THE Howard Government's lightning-fast tax cuts are a brilliant tactical move, but a dubious strategic one.
The announcement of $34 billion in tax cuts on the first full day of the election campaign is eye-catching, and puts Labor under instant pressure to put something in the vacant shopfront of its tax policy.
It's also helpful to the Coalition because it gives a sepia-toned Government a chance to talk about a bright and colourful future. Yet the plan raises two big strategic questions. First is whether it's smart for the Government to declare a plan to "go for growth" when the Reserve Bank is campaigning for a slowdown.
Chris Richardson, of Access Economics, told the Herald in August: "The Government is throwing money into the economy and the Reserve Bank is trying to take it out again. We have one foot on the accelerator and one on the brake. No wonder we're blowing smoke."
The Government's announcement shows an economy that is continuing to accelerate. It will fuel this by adding a further $7 billion in tax cuts in the year from next July 1.
"Based on the Government's own forecasts, the car is accelerating, and at the margin its tax cuts increase the probability that interest rates will increase in 2008 and beyond," said ANZ Bank's chief economist, Saul Eslake.
Macquarie Bank's Rory Robertson agrees: "The tax cuts will boost demand, and that boosts inflation." The foot on the accelerator presses down, challenging the Reserve Bank to press down even harder on the brake.
The second strategic question looming over the Government's policy is whether, having taken the economic risk, it will reap the political reward? A Liberal strategist privately posed the party's secret fear: "Why would these cuts have a bigger political effect than the tax cuts in the May budget?"
The $36 billion in cuts in May produced no discernable improvement in the Coalition's deathly poll figures.
As the Government delivered five consecutive years of tax cuts, the political benefit has seemed to become successively smaller.
If a $36 billion four-year program of tax cuts yielded zero effect, why would a $34 billion three-year program do better?
Last week's Herald-Nielsen poll suggests tax cuts are of no interest at all to half the electorate. Asked if political parties should offer personal tax cuts in this campaign, 51 per cent of voters said yes. The other 49 per cent said no or didn't care.
Labor may decide to mimick the Government. But it also has the option to demonstrate that it can be more responsible. As Opposition leader, that's what John Howard did in response to the Keating tax policy in 1996.
The Government's quick victory in the election campaign's early battle is not sufficient to decide its fate at the end of the larger, longer war.
With the election campaign just beginning, Australian Prime Minister John Howard has promised AU$34 billion in personal income tax cuts over the next three years.  That is on top of $31.5 billion announced in May, and $36.7 billion announced in 2006.

The new tax cuts are based on new projections for growth in the Australian economy.  The Treasury estimates that the economy will expand by 4.25% in the 12 months to June 2008, up from growth of 3.75% predicted in May.

The Government has challenged the Labor opposition to announce their tax policy immediately. 

"The biggest, boldest tax plan that we've seen in a long time is presented yesterday, it deals with participation, competitiveness, building capacity in the Australian economy, and what does Kevin Rudd say? Nothing," treasurer Peter Costello said. "He better have an answer today."

Costello described the government tax policy as "very responsible" and said Rudd was a "Nothing Man" because he has not revealed Labor's tax policy.

The Shadow Treasurer, Wayne Swan, replied "The only responsible course of action here is to study the detail. We've said we'll put out all our policies well before the election and we'll do that".

"But in terms of what the Government's put forward, we will take our time to study the detail. That's the only responsible and reasonable thing to do."

Economists from Access Economics, the ANZ Bank, HSBC and Macquarie Bank noted that the tax cuts will boost demand at a time when the Reserve Bank is trying to slow the economy.  The Reserve Bank has been raising interest rates to keep the inflation rate within its target range.  Households with substantial mortgages could end up worse off.

Rudd has said the Opposition will reveal its tax policy in its own time - mimicking John Howard's approach when he was Opposition Leader in 1996.