Statement 1: Budget Overview (Continued)
Introduction
The Government is returning the budget to surplus in 2012‑13 and will build growing surpluses over the forward estimates, while also spreading the benefits of the mining boom to help families on low and middle incomes and small business.
A return to surplus, which will be achieved ahead of any major advanced economy, will sustain confidence in the strength of Australia's public finances, by demonstrating the Government's commitment to fiscal discipline and by providing a buffer at a time when the global economy remains fragile.
A return to surplus is appropriate given domestic economic conditions and will provide ongoing scope for monetary policy to respond to economic developments. The economy is forecast to grow around trend over the next two years, with low unemployment, contained inflation, and record levels of mining investment.
While global financial market tensions eased in the early months of 2012, after the period of acute instability in late 2011, there are still substantial downside risks to the global economic outlook. In particular, many advanced economies still face the significant task of generating growth while at the same time placing public finances on a sustainable footing.
The global economy is also undergoing dramatic structural changes, as the weight of economic activity moves towards Asia. Successfully adapting to changes in the global economy will allow Australia to convert the significant opportunities of the Asian Century into lasting prosperity over the medium and long term.
The Australian economy continues to be affected by the fragile and changing nature of the global economy. However, Australia's success in supporting the economy and jobs during the global financial crisis means the economy faces these transitions from a position of strength.
The Australian economy has grown significantly above its pre‑crisis level of output and continues to perform solidly against this weak and uncertain global backdrop. Australia's medium‑term prospects are healthy, with continued strength in business investment, particularly in the resource sector, expected to drive overall growth in the economy.
Strong growth in the resources sector will directly and indirectly support growth in other parts of the economy. However, conditions in some parts of the economy are likely to remain challenging, with unsettled global conditions, the high Australian dollar, ongoing consumer caution and changes in expenditure patterns all expected to weigh heavily on some sectors.
While these forces are placing considerable pressure on some businesses, many are successfully adapting to the changing economic landscape, identifying and exploiting opportunities to grow and prosper.
Overall, Australia's economic outlook remains positive, with the economy forecast to grow around trend over the next two years, the unemployment rate expected to remain low and inflation likely to remain well contained.
While tax receipts continue to recover from their post‑crisis trough, the recovery has not matched that of nominal GDP. This reflects a number of factors including structural changes in the tax base and the unsustainable peaks in tax receipts reached prior to the global financial crisis. Tax as a proportion of GDP in 2011‑12 and the previous two years is the lowest it has been since 1993‑94.
Since the Mid‑Year Economic and Fiscal Outlook 2011‑12 (MYEFO), the impact of the uncertain global economy on asset prices, lower than expected company tax collections relating to the 2010‑11 income year and consumer caution have resulted in further write‑downs to tax receipts of $28.0 billion over the four years from 2011‑12.
Despite the write‑down in revenue, the Government is returning to surplus, and creating room for new investments, by making $33.6 billion of savings.
The savings in this Budget are targeted and responsible, protecting the most vulnerable and frontline services.
The underlying cash surplus is expected to be $1.5 billion (0.1 per cent of GDP) in 2012‑13, rising to $7.5 billion (0.4 per cent of GDP) by 2015‑16. This follows a revised deficit of $44.4 billion (3.0 per cent of GDP) in 2011‑12 (Table 1).
Table 1: Budget aggregates
(a) Excludes expected Future Fund earnings.
This Budget spreads the benefits of the mining boom to help over 1.5 million families on low and middle incomes with the costs of living, through measures including targeted increases to family payments, and supports low‑income earners with a new Supplementary Allowance for eligible income support recipients. It will also help provide much needed help for businesses struggling with an economy in transition.
It provides more timely and accessible education payments to parents, so that all eligible families will receive assistance with their children's education costs.
It supports businesses to adapt to the high dollar by introducing loss carry‑back reforms for companies to help them finance the investment, training and restructuring needed to improve competitiveness. This builds on the instant asset write‑off which will support all small businesses, driving investment and productivity.
It commits to the first stage of a National Disability Insurance Scheme, which will fund reasonable and necessary care and support for people in launch locations who suffer significant and permanent disability.
It reforms the aged care system, by improving access to services, providing greater incentives for investment in the sector, and directing resources to those most in need.
It invests in dental services to treat those on public dental waiting lists and strengthens the dental workforce in the public sector and in areas of need to ensure those on low incomes will have better access to dental health care.
It builds on past investments in education to improve outcomes for students from early childhood to university.
It invests in high‑quality infrastructure projects, to expand capacity and boost productivity.
It invests around $3.4 billion over ten years to work in partnership with Aboriginal people and the Northern Territory Government to continue efforts to Close the Gap in Indigenous disadvantage.
The Budget delivers on these priorities while returning the budget to surplus in order to further strengthen confidence in Australia's economy, and to ensure the Government can continue to make important investments for the future.
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