This is an edited version of the speech by the Treasurer, Wayne Swan.
THIS budget is designed to meet the big challenges of the future.
It is a budget that strengthens Australia's economic foundations and delivers for working families under pressure.
It is the responsible budget our nation needs at this time of international turbulence, and high inflation at home. A budget carefully designed to fight inflation, and ensure we meet the uncertainties of the future from a position of strength.
A budget with a $55 billion working families support package at its very core.
A budget that begins a new era of strategic investment in Australia's future challenges and opportunities.
And a budget that helps plan, finance and secure Australia's long-term national security and defence needs.
These are the commitments the Government gave to the Australian people at the election. This budget honours those commitments.
The Government has made sure every single cent of new spending for the coming year has been more than met by savings elsewhere in the budget.
Our commitments have been honoured by redirecting spending. Difficult spending cuts have helped fund our working families support package and our new priorities for the nation.
We are budgeting for a surplus of $21.7 billion in 2008-09, 1.8 per cent of gross domestic product, the largest budget surplus as a share of GDP in nearly a decade.
This honours and exceeds the 1.5 per cent target we set in January, without relying on revenue windfalls.
It is a surplus built on substantial savings of $33 billion over four years, including $7 billion in 2008-09 alone.
And it is a surplus built on disciplined spending, with the lowest real increase in Government spending in nearly a decade - spending growth which is one-quarter of the average of the previous four years.
We need a strong surplus to anchor a strong economy, to do our bit to ease inflationary pressures in the economy, to build a buffer against international turbulence, and so we can fund ongoing long-term investment in the ports, roads, railways, hospitals, universities and vocational education we need to deliver growth with low inflation into the future.
These are challenging times. Countervailing forces are creating high inflation at home and economic turbulence abroad.
Weaker global growth and the effects of monetary policy are slowing our economy.
Inflation has increased in recent years, pushing up interest rates, and putting more pressure on families. Eight interest rate rises in three years, and the global slowdown, are expected to see growth in our economy moderate to 2¾ per cent in 2008-09.
Potent forces in the global economy are pushing Australia in opposite directions.
Slower growth in the United States and turbulence in world financial markets are affecting many countries, including our own. At the same time, the prices of our exports are rising strongly, when domestic inflationary pressures are already high.
Robust growth in emerging economies, particularly China and India, is expected to drive further large rises in Australia's terms of trade, boosting income and price pressures. The terms of trade are anticipated to rise by over 20 per cent by the end of this year. This will be the largest increase in a generation, lifting nominal economic growth to 9¼ per cent, the highest rise in 19 years.
The Australian economy is enjoying its 17th year of growth, now spanning three governments. But productivity growth over the last five years has averaged 1.4 per cent a year, the lowest in 17 years. And capacity constraints have put upward pressure on inflation.
When the Government came to office less than six months ago Australia was facing the highest levels of domestic inflation in over 16 years, and inflation reached 4.2 per cent in the March quarter. The price of bread has risen over 18 per cent in the past two years alone.
Inflation is a drag on growth. It saps confidence and hurts families and businesses. We are working to put downward pressure on inflation so that we can ease the cost of living and interest rate pressures on working families.
Our nation also faces
longer-term challenges and opportunities, in the form of an ageing population, the economic effects of the rise of China and India, and the consequences of climate change.
With careful, responsible economic management, we are confident we can meet these challenges.
In framing this budget, foremost in our considerations are the Australians who work hard, pay their taxes, and demand little more than a fair go.
This Government understands the stress on working families in these difficult times.
More and more family income is being eaten away in mortgage repayments, rent, groceries and petrol - leaving so many families feeling the pinch.
That's why a key priority of this budget is to deliver the working families support package. The $55 billion package comprises targeted initiatives in tax, child care, education, housing and other essential components of family budgets.
For too long working families have watched the proceeds of the boom directed elsewhere, in the form of tax cuts skewed to those already doing very well.
Tonight we tip the scales in favour of working families.
The Government will fully implement our promise to
reduce personal income tax by $47billion over four years. This tax cut is directed to low- and middle-income families - the backbone of the economy.
These tax cuts will allow
low-income earners, including part-time workers, to keep more of their income and ease the financial pressure on families. And they will provide further incentives to participate in the workforce.
From July 1 a worker on $48,000 - average weekly earnings - will receive a weekly tax cut of $20. And low-income workers earning $14,000 or less will pay no tax at all.
We will make the Medicare levy surcharge fairer. The Government will increase the income thresholds from $50,000 to $100,000 a year for singles and from $100,000 to $150,000 a year for couples.
The longer our nation's economic challenges are neglected, the harder it will be to deal with them. In implementing our new vision for the nation's economic future we don't have a moment to waste.
I'm confident Australians will see this as the budget our nation now needs, to beat inflation, and lay the foundation for future growth.
It is the beginning of a long-term plan to build a stronger economy that delivers for working families.
A coherent package of reforms based on four principles: honouring our commitments, delivering for working families, investing in the future and beginning the new era of economic responsibility we need to sustain growth in challenging times.
The Rudd Government's first budget lays the foundation for a modern and competitive economy that can meet the challenges of the 21st century with optimism, and with confidence.
It is a Labor budget for the nation, for Australia's future, for all Australians.
