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‘Election budget without an election’

The government ‘s desperate for love, says Peter Hartcher, while Michelle Grattan says it wants to shore up battler votes.

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The federal opposition has abandoned its principle of opposing all the measures the mining tax will fund and support $2.9 billion in welfare increases to be funded by the levy.

In the federal budget handed down yesterday, the government scrapped a promise to reduce company tax from 30 per cent to 29 per cent because it could not get the measure through Parliament.

The Greens were only prepared to support a cut for small businesses – defined as having a turnover of $2 million or less. This would have created a two-tiered system of company tax. The opposition indicated it would oppose the entire tax cut, worth $4.7 billion over four years, because it was funded by the mining tax.

Joe Hockey ... accused Labor.

Joe Hockey. Photo: Joe Armao

The Coalition has vowed to abolish the $13.4 billion mining tax if elected and all the measures it was slated to fund, except for an increase in the superannuation guarantee from 9 per cent to 12 per cent.

The money saved from scrapping the company tax cut will be redirected to a new $1.1 billion Supplementary Allowance, which will pay cash bonuses to people on the dole, youth allowance and parenting payments.

The mining tax will also fund a $1.8 billion boost to Family Tax Benefit A payments.

Both measures, as well as $700 million tax deduction for loss making businesses are directly linked to the mining tax in the budget papers.

”The government was going to use the proceeds of the Minerals Resources Rent Tax to cut the company tax rate,” the papers say.

”However, the government was not able to secure the necessary parliamentary support and, for that reason, will now adopt a different approach to spread the benefits of the boom to families and businesses.”

Shadow treasurer Joe Hockey said the Coalition would support these welfare benefits.

”The Family Tax Benefit Part A and the allowances which are out in 2013, we are inclined to support because the carbon tax will have an impact on families,” he said this morning.

If the Coalition is elected and abolishes the mining tax, it would have to find the $2.9 billion from other areas, creating a potential cost-blowout in its costings.

The Coalition will oppose another handout – the so-called Schoolkids Bonus – which is not being funded by the mining tax.

”This sugar hit cash payment that they have to get out before the first of July we are going to oppose,” he said.

”It is bad policy, it is not linked in any way to education it is simply about a bribe to the Australian electorate and the Australian electorate won’t like it.”

This measure will pay families $410 a year for each child of primary school age and $820 for each child of high school age.

This morning Opposition Leader Tony Abbott told reporters that the Coalition was opposed to the school payments because they were dishonest.

“It is a handout masquerading as an educational bonus,” he said.