By figuring out who got what piece of the excess revenue that was generated by lower unemployment and the China-led resources boom since 2004, we get a better idea of the reform hurdles ahead for the Rudd Government. Assuming that no government will want to take money off people, how do you fix a system that is, in many respects, overly generous?

The mixed result in the analysis of Australia’s tax and handout system shows how much further the Rudd Government has to go in order to achieve its stated goal of a simpler, fairer and more jobs-friendly regime. The analysis shows that 97,000 families in the top half of the income ladder lost family payments because of the budget. However, the clawback was offset by 53,000 new family payment recipients coming from the bottom half of the ladder, due to other tax changes.

Opening question time today, Opposition Leader Malcolm Turnbull challenged the Prime Minister to explain what he was doing to fireproof the economy in the wake of the crash of Wall Street giant Lehman Brothers. But Treasurer Wayne Swan accused Mr Turnbull of vandalising the surplus by blocking budget measures in the Senate.

This week saw big problems emerge for the Labor Party in New South Wales and Western Australia, while federally the Nationals shrank even further with the loss of Lyne. In the Senate, Steve Fielding voted down the luxury car tax increase, while in the United States, Sarah Palin has garnered an immediate and positive reaction.

Family First senator Steve Fielding sided with the Coalition this morning to vote down the increase in the luxury car tax at the second reading, 34 votes to 33. Senator Fielding had wanted to exempt farmers and those in the tourism industry who use cars, worth more than the tax threshold of $57,180, as tools of trade.

Wayne Swan today called the news that Wizard Home Loans had cut its variable rate from 9.54 to 9.29 per cent a “wonderful weekend surprise” and said other banks would soon have no choice but to follow. Mr Swan said banks had passed on previous official rate rises “in a nano-second” and should pass on any cuts just as quickly.

After weeks of escalating complaints about its emissions trading scheme, the Rudd Government has agreed to work with the major polluting industries to find a fairer way of distributing compensation in the early years of the scheme. The Government had been warned that its proposed formula might seriously harm the economy.

The Rudd Government faces a dilemma with no escape: it must either alienate the green lobby and climate-change believers to whom it has pandered, or proceed without sufficient support from corporate Australia in the teeth of warnings about corporate financial risk. The second option is unthinkable.

Although he ruled out a direct challenge for the Liberal leadership, the former treasurer did not answer any questions on whether he would accept an overture to accept the leadership if Brendan Nelson quit. Mr Costello had previously indicated to colleagues that he might enter the fray if Malcolm Turnbull launched a challenge against Dr Nelson.

The Opposition Leader said that the Coalition’s “natural disposition” was to support anything that would reduce the harm associated with drug and alcohol abuse. “But having examined the evidence which led to this particular budget initiative, we have made a decision that we will not be supporting the excise increase,” he said today.