Statement 1: Budget Overview
The Government is returning the budget to surplus in 2012‑13, on time and as promised, with surpluses growing over the forward estimates. This Budget delivers on the Government's fiscal strategy while also spreading the benefits of the mining boom to help families on low and middle incomes and small business.
A return to surplus, ahead of any major advanced economy, sends a strong message to international investors on the Government's commitment to fiscal discipline, and provides a buffer in uncertain global economic times. While global financial stresses eased somewhat in the early months of 2012, after the period of acute instability in late 2011, conditions remain weak and fragile, with many advanced economies still facing a significant task of generating growth and placing public finances on a sustainable footing.
A small surplus in 2012‑13 is appropriate given domestic economic conditions and will provide ongoing scope for monetary policy to respond to economic developments. Australia's economy is expected to outperform the major advanced economies over the next two years. The economy is forecast to grow around trend, with low unemployment, contained inflation, record levels of mining investment, and very low levels of Government debt.
The Australian economy continues to be affected by the dramatic structural changes underway in the global economy, as the weight of economic activity moves towards Asia. Resource prices and the Australian dollar are expected to remain elevated by historical standards. However, the high dollar, cautious consumer and ongoing global uncertainty are expected to weigh heavily on some parts of the economy outside of the resources‑related sectors.
In response to these challenges, this Budget spreads the benefits of the mining boom to help low and middle‑income families, through increased payments to families, and an allowance for eligible income support recipients. It also supports businesses to meet the challenges and opportunities of the mining boom through a loss carry‑back reform which builds on the instant asset write‑off due to start on 1 July 2012.
This Budget also launches the first stage of the historic National Disability Insurance Scheme, strengthens the aged care system, and improves dental services.
Notwithstanding a further write‑down in tax receipts, the Government is delivering these priorities while still returning the budget to surplus by making $33.6 billion in targeted and responsible savings. Following a revised underlying cash deficit of $44.4 billion (3.0 per cent of GDP) in 2011‑12, a surplus of $1.5 billion (0.1 per cent of GDP) is expected in 2012‑13, growing to $7.5 billion (0.4 per cent of GDP) in 2015‑16.
This Budget delivers on the Government's fiscal strategy, assists families and sectors of the economy in responding to current challenges, and gets the long‑term settings right so that the entire Australian community can take advantage of the significant opportunities of the Asian Century from a position of strength.
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