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Senate hurdle for Rudd's budget

AUSTRALIAN Prime Minister Kevin Rudd is seeking to reassure debt-wary voters that soaring national deficits will be temporary after a key independent senator threatened to block parts of his second budget.

Rudd's Labor government is expected to use today's budget to curb payments to middle-income families, while giving more money to elderly pensioners, although media reports said single mothers on welfare may miss out on the handouts.

But Nick Xenophon, whose vote the government may need to pass laws through a difficult Senate, said any move to increase pension payments for the elderly would also need to boost welfare payments to sole-parent families.

"My position is very clear - you can't have a society of haves and have-nots. You can't have one class of pensioners getting an increase and another class not getting an increase," Xenophon said.

If the conservative opposition votes against the budget measures, Rudd will need support from Xenophon, one other independent, and five Greens to pass his budget laws through a Senate providing headaches for Rudd on a raft of issues.

Australian voters, conditioned by a decade of surpluses, generally punish governments which run up large debts or mismanage the economy, and Rudd will want the budget to secure his economic credentials in case he opts for an early election.

The next election is due in late 2010, but Rudd may have the option of calling a vote earlier if the Senate blocks his laws to fight climate change or lift taxes on alcoholic drinks targeted at young people.

The government has said the budget will target middle-class welfare payments, such as rebates for the cost of private health insurance, to pay for spending and promised tax cuts.

Rudd will also commit to fund paid maternity leave from 2011, and is expected to outline new stimulus measures to help Australia through a looming recession, including up to A$25 billion (US$19 billion) in new infrastructure projects.

But economists expect the budget will unveil a record deficit for the 2009/10 financial year. Rudd said all countries were running deficits to ward off the global downturn.


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