Tonight's budget set out to please many and to upset few.

The Treasurer, Wayne Swan, talks tough. He trumpets it as a budget to "fight inflation first," yet it is a budget that actually squibs the fight.

How? It will tip over $15 billion into taxpayers' incomes in 2008-09. Plus, this budget will increase overall Federal spending, after adjusting for inflation, by 1.1 per cent.

These are both measures that will stimulate demand and add to inflation.

Swan declared yesterday that the budget delivered a "mild tightening." But, in truth, the budget is stimulatory. It will add to inflation, not fight it. That leaves the Reserve Bank to do the tightening instead.

And, despite the Robin Hood rhetoric of taking from the rich to give to Rudd's "working families," in truth, the rich emerge from this budget unscathed and, on some measures, better off.

The budget does give generously to the "working families" previously known as Howard's battlers.

The "typical working family" illustrated in Government budget pamphlets has a primary breadwinner - Patrick - earning $60,000 and Susie - earning $27,000 and their two young kids will receive total new benefits worth $4,160.

This comprises tax cuts worth $1,050, an education tax refund of $375, plus an increase in the child care rebate worth $1,255, and benefits through the first home saver account of $1,480.

Altogether, that's an increase in Patrick and Susie's disposable income of 4.8 per cent a year.

Although much Rudd Government rhetoric gives the impression that it is taking a stern approach to upper-income earners, it is not imposing any real penalty.

The budget does indeed impose a means test on the baby bonus and family tax benefit part B, denying these benefits to anyone earning over $150,000.

A household with an income of $200,000 a year, one stay-at-home spouse and two young kids will lose a tax benefit worth $118 a week under this measure.

This, Swan said yesterday, was the toughest decision of the entire budget. But offsetting this is the fact that that same family will receive a tax cut worth $50. So the net loss from the budget will be $68 a week. That's a loss of 1.7 per cent. It's real, but it's very modest. Few families in this income bracket will cancel the family holiday as a result.

But look two years ahead. The gathering value of the tax cuts will give an annual benefit of $6,050 a year to this family on $200,000, completely cancelling out the loss of the family tax benefit part B. Not so tough after all.

In its first budget, a new government should be ambitious. Rudd seems to be concentrating on popularity rather than ambition in the national interest.

Listen in to Ross Gittins audio analysis

http://www.smh.com.au/interactive/2008/national/ross-gitt ins-federal-budget-2008/index.html