JOHN Brumby must be really worried that election spending could end up sending Victoria into deficit. It's hard to see any other reason why he would risk losing office by offering such a small cut to his one big retail tax.
Ted Baillieu is not so constrained; maybe that should worry us more. The Coalition's spending promises are ambitious. Its pledge to cut stamp duty revenue by $750 million over four years must push it closer to, or even over, the line where, to keep the budget in surplus, it must decide which promises to break.
Labor's handout is highly targeted. First home buyers are at most 20 per cent of the market. Those buying outside Melbourne are at best 6 per cent. Even on Brumby's figures, those building new homes will average 4000 a year 2.5 per cent of all buyers.
The Coalition's cut is broader, but shallower. It will go to all first home buyers, whether in Melbourne or the regions, and whether they are building or just buying an existing home. It covers 20 per cent of buyers, but even at full strength from 2014, offering only half as much as Labor gives its smaller group.
Many economists will tell you this is bad policy. They argue that first home buyers bid whatever they can afford, so their tax cuts will just push up house prices, to no benefit. I respectfully disagree.
How can a handout to 20 per cent of home buyers change what the other 80 per cent would bid? Both policies would help cash-poor first home buyers compete with rental investors, who get tax breaks of $5 billion a year from Canberra.
One big strength of the Brumby government is that its own handouts to first home buyers are targeted to those building homes, so they add to housing supply rather than just demand. By contrast, Baillieu's cuts would add to demand only.
Labor's plan would push more building out of Melbourne into Geelong, Ballarat and Bendigo where it has eight marginal seats to defend. It would also add to the trend, as The Age reports today, for Melbourne's development to leapfrog the urban growth boundary into towns such as Bacchus Marsh, Gisborne and Wallan.
But surely first home buyers facing Melbourne prices need help as much as those further out. Labor's tax cuts would give back just 1 per cent of stamp duty revenue, the Coalition 5 per cent.
That is self-denying austerity. It suggests that the state's wallet must be almost empty.
