Deputy Prime Minister and Treasurer
3 December 2007 - 27 June 2013
SUBJECTS: Budget 2012-13
I can see a lot of familiar faces around the room. There's plenty of people who have been here four times previously. So I think we ought to get on with it, I think we've been through a lot together and of course we have over the past four years. We've been through the wildest ride in the global economy since the Great Depression of the 1930s. And of course during that period we've looked over the abyss, we've seen economic bloodbaths and we've seen social tragedies in many other countries. But what we have seen here in Australia is a remarkable resilience.
Now, I won't go through all the details again, you can read them in the Budget papers, but the story of Australia over the past five years in quite a remarkable story. I think many will remember when I stood here in 2009, when we expected that growth would fall below zero and global demand was falling off a cliff and all we could see was deficits each year of the forward estimates. And today I can stand here and say we are coming back to surplus with an economy which is expected to outperform every other major developed economy.
Our unemployment rate is expected to remain low, half of Europe, lower than the United States, and more Australians are bringing home pay packets than ever before. And of course investment is heaving in resources, and we've got contained inflation which means the RBA has been able to cut interest rates.
Now, for all the talk of boom times, many Australians find themselves removed from that reality. They don't feel that this boom is their boom and what this Budget is really about is giving more Australian's a stake in our future prosperity.
So I am deeply proud of the cost of living package that this Budget delivers, spreading the benefits of the boom right across the country. Therefore it's a Labor Budget to its bootstraps. It's about looking after people on low and middle-incomes, and the most vulnerable, it's about business and it's about fostering sustainable economic growth.
Now, whether it's by making sure that low and middle income earners are protected as we go about our savings exercise or whether it's by putting in place the really big Labor reforms that ensure we're holding true to the fair go. Or whether it's by the investments we're making in our people or in their skills. What we are doing is delivering opportunity to a wide of Australians and in particular by delivering a surplus, not only providing scope for interest rate relief, but building a stronger economy at the same time. Because ultimately all of this is about building a strong economy – supporting jobs, growing wealth – it's the very best thing we can do for all Australians.
Now the resilience of the Australian economy was on display during the global downturn, but we've also seen it there during 2011. Not only were we hit in 2011 by the worst natural disasters in our history, we were buffeted by the worst bout of global instability since the Global Financial Crisis. Now despite all of those events we've continued to grow solidly and growth is expected to return to around trend growth over the forecast period.
GDP growth is forecast to be 3.25 per cent in 2012-13 and 3 per cent in 2013-14. Now that outperforms every single major advanced economy. So in these circumstances it is entirely appropriate that we are returning to surplus. Heading back to surplus is entirely appropriate in these circumstances.
Now, I just want to make a couple of remarks about the appropriateness of fiscal policy given these growth forecasts. While the size of the fiscal consolidation is significant, you cannot equate that with an impact on growth. It is not proportionate to an impact on growth. They are two very separate things.
Firstly, the consolidation partly reflects the natural recovery in revenues as the economy strengthens, and of course acknowledging in saying that revenues are simply not recovering as fast as we expected in the last update. And secondly, our savings are well targeted to have the least impact on domestic activity. And we shouldn't also forget that our surplus strategy means we're not generating price pressures in the economy which gives the RBA ongoing scope to reduce interest rates, if necessary, like it did last week. So here we have fiscal policy with its eye on the medium-term, the primary role of monetary policy is to manage demand, consistent with its inflation target.
Now like each of my previous four budgets, the global context has heavily impacted on my fifth, and in particular, on the imperative of a surplus in 2012-13.
Now despite some easing in global financial conditions in recent months and a moderate recovery in the United States, Europe still clouds the global outlook. In these uncertain times, there's an absolute premium on clear and credible fiscal policy and that is why the Government has charted this course. And that's why I'm saying that a surplus is not just appropriate for domestic conditions; it's an imperative because of the global economic challenges. It does provide a critical fiscal buffer in uncertain times, and of course it does underpin our AAA credit rating and certainly the confidence of global financial markets.
Now against this backdrop, against this backdrop that's going on elsewhere in the world, what we have happening here in our region is a remarkable transformation of our regional economy, as the centre of activity in the global economy shifts to our region. And of course it is demand in Asia that is underpinning a record wave of mining investment, with $120 billion planned for 2012-13 alone. Now think about that for a moment and think about some of press conferences we have done here over the past five years. That amount of money is 13 times greater than its level before the first phase of the mining boom. An extraordinary level of investment.
But despite that investment conditions in our economy do remain uneven. We have a sustained high dollar and of course we have ongoing global uncertainty which does weigh very heavily on certain sectors in our economy and of course they are experiencing very uncomfortable transitions. But the point is this, it's better to be making these transitions in an economy which has the strongest set of economic fundamentals in the developed world. And I want to make this point by reference to the graph.
Many of you would have seen part of this chart before. It shows that our economy has grown by 7 per cent on its pre-Global Financial Crisis level while other major advanced economies are struggling to recover lost ground. The British, for example, are still something like 4 per cent behind where they were prior to the Global Financial Crisis. The United States has just got back with a little bit to where it was prior to the Global Financial Crisis.
But what I want you to look at is where it will be in mid-2014, our economy is expected to be 16 per cent larger than its pre GFC levels, streets ahead, streets ahead of every other major advanced economy. And yet another reason to demonstrate why it is so important to build our surplus and to ensure that there is credibility for our fiscal policy in the international scene.
So we're going to grow 16 per cent, that will compare to 6.5 per cent for the United States, 2 per cent for Japan, with Europe still below its pre-GFC level – six years on from the Global Financial Crisis.
So there is a very clear contrast here. Other economies are plagued by very high levels of unemployment, hitting 25 per cent in Spain. Ours is forecast to remain at 5.5 per cent over the next two years, and that is accompanied by contained inflation.
So in addition to solid growth, low unemployment, contained inflation and a record pipeline of investment, we do have very strong public finances, amongst the strongest in the developed world.
And that is why once again it is important to bring the Budget back to surplus. A modest surplus of $1.5 billion in 2012‑13, growing over every year of the forward estimates.
Now, this delivers on the Government's fiscal strategy on time, as promised, and ahead of every other major advanced economy. And of course, all of this has occurred in an environment where global turmoil, particularly at the end of last year has impacted on our revenues quite substantially.
That combined with structural changes in our economy, particularly the mining boom and more cautious consumers, has reduced the Government's revenue base over the short and medium term.
As you can see in this chart, taxes are down $12 billion across 2011-12 and 2012-13 since the last update, taking the total write‑down since the crisis began to around $150 billion over five years and you can see that very clearly in the chart. What this means is that tax as a proportion of the economy over this year and the previous two years is the lowest it has been in almost 20 years.
Now this has contributed to a deficit in 2011-12 of $44 billion and means net debt will now peak at 9.6 per cent of GDP, but that is around one tenth of the average across major advanced economies.
More than half of the increase in the deficit in 2011-12 is due to revenue write-downs, which has made the return to surplus harder to achieve. Now, despite all of this, we have not deviated from our strategy to return the Budget to surplus in 2012-13. And that's why we have engaged in such a large, targeted, and responsible savings process to ensure Australia's public finances remain strong.
Less than half of the savings that we've taken relate to tax decisions, and out of those around half are simply a result of not proceeding with tax changes that haven't yet been implemented. And of course what we've done is exercise restraint, spending restraint, right across the board, with payments as a proportion of GDP remaining below 24 per cent over the forward estimates.
Now, you know that's something that has not been achieved in this country in over 30 years. It's a graph well worth looking at.
So in doing this, we've made our savings, but we have made sure that as we went about putting in place those savings we've protected low and middle income earners and preserving the frontline services that they depend upon. And also because of all of this, we understand that many Australians still feel removed from the resources boom. They think it's happening in someone else's corner of the country, but it's not happening for them. And of course the Government has seen that because of Mr Abbott's opposition to a company tax cut that our proposed company tax cut was not going to pass the Senate and that is why we've taken a decision to re-direct these funds to give more Australian's a stake in the prosperity of our country and in the mining boom.
So that's why today we've announced a Spreading the Benefits of the Boom package; $3.6 billion in relief to help spread the proceeds of the mining boom to low and middle income earners and businesses from the mining tax.
At the heart of this package is $1.8 billion in extra support for families through more generous family payments from 1 July 2013 and we're also investing $1.1 billion in a new supplementary allowance for the unemployed, students and parents on income support. On top of this package, we will transform the Education Tax Refund into a new Schoolkids Bonus, which will be paid automatically to families in January and July next year.
Now all of this builds on further assistance we've already announced, such as, a very important reform to the tax system: the tripling of the tax free threshold from 1 July this year and cutting taxes for all taxpayers on less than $80,000. As well as the increases in family payments, allowances, and pensions flowing from the clean energy household assistance package.
Also we understand that the structural changes in our economy are weighing down on business, particularly the high dollar and that is why we are introducing a loss carry‑back arrangement to support businesses to invest and compete.
Companies will be encouraged to invest and innovate by using a tax loss of up to $1 million to get a refund against tax paid in previous years. This is worth up to $300,000 for a company each year.
This major tax reform is estimated to help around 110,000 companies in its first four years.
The Government is also continuing to engage with the business community on future reforms through the Business Tax Working Group.
We will continue to support a lower company tax rate or other business tax reforms so long as it is paid for by savings identified by business and has the support of the Parliament.
Also in the Budget, we have found room for other important social initiatives; the National Insurance Disability Scheme is one and a very important one in terms of social policy in Australia.
People with disability have waited too long for their need to be recognised and for a comprehensive policy response to be prepared. I am particularly proud of the inclusion of the money in the Budget for that goal, along with what we are doing in dental health.
So I think it goes without saying that this Budget is one that which not only the Labor Party is proud of, it is one which I think suits our times. It's not just a Budget for a surplus, what it is is a Budget that recognises that everyone in Australia should have a stake in our prosperity.
Now I know from 7.30pm tonight our opponents will be getting out there and saying that the saves are not there or can't be done and they will be doing their best to tear it apart. Well I have a tip for them: you can't be taken seriously when you have got a $70 billion hole in the bottom of your budget bottom line and that's one that existed prior to this Budget. You can't bang on about fiscal discipline if you have a $70 billion crater in your Budget bottom line.
This is a serious Budget; it's a serious Budget for serious times. For too long too many people have been talking down the Australian economy. The Australian economy is resilient, its economic fundamentals are strong and what this Budget does is enhance those fundamentals and does it in such a way that is spreads prosperity right around our country. Over to you.
Mr Swan, you've said that lots of us have been here in previous years. Last year we were here and you told us the deficit would be $22 billion. It's doubled to $44 billion. Why should people believe the surplus that you say is a $1.5 billion buffer will come true when you've had such a blowout in the previous years? What do you say to people who would say this cost of living payment is to families is nothing more than a vote buying bribe?
Well, there's a couple of points to be made about that because you can't just freeze an economy in time and pretend that the conditions that existed in May last year are exactly the same one year on. Let's just go through last year.
(Inaudible) conditions for the year ahead?
That's what I was about to go into because although we've been through the biggest natural disasters in our history by May last year, we hadn't appreciated the full enormity of their impact on both our Budget and on our economy, and as we went through last year they were seen to be much larger than we've anticipated even in that Budget. So that had an impact and what we saw last year was a reasonably strong September quarter after some difficult quarters early in the year, then followed by a weaker quarter in December. What occurred in December last year was quite important in terms of the global outlook, global growth, and the transfer to Australia of the lack of confidence that was seen in the international economy and its impact on our markets.
The last quarter of last year was simply dreadful for Europe and that saw countries such as Germany contract and that had a very powerful effect on global sentiment and that transferred through to here and transferred through to further revenue write-downs.
So what we've seen since the Budget last year was further revenue write-downs and what we saw was the impact of those events at the end of last year in Europe transfer to the global economy. All of those things are reflected in our Budget bottom line. The consequence of that is over half of the increased deficit for 2011-12 is further revenue write-downs but let me take you through the further revenue write-downs by year.
In 2011-12 something like $4 billion revenue write-downs, Commonwealth revenues. 2012-13 $4.5 billion. 2013-14 $4.5 billion. The next year another $4 billion. So what we've seen from our Budget update just last November, which was brought down before the full enormity of what was going on in Europe was apparent, is further revenue write-downs which impacted upon our Budget. What we've done in the face of that, is say it's important that we stick to our pledge to come back to surplus because growth is returning to trend.
The easiest thing in the world I could have done was sidle up here today and say, oh, look we didn't think the return to surplus was really possible, the savings task was too big, we weren't up for it, so I'll be here today announcing, you know, a deficit.
Well, I haven't done that. The Government hasn't done that because for all the reasons I've put forward today, the conditions demand a surplus so we were up for a very substantial savings exercise – $33 billion worth of savings after you take out the new spending priorities. $17 billion worth of savings net, and that's why we've got a surplus. And you can see that reflected in the payments as a percentage of GDP, they're flat lining all the way through the forward estimates because we've done the hard yakka in the changed conditions and all of the global headwinds that we've faced, we've still come back to surplus because we reckon it's the right thing to do because of international conditions but also domestic conditions.
On payments to families, why shouldn't people just think that's a vote buying (inaudible).
Well, first of all the Spreading the Benefits of the Boom package that we've announced in the Budget won't start until 1 July next year and that's appropriate because that's when we've budgeted for the revenues from the 1 per cent company tax cut. That's when we budgeted revenue for the 1 per cent company tax cut.
We've done the responsible thing and recognised that if people are going to have some faith in the country, if people are going to feel that they're part of the boom, then what we should do is try and spread the benefits of that far more widely across our community and that's why we decided to do that.
Just on that point, for a couple of years now your explanation of the mining tax was that this was to address the patchwork economy. I accept the reasons about why you have changed and you are instead giving that money to people directly, but what has happened to your patchwork economy agenda? What are you doing to address those areas of the economy that are in (inaudible).
Thank you for that very, very important question. Let me just take you through a pretty long list. The tripling of the tax free threshold. Nothing could more important to this community than to get more people into work. We want to lift workforce participation rates, particularly because of the size of the investment boom. That is very, very important and a whole range of other reforms, starting on 1 July is the instant asset write-off. This is a huge package for small business to give them an incentive to invest. $6,500 can be instantly written off, not written off over two years or three years by small businesses. 2.7 million small businesses, up to 2.7 million small businesses will be eligible for the instant asset write-off. That is another example of where we're using revenue from the mining tax, the MRRT, to spread the benefit across up to 2.7 million small businesses and it's why we've put the package in this budget of $700 million for the loss carry-back. Those two things combined are a huge package for all of those small businesses out there that aren't in the fast lane of the mining boom – for the tourist business in Port Macquarie or in Cairns…
Is the Loss Carry Back stuff like a consolation, maybe not the right word, a replacement for the fact that you cannot deliver your promised reduction in corporate tax?
No, no, not at all. The Business Tax Working Group that we set up came out of the Tax Forum last year, got together, it has recommended that we do Loss Carry Back and we are funding it with the revenue that would have been spent on the 1 per cent company tax rate. They also said they wanted to do some more work on the future design of corporate, or company tax policy overall. They said if you were of a mind to do a number of things in tax, they gave us a number of areas where we could take savings from to fund further company tax cuts but the business community as a whole said oh no, look we want some more time to look at those proposals for savings in the company tax system.
So what we've done is we've gone ahead. We've implemented Loss Carry Back, as recommended to us by the Business Tax Working Group, it sits really well beside the instant asset write-off, as a package of measures which really help all of those small businesses that aren't in the fast lane. And over here for individuals we've got a tripling of the tax free threshold, a very big tax reform in its own right and what we've also got now is the Spreading the Benefits of the Boom package to give a bit of a boost to the family payments of people out there on low and middle incomes.
So I reckon it's a win-win. We've got a very big business package over here for small business and over here for all of those people that don't think that they're part of the boom, they don't feel like they're part of it, we've got a bit of a boost to their family payments.
But Treasurer why did you not even put your company tax legislation to the Parliament to actually test support for it? Isn't it a breach of faith with business that you've dropped that company tax cut?
Not at all. In fact I've gone to extraordinary lengths to try and support and get through, in the environment that we are in, this 1 per cent company tax rate cut. The fact is it's the Liberal Party, the Liberal Party that has said that they won't vote for it. The Greens said from day one they were never voting for it but I never thought we'd see the party of Menzies stand up in the Parliament and say, oh no, we're not going to cut company tax. We're not going to do that. We're actually going to put it up. Which is where they are at the moment.
So the Liberal Party were against it in the House of Representatives and the Senate, the Greens from day one said they were never going to support, and I certainly wasn't going to sit around twiddling my thumbs when it was going to go down in the Parliament. So I think it was a pretty sensible thing to do, to re-devise a package which spread the benefits right across the business community, right across the community in this country and that in itself is very good for business.
So under what circumstances would you bring the company tax back onto the table? It is correct for us to assume that you want the business community as a whole to allow you to take things from them that they agree, for them therefore to badger and harass the Liberals to support it?
Well, it's up to them as to how they want to relate to the Liberal Party but when we had the Tax Forum last year there were a range of views expressed about how we should make substantial progress on business tax reform and the consequence of that was that we set up the Business Tax Working Group. And the Business Tax Working Group has consulted widely across the business community about possible changes short term, medium term and long term.
The first thing they concentrated on was this measure called Loss Carry Back and made a very concrete recommendation about it to the Government and the Government is accepting it in this Budget.
Where they couldn't necessarily reach agreement was how would further cuts to the company rate be funded. Now, they suggested some areas where savings could be found in terms of Loss Carry Back but they came to the Government and the business community itself came to the Government after that report came down and said, look we're not sure about the savings the Business Tax Working Group has suggested. We want to go away, we want to think about it, we want to do some more work.
My bottom line is I do want to see a good consensus in the business community about how we take business tax reform forward and I remain ready, willing and able to work as closely as possible with the business community to bring about fundamental reform of business tax but it's got to have everybody at the table.
The British Government said it wouldn't balance the books on the back of the world's poorest but you're willing to do that by delaying the aid increase.
I don't accept that at all. Aid is still increasing and increasing substantially over our forward estimates. I think by the end of our forward estimates period we will be the sixth largest donor. I am exceptionally proud of what our country has done over recent years and will do over future years with the increases in our aid budget which continue. All we've done is put back that goal, that target, by one year but aid continues to increase.
Mr Swan, did you make that decision because you doubted AusAid's capacity to spend that effectively, or you just felt you couldn't afford it?
No, if you look at the Budget papers you'll see that every area of Government spending has in one way or another been reigned in in this Budget. Which is why payments as a proportion of our economy continue to be very low or historically low over the forward estimates. So every area has felt restraint.
Treasurer, what factors in the global economy give you confidence that you'll meet your growth targets?
Well, can I just say this about Australia's relationship to the global economy but most particularly to our regional economy. If you have a look at the forecasts that are in the Budget papers you will see that we're forecasting growth in our major trading partners which is much healthier than global growth. And the reason for that is, and it's the reason I have discussed with many of you on a number of occasions, is that the regional economy remains strong. And when we talk about the Asian Century we're just not talking about China. We're talking about Indonesia. We are talking about South Korea. We're talking about Malaysia. We're talking about India. We're talking about a whole range of economies. And despite of the best efforts of the Europeans that has not managed to dramatically slow our regional economy.
So I've got a lot of faith in the direction of our regional economy and I know there's this debate, and everyday someone reports China is falling over tomorrow, when it isn't, but our regional economy is still solid and will remain solid and that is reflected in the forecasts.
The big question mark in the global economy really relates to what is going happen in the United States. The beginning of last year we saw the start of recovery, early green shoots, they were snuffed out. This year started even stronger but now some people are wondering if it is going to continue.
The global economy can do without Europe but they can't necessarily do without the United States returning to strong growth but here in our region we have been so resilient and so solid that we are in the position that we are in. It is because we took the policy decisions that we took over the past five years that we are in the position to reap the benefits of much of that.
Mr Swan this Budget has got a heavy emphasis on cost of living or key measures directed at cost of living, how much of this Budget is a political statement about Labor trying to reconnect with its base.
Well, can I just say first and foremost we have come back to surplus despite very large revenue write downs but we have come back to surplus because we think good fiscal policy, provides the buffer that we require given global uncertainty, gives the Reserve Bank maximum room to move should it wish to move on rates, and also firmly anchors our economy in a strong fiscal policy for the years ahead. Precisely what we need for an economy going through an investment boom the size of which we are experiencing.
I do recommend that you all have a read of the special chapter, or the special statement, in the Budget on national savings because it goes to this core issue. Reorientating our fiscal policy to medium term is really important to maximise the opportunities that we have in this region where investment will remain strong and that we will continue to be more closely aligned with our major trading partners to the north.
You can't really say that you have come back to surplus though until this time next year, can you?
That would be viewed with a very critical eye by many internationally. The fact is that it is entirely appropriate to come back to surplus when your unemployment rate is 5.2 per cent, when consumption in your economy is solid, when wages growth in your economy is solid, when you have the biggest investment boom in our history going on. All of those things are an indicator that we should be building up surpluses and buffers. Because whilst we have better times than just about anyone else in the world we do need to be building up those buffers.
And if at the same time as coming back to surplus we can actually find a bit of room through a disciplined saving strategy in our Budget not just to give a bit of help with the cost of living to a lot of people who work hard and live on modest incomes, who get up every day, go to work, come home cook the tea, get up and do it again. They do it for really modest wages. They do all of that, give them a bit of extra help, then I reckon that is a pretty good outcome for a country like Australia and its one of the reasons that I am so proud to be an Australian.
It does appear that the GST revenue is part of the revenue that is down because of the lower revenue. (Inaudible)
Yes they are acutely aware that their revenues are down just like our revenues are down and that's all there in the Budget papers. You can see total Government revenues, what they are down. You can see state revenues. You can see Commonwealth revenues.
Treasurer, with the mining boom, we have a situation where the forecasts are for smallish surpluses, at a time when the terms of trade are near record highs. Now what's going to happen when the terms of trade drop? Are we looking at a big black hole?
Well first of all, there's an assumption in your question which you've completely left out of it. Yes, the terms of trade are high, yes we're having a mining boom, we're just not having a revenue boom with it and that's the problem.
But isn't it going to get worse when that situation drops off and the income that's coming through [inaudible].
Well, it's not going to get worse. There's two parts of your question, I'm happy to deal with the longer term, but first of all, whilst we have a mining boom, we're not having a revenue boom. So, in mining boom mark one there was a lot of money invested, a lot of production, and a lot of tax paid because it came out of existing mines. Mining boom mark two has a very big investment phase which means our miners are paying proportionally less tax than they would have in mining boom mark one.
It's entirely appropriate, I don't put a question mark over it, it's a big investment phase that we will not see the revenue, or the rivers of gold we saw in mining boom mark one. So whilst we have an investment boom, we don't have a revenue boom.
So what we've got to do in the middle of this is strike the right balance. And that's what I believe we've done. The revenues are down, we've gone back into the budget, we've found the savings. But the revenues will start to flow over time from that mining investment boom, they'll flow more strongly . . .
(Inaudible) terms of trade, it's not going to affect your revenue, is that what you're saying?
No, not at all. And I'll now move onto the forecasts. The forecasts are that the terms of trade will come off, five and three quarter per cent in 12/13, and three and a quarter per cent in 13/14. Then we have them coming off, something like twenty per cent over a long period of time. So we are not standing here saying we assume that the terms of trade stop at historical highs forever.
But I do believe they will be higher as we go forward, then they were in the past. Why do I believe that? For the very good reason that I outlined earlier. That what is going on in our region is changing the world. The reason our region is going to provide a much greater proportion of global growth as we go forward is that the productivity growth and the population growth is in this region.
As all of those people come out of poverty in China, come out of poverty in India, they go up the value chain, earn higher wages, the prospects for us, not just in resources but in agriculture and a whole range of industries are going to be fantastic. So it won't just depend on what is paid for coal or iron ore, it'll actually depend upon what's going on in our heads. It'll depend upon the quality of our education, the quality of our service sector.
What this budget and what all of our budgets have been about is not being dependant on just one country or one commodity, but broadening our industrial base through initiatives like the instant asset write-off, through loss carry back, noting that what we have to do is strengthen the rest of our economy that isn't in the fast lane. That's what all the budgets have been about – dealing with that potential challenge if it were to eventuate.
You say that last year the difficulty came from the consequences of the disasters that took place, and also what happened in Europe in the December quarter. What keeps you up sleepless at night, what are the things that contain the risk that could potentially damage us this year in the way that your budget projections last year were so severely damaged by events?
Well it's a truism that unexpected things can happen in national and international economies. I mean, no one predicted or forecast the biggest natural disaster in our history, nor was it possible. So a lot of these questions are really just a bit out there.
The fact is, we use all of our best endeavours, with the best professional advisers, the best information we can possibly get to do our forecasts. And that's what we do.
You mentioned something earlier that the spending cuts are well targeted to have the least impact on the domestic economy, but on the other hand you say that it will leave the door open for further rate cuts from the RBA. I mean, which one is it? Is it fiscal consolidation that's tough enough to cause a subtraction from economy that the RBA has to step in and prop it up, or are they gentle spending cuts that aren't (inaudible).
It's a re-weighting over time between the use of fiscal policy and monetary policy. Look, we aggressively in this country, appropriately used fiscal and monetary policy to save this country from the impact of the global financial crisis and prevent a recession here. That was appropriate. Fiscal policy was expansionary and monetary policy was expansionary. As global growth returned, as our growth picked up, all of that has been bought back closer to neutral.
What we're trying to do with this budget is to anchor future policy in a medium term fiscal policy, that is, the Government saving, building up surpluses over time and providing greater latitude for the deployment of monetary policy by the Reserve Bank depending on their assessment of where inflation is.
Thanks very much.