Will the real fiscal conservatives please stand up?

Is the Coalition to blame?

Should the Howard government have squirreled away more in the boom years so that we were better prepared for the inevitable downturn? This was certainly the sentiment of voters at the last election.

The early Costello budgets savagely cut spending on research and development (R&D) and education, among other areas, in order to balance the budget it inherited from Hawke and Keating. As the boom kicked in, tax receipts grew considerably, but instead of investing the surplus in key sectors like R&D, education and infrastructure, the Howard government funneled large chunks of it into middle class welfare.

To the Howard government's credit, significant cuts to income tax were made during the boom years. I would rather see taxpayers pay less tax than have their tax churned through the bureaucracy and then given back to them in the form of middle class welfare.

The boom years masked a level of government spending that was simply not sustainable. We are not dealing with a "revenue gap" that will get better once the economy improves. The budget will remain in deficit, and will never return to surplus over the cycle, unless governments make structural reforms to taxation and public spending.

The Rudd Government will be judged on their own performance, not on the mistakes of past governments. Swan promised in his first budget to take a razor to wasteful public spending, but the result was underwhelming. This budget promised "tough decisions", and the Government went a small way to eliminating middle class welfare, but more needs to be done to fix the structural deficit.

I would not describe any of the Labor front bench (except perhaps Finance Minister Lindsay Tanner) as fiscal conservatives. The Rudd Government must try harder if it wants to escape Labor's reputation for profligate spending and financial mismanagement.