Mark Dreyfus (Isaacs, Australian Labor Party, Cabinet Secretary) Share this | Hansard source

The government is returning the budget to surplus in 2012-13, and we will build growing surpluses over the forward estimates while also spreading the benefits of the mining boom to help families on lower 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.

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 that the economy faces these transitions from a position of strength. 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, a 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 pressures on some businesses, many are successfully adapting to the changing economic landscape and identifying and exploiting opportunities to grow and to prosper.

I now turn to some of the key initiatives of the 2012-13 budget. This budget spreads the benefits of the mining boom to help families on low and middle incomes with the cost of living, and provides much-needed help to small business while still returning the budget to surplus, as is appropriate given domestic and global economic conditions. Support to families on low and middle incomes is being provided through measures including increases to family payments, more timely and accessible education payments and a new supplementary allowance for eligible income support recipients.

Key initiatives announced in this year's budget include returning the budget to surplus on time and as promised; spreading the benefits of the mining boom; the first steps towards a National Disability Insurance Scheme; helping business to invest by allowing companies to carry back tax losses and delivering tax breaks for small business; investing in key health services; building an aged care system for the future; building a more productive workforce by investing in jobs, education and training; and building productivity by investing in nation-building infrastructure—by investing in roads, rail and ports.

The government's fiscal strategy is designed to ensure fiscal sustainability while providing the necessary flexibility for the budget position to vary in line with economic conditions. The medium-term fiscal strategy, which has remained unchanged since the government's first budget in 2008-09, is to achieve budget surpluses on average over the medium term; to keep taxation as a share of GDP on average below the level for 2007-08—that was 23.7 per cent; and to improve the government's net financial worth over the medium term.

To ensure a timely return to surplus and recovery in the fiscal position, since the beginning of the global financial crisis the government has further committed to allowing the level of tax receipts to recover naturally as the economy improves, while maintaining the government's commitment to keep taxation as a share of GDP below the 2007-08 level on average and building growing surpluses by holding real growth in spending to two per cent a year on average until the budget surplus is at least one per cent of GDP and while the economy is growing at or above trend.

Returning the budget to surplus in 2012-13 remains appropriate given domestic economic conditions. The economy is forecast to grow around trend over the next two years, the unemployment rate is expected to remain low and mining investment is expected to reach record highs. A return to surplus also recognises that fiscal policy should be set in a medium-term framework. In normal circumstances, monetary policy should play the primary role in managing demand to keep the economy growing at close to capacity, consistent with achieving its medium-term inflation target.

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