Statement 1: Budget Overview (Continued)
Introduction
The recent natural disasters have had a devastating impact on affected individuals and communities. They have also had a substantial impact on the Australian economy and the Government's fiscal position, although the economic impacts will be temporary.
Australia's medium‑term prospects remain strong, with the economy expected to grow at an above‑trend rate over the next two years, unemployment forecast to fall and the budget still on track to return to surplus in 2012‑13.
While the high Australian dollar and legacy effects from the global financial crisis are weighing particularly heavily on some sectors, the overall growth outlook is strong.
Sustained high prices for our mineral resources underpin record investment intentions in the mining sector and strong forecast growth in commodity exports.
This is expected to drive strong growth in the overall economy and employment. With the unemployment rate already low, capacity pressures are expected to re‑emerge.
It is important that fiscal policy doesn't compound these pressures, which is why the Government has delivered savings to pay for its new spending, including the cost of the recent natural disasters, and to return the budget to surplus.
The expected underlying cash deficit for 2011‑12 is $22.6 billion (1.5 per cent of GDP), with a surplus of $3.5 billion (0.2 per cent of GDP) in 2012‑13 (Table 1). The return to surplus in two year's time has been achieved despite the impact of natural disasters and a weaker near‑term outlook for tax receipts.
Table 1: Budget aggregates
- Excludes expected Future Fund earnings.
The Government has paid for its new spending, including the cost of the recent natural disasters, by making $22 billion in savings. This has provided scope for the Government to continue to expand the economy's productive capacity and to deliver reforms in a number of key areas.
The Budget responds to Australia's workforce needs through investments in skills and training that are more targeted to the needs of industry, and other measures to boost participation to ensure there are opportunities for all Australians to experience the benefits of work.
It delivers long‑term reform to mental health to help those who have a mental illness get the care they need, and to support their families and carers. It also invests in services to support growth in our regions including health and hospital infrastructure.
It further strengthens the school system by recognising and rewarding great teachers and supporting all students, no matter where they live and what challenges they face, to achieve their best.
It builds on past initiatives to provide extra support for those families most in need, when they need it. It also contains measures to assist small businesses and manufacturers by providing more opportunities for them to prosper.
The Budget delivers on these priorities while supporting communities affected by the recent natural disasters, delivering on our election commitments and returning the budget to surplus in 2012‑13.
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