The Australian economy is entering its 25th year of economic growth, something few other developed economies have done. Employment has been growing and consumers are benefitting from lower prices and interest rates.
The global economy is starting to recover as major economies continue to strengthen and India and China continue to grow.
The lower Australian dollar, combined with free trade agreements with the important export markets of China, Korea and Japan, will open opportunities for Australian exporters. The agreements with these three countries are worth more than $6 billion in tariff reductions.
Household and business incomes have been affected by the fall in commodity prices with declining demand from China for some key Australian exports. This has put some pressure on government revenue.
LOWER IRON ORE PRICES
A key commodity for Australia
Australia produces around a third of the world’s iron ore. It has been a key driver of Australia’s economic growth and national income during the past decade.
Demand is lower and so are prices
Because of increased supply and lower demand, the iron ore spot price is almost half of what it was a year ago.
Less revenue for Australia’s budget
The fall in iron ore prices means lower profits for mining companies, so they hire fewer people, use fewer services, and pay less tax. This has a direct effect on tax revenue from mining companies, and on overall economic activity in Australia.
A CREDIBLE PATH TO SURPLUS
A lower deficit every year
Despite falls in revenue, the Government will continue to reduce the budget deficit each year. This will see the deficit fall from $35.1 billion in 2015–16 to $6.9 billion in 2018–19.
New spending for productivity
New spending in this Budget aims to invest in Australia’s future: increasing workforce participation, creating the environment for small businesses to establish and thrive, and making the tax and welfare systems fairer.
There’s more to do
There is still more to do. The Government is committed to returning the budget to surplus as soon as possible.