and success in selling the Budget to a sceptical public is crucial.

The Opposition is now linking popular perceptions of Gillard as untrustworthy and untruthful to the scandals surrounding Thomson and Slipper, and to the credibility of the A$1.5 billion Budget surplus and associated measures.

Swan is painting his strategy as a "fair go Budget" supporting jobs, helping struggling families to deal with rising costs of living, and looking after the nation's most vulnerable.

Measures included national disability and dental care schemes, a cash bonus to help parents with children at school, and tax relief for small business.

But while raising superannuation taxes for the rich, Swan also axed welfare payments for solo parents when their youngest child turned 8, requiring them to look for work. Community groups warned this could force many single-parent families into poverty.