Responsible economic management

Fiscal strategy

A strong surplus in 2008‑09 is required to:

• bear down on inflationary pressures in the economy
• provide funds for long term investment in the infrastructure, education and training, and health and hospital needs of the nation
• ensure a strong budget at a time of heightened uncertainty in the global economy.

The Budget honours the Government's commitment to responsible economic management. The Government is budgeting for a surplus in 2008‑09 of 1.8 per cent of GDP, with all tax receipt

windfalls since the election banked, rather than spent. Global financial market turbulence has limited the extent of upward revisions to taxation receipts from commodity price rises.

Spending growth has been reined in to 1.1 per cent in 2008‑09, the lowest growth rate in nine years.

Responsible spending

Spending has been reprioritised to implement election commitments in areas like health, child care and education to meet the needs of a modern Australia. New spending in 2008‑09 is offset by spending cuts.

Funding future challenges

The Government will establish a Building Australia Fund, an Education Investment Fund and a Health and Hospitals Fund, using the 2007‑08 and 2008‑09 budget surpluses, and future surpluses as appropriate, to finance investment in infrastructure, education and health for our future.

Reducing the tax share

The Government has reduced tax as a share of GDP from 24.7 per cent in 2007‑08 to 23.8 per cent in 2008‑09. This meets the Government's medium term objective of keeping taxation as a share of GDP on average below the level for 2007‑08.