Australia's Howard lures voters with tax promise

CANBERRA, Oct 15 (Reuters) Australian Prime Minister John Howard, facing crushing defeat at a November election, promised A billion (30 billion dollar) in tax cuts today if returned by voters as he fired the first shots in a tough six-week campaign.

The tax cuts would be delivered on the back of stronger than expected economic growth, which will bring the government a budget windfall of some A12.5 billion Australian dollars over the next four years.

With polls pointing to an opposition Labor landslide, Howard's deputy, Treasurer Peter Costello, said the conservative government would deliver tax cuts worth A20 Australian dollars a week to ordinary wage earners from July 2008, rising to A35 Australian dollars a week in 2010.

''This plan is all about further building and growing the Australian economy, it's about creating more not less jobs,'' Howard said in his first big campaign promise, warning the boom times would be at risk if Labor took office.

Costello predicted Australia's economy would grow by 4.25 per cent in 2007/08, up from a previous estimate of 3.75 per cent, but inflation would remain within the central bank's 2-3 percent target band, he said.

Opinion polls on Monday showed Opposition Leader Kevin Rudd's Labor party ahead of the conservative government by 56 per cent to 44 percent.

Howard, 68, is fighting to overturn a mood among voters for change despite the country enjoying a 16-year expansion, unemployment at 33-year lows and previous tax cuts worth A0 billion (100 billion dollars).

RATE HIKES BLUNT PITCH But Howard's pitch of continued prosperity and more jobs has been blunted by a string of interest rate hikes to 6.5 per cent, hurting bedrock conservative support in mortgage-saddled outer city suburbs, which both sides call ''aspirational'' belts.

The Newspoll survey showed support for Rudd, 50, a Mandarin-speaking former diplomat who may bolster ties with China, was strengthening as preferred prime minister, with 48 percent believing he would do better than Howard.

The centrepiece of Rudd's campaign is a call for ''New Leadership'', stressing generational change over Howard and pledging sweeping reforms to health, education and controversial labour laws, while maintaining economic conservatism.

The election will determine the future of Australia's military contribution in Iraq and climate change stance, with Labor promising to bring home combat troops and sign the Kyoto Protocol. But the poll will be fought and won on domestic issues.

Rudd, who needs an imposing 16 more seats to take power in the 150-seat lower house, said he would release his tax policy later in the campaign for the Nov. 24 election.

Markets have so far remained unmoved, with the Australian dollar touching 23-year highs despite Howard's warning of an economic slide if Rudd's Labor wins power.

HSBC chief economist John Edwards said the tax cuts were far larger than he expected.

''It's a direct challenge to the Reserve Bank and I do think it puts Australia's inflation experience and the durability of the expansion at risk,'' Edwards said.

However, Deutsche Bank economist Tony Meer said tax cuts were affordable as tax receipts had been far larger than expected.

REUTERS SS AS1212