The Economic Statement released today shows the Australian economy continues to lead the developed world, with a strong employment outlook and the Budget on track to return to surplus in three years, three years early and comfortably ahead of any major advanced economy.
The Economic Statement also shows a modest improvement in the surplus expected to be reached in three years time, as well as dramatically lower debt than any major advanced economy.
These strong results come despite increased uncertainty around the global economic outlook arising from sovereign debt issues in Europe in particular and an uneven global economic recovery.
Responsible economic management during the global financial crisis meant Australia was almost alone among advanced economies in avoiding recession, leaving our economy in a strong position to withstand any intensification in global stresses.
Real GDP is expected to grow solidly by 3 per cent in 2010 ‑11 and 3¾ per cent in 2011‑12, slightly lower than anticipated at Budget, although still stronger than advanced economies as a whole.
Nominal GDP is expected to be slightly stronger in 2010 -11 than forecast at Budget, reflecting higher prices for key commodity exports and a higher terms of trade.
Australia's labour market has continued to outperform other developed economies, with a remarkable 353,000 jobs added in the past year and strong employment growth expected to continue. Australia's unemployment rate, which is already lower than any of the major advanced economies, is still expected to fall further to 4¾ per cent in late 2011‑12.
The Government is still projecting a return to Budget surplus in 2012 ‑13 – ahead of any of the major advanced economies. This represents the fastest fiscal consolidation in Australia since at least the 1960s and puts Australia at the forefront of global fiscal consolidation efforts.
The Government remains committed to maintaining strict budget discipline, including restricting real spending growth to 2 per cent a year on average until the surplus has reached 1 per cent of GDP.
Australian Government net debt is expected to peak slightly lower than anticipated at Budget at 6 per cent of GDP in 2011‑12, and fall to 5.3 per cent of GDP by the end of the forward estimates. In comparison, the collective net debt of the major advanced economies is expected to reach 94.2 per cent of GDP in 2015.
This Economic Statement provides further details of the breakthrough agreement on resource taxation reached by the Prime Minister, which will apply from 1 July 2012.
The new resource tax arrangements will provide $10.5 billion which will fund an historic boost to superannuation, further investment in world-class infrastructure, business tax cuts including a $5000 up‑front tax break per item for small businesses and personal tax simplification.
These major economic reforms will broaden and strengthen our whole economy, boost our pool of national savings and help our country take full advantage of the opportunities presented by strong growth in our region.
While our national economy is strong and our country has done well to fight off the global recession, we understand that many Australians still face financial pressures.
That's why the Government has been determined to deliver cost-of-living relief wherever possible, including through our third round of tax cuts starting from 1 July this year, as well as improvements to the Child Care Rebate, the Education Tax Refund and an historic boost to the age pension.
The Government will continue to strengthen our economy so we can return to surplus three years early, keep Australians in work and move our country forward with confidence.
The Economic Statement is available at http://www.budget.gov.au/2010-11/content/economic_statement/html/index.htm
14 July 2010