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AUSTRALIA 
Budget: $7 billion in savings
Tuesday, 13 May, 2008
Prime Minister Kevin Rudd and Treasurer Wayne Swan deliver their first federal budget. (Getty)
Federal Treasurer Wayne Swan has handed down his first Federal budget.
The Government is banking on a record budget surplus in 2008/09 after slashing government spending and planning for ongoing growth in taxation revenue as companies continue to benefit from the global commodities boom, despite share market volatility and high interest rates.
Have Your Say: Is this year's Budget 'tough but fair'?
Treasurer Wayne Swan said the budget, which has been billed as an inflation fighting budget, would have a mild tightening effect on the economy.
"There is a mild tightening in this budget, for sure," Mr Swan said during the budget lockup.
"But what we've done is that we've put aside the reserves, if you like, to give us the flexibility to deal with international uncertainty and in the longer run, to make those investments for
the future."
Surplus of $21.7 billion
The first budget of the new Labor government is estimating an underlying cash surplus of $21.7 billion for the year, beating the median financial market forecast for a surplus of $20 billion.
The surplus will equate to 1.8 per cent of gross domestic product (GDP), which is better than the government's own projection of at least 1.5 per cent of GDP and its best level in about 10years, assuming the economic outlook will remain positive.
The surplus will be built on $7 billion in government savings across its departments and takes into account more moderate real GDP growth of 2.75 per cent over the year, down from an estimated 3.5 per cent in 2007/08.
"Weaker global growth and the effects of monetary policy are slowing our economy," Mr Swan told parliament.
"Eight interest rate rises in three years and the global slowdown are expected to see growth in our economy moderate."
Mr Swan said Australia faced countervailing economic forces as it battled high inflation at home and economic turbulence overseas.
Inflation still a concern
But he said inflationary pressures would ease in the year ahead as the budget spending cuts worked with the government's move to increase capacity in the economy.
"These are all things that demonstrate a degree of rigour which has not been evident in policy in the last four or five years," Mr Swan said.
Treasury has forecast the consumer price index (CPI) inflation at a year average of 3.5 per cent in 2008/09, down from an estimated four per cent in 2007/08. Tighter fiscal and monetary policies would gradually ease underlying inflation down from its recent 16 year high of 4.2 per cent.
The government sees household consumption growth moderating to 2.75 per cent next financial year.
The government revealed a $55 billion Working Families Support Package, which for the most part encompasses promised tax cuts over four years and other measures flagged prior to tonight's budget, such as increases in the Medicare levy surcharge and child care tax rebate.
On the revenue side, it expects a total of $319.464 billion in 2008/09, up from an estimated $303.831 billion this year.
Growth on tax revenue
Taxation revenue is expected to grow by a real 0.9 per cent year on year to $299.2 billion.
"Individuals' incomes, including from unincorporated businesses and property, are expected to grow strongly," the papers said.
"Company profits are forecast to to be higher, reflecting further strong rises in commodity prices."
Those gains may be partly offset by reduced capital gains due to share market falls and higher interest expenses for business.
Business investment is expected to grow by 8.5 per cent in 2008/09, down from an estimated 9.5 per cent this year.
The budget papers caution that, business is still facing higher labour and materials costs and that a further deterioration in global capital markets could impact funding rates.
Source: SBS staff and agencies
The Government is banking on a record budget surplus in 2008/09 after slashing government spending and planning for ongoing growth in taxation revenue as companies continue to benefit from the global commodities boom, despite share market volatility and high interest rates.
Have Your Say: Is this year's Budget 'tough but fair'?
Treasurer Wayne Swan said the budget, which has been billed as an inflation fighting budget, would have a mild tightening effect on the economy.
"There is a mild tightening in this budget, for sure," Mr Swan said during the budget lockup.
"But what we've done is that we've put aside the reserves, if you like, to give us the flexibility to deal with international uncertainty and in the longer run, to make those investments for
the future."
Surplus of $21.7 billion
The first budget of the new Labor government is estimating an underlying cash surplus of $21.7 billion for the year, beating the median financial market forecast for a surplus of $20 billion.
The surplus will equate to 1.8 per cent of gross domestic product (GDP), which is better than the government's own projection of at least 1.5 per cent of GDP and its best level in about 10years, assuming the economic outlook will remain positive.
The surplus will be built on $7 billion in government savings across its departments and takes into account more moderate real GDP growth of 2.75 per cent over the year, down from an estimated 3.5 per cent in 2007/08.
"Weaker global growth and the effects of monetary policy are slowing our economy," Mr Swan told parliament.
"Eight interest rate rises in three years and the global slowdown are expected to see growth in our economy moderate."
Mr Swan said Australia faced countervailing economic forces as it battled high inflation at home and economic turbulence overseas.
Inflation still a concern
But he said inflationary pressures would ease in the year ahead as the budget spending cuts worked with the government's move to increase capacity in the economy.
"These are all things that demonstrate a degree of rigour which has not been evident in policy in the last four or five years," Mr Swan said.
Treasury has forecast the consumer price index (CPI) inflation at a year average of 3.5 per cent in 2008/09, down from an estimated four per cent in 2007/08. Tighter fiscal and monetary policies would gradually ease underlying inflation down from its recent 16 year high of 4.2 per cent.
The government sees household consumption growth moderating to 2.75 per cent next financial year.
The government revealed a $55 billion Working Families Support Package, which for the most part encompasses promised tax cuts over four years and other measures flagged prior to tonight's budget, such as increases in the Medicare levy surcharge and child care tax rebate.
On the revenue side, it expects a total of $319.464 billion in 2008/09, up from an estimated $303.831 billion this year.
Growth on tax revenue
Taxation revenue is expected to grow by a real 0.9 per cent year on year to $299.2 billion.
"Individuals' incomes, including from unincorporated businesses and property, are expected to grow strongly," the papers said.
"Company profits are forecast to to be higher, reflecting further strong rises in commodity prices."
Those gains may be partly offset by reduced capital gains due to share market falls and higher interest expenses for business.
Business investment is expected to grow by 8.5 per cent in 2008/09, down from an estimated 9.5 per cent this year.
The budget papers caution that, business is still facing higher labour and materials costs and that a further deterioration in global capital markets could impact funding rates.
Source: SBS staff and agencies
