Australian Government, 2007–08 Budget

Statement 1: Fiscal Strategy and Budget Priorities

The Australian economy is currently in the longest period of continuous expansion ever recorded. Economic growth has been supported by sound fiscal management and the Government's policy reforms.

Economic growth is expected to be sustained with the Australian economy forecast to grow at 3¾ per cent in 2007-08.

An underlying cash surplus of $10.6 billion is expected in 2007-08, with further surpluses projected for the following three years.

The Intergenerational Report 2007 found that while long-term fiscal sustainability has improved since the first Intergenerational Report in 2002, demographic and other factors continue to pose substantial challenges for economic growth and long-term fiscal sustainability.

The 2007-08 Budget includes initiatives to further improve Australia's long-term economic growth and prosperity.

A high quality and responsive education system is vital to increasing skills which, in turn, boost workforce participation and productivity. The Government is introducing a comprehensive package of measures to improve Australia's education system. A key component is the establishment of a perpetual Higher Education Endowment Fund with an initial investment of $5 billion from the 2006-07 surplus. In addition, there are $3.5 billion of initiatives to promote the flexibility and diversity of the higher education sector, increase assistance for vocational education and training students, and enhance high-quality teaching and learning in Australian schools.

Building on the substantial tax reform delivered in previous budgets, the Government will further reduce personal income tax by significantly increasing tax thresholds and improving the low income tax offset. The tax cuts will increase disposable incomes for all Australian taxpayers and provide further incentives for individuals, including part-time workers, to participate in the workforce.

The Government is increasing the rates of Child Care Benefit by 10 per cent and ensuring more timely assistance by providing the Child Care Tax Rebate as a direct payment shortly after the end of the financial year. This will assist more than 700,000 families by providing access to more affordable child care.

The Government will also provide significant additional funding for road, rail and water infrastructure including funding for the second AusLink land transport plan (AusLink 2). High quality land transport infrastructure underpins Australia's productivity, economic growth and future prosperity.