The Rudd Government has framed the 2008-09 Budget so that it delivers for working families under cost-of-living pressures.
The Government understands the financial strain that eight official interest rate increases in just over three years and rising costs of living are putting on household budgets. That is why we have put tackling inflation at the centre of this Budget.
A key component of the Government's plan to tackle inflation is responsible and disciplined fiscal management, and for this reason the 2008-09 Budget delivers a surplus of 1.8 per cent of GDP.
This strict fiscal discipline is part of the Prime Minister's Five Point Plan to tackle inflation, which also includes:
- major investments in education and skills, including Trades Training Centres in schools and a commitment of up to 630,000 new training places over five years to help tackle the skills crisis that is adding to inflationary pressures;
- national leadership on infrastructure to ease bottlenecks which are pushing up the costs of doing business - including establishing Infrastructure Australia to develop infrastructure priorities and a Council of Australian Governments Working Group to coordinate infrastructure planning;
- significant incentives to encourage private savings through our First Home Saver Accounts; and
- measures designed to boost workforce participation, particularly through the Government's tax and childcare changes.
Economic modelling undertaken by Treasury indicates the Rudd Government's tax cuts alone will encourage around 65,000 people into the workforce in the medium term. This additional supply of labour, together with the anticipated increase in the hours worked by those currently in the workforce, will mean around 2.5 million additional hours of work in the economy each week. At a time of acute skills shortages and labour shortages more generally, this boost to workforce participation is vital if we are to tackle inflationary pressures.
Similarly, workforce participation will be enhanced by the Rudd Government's moves to improve access to child care, with 260 child care centres to be established in priority areas. To help with the high costs of childcare, the Government will also deliver on its commitment to increase the Child Care Tax Rebate from 30 per cent to 50 per cent of out-of-pocket costs and increase the cap from $4,354 to $7,500 per child for approved care. We will also pay the 50 per cent Child Care Tax Rebate every three months, instead of once year, providing financial support when it is most needed by families.
To help families meet the cost of education, the Government will also deliver on its commitment to provide a 50 per cent Education Tax Refund - an investment of $4.4 billion over the next four years. The Education Tax Refund will provide up to $375 a year to help parents with the cost of educating each child in primary school and $750 per year for each child in secondary school.
These measures to help ease pressures on the family budget are in addition to the Government's personal income tax cuts, which are aimed particularly at low- and middle-income families who have missed out on substantial tax relief in recent years.
The Rudd Government also recognises that housing has become increasingly unaffordable for many Australian families. The Government will deliver on its commitments to improve housing affordability by increasing the supply of affordable rental housing, and also by making it easier for families on average incomes to save for and buy their own home.
The National Rental Affordability Scheme will encourage construction of affordable rental housing and ensure that it will be provided to households on modest incomes at rents at least 20 per cent below market rates. The Government will introduce a $500 million Housing Affordability Fund to reduce the costs of new housing-related infrastructure and to improve planning processes.
We also understand that one of the biggest obstacles to buying a first home is saving a deposit, and so the Government is also introducing new, low-tax First Home Saver Accounts.
The Government also recognises the pressures that rising petrol prices have on the family budget. While international factors are the main drivers for rising petrol prices, the Government has taken decisive action to ensure that working families do not pay a cent more than they have to when filling up at the bowser.
The Government has given the Australian Competition and Consumer Commission (ACCC) tough new powers to conduct formal monitoring of unleaded petrol prices, and has put a permanent cop on the beat by appointing Pat Walker as the first Petrol Commissioner within the ACCC.
The Government will also introduce a National Fuelwatch Scheme on 15 December 2008 to promote competition and improve price transparency in the Australian retail petrol market.
Under FuelWatch, petrol retailers will be required to notify the ACCC of their next day's prices by 2.00 pm each day and maintain this advised price for a 24-hour period. Petrol prices will be made available to consumers by text message, by an email service or by logging on to the ACCC website.
Steep rises in grocery prices have also put added financial pressure on many families and so the Rudd Government has taken steps to improve the transparency of the grocery market. In particular, the Government has instructed the ACCC to conduct a monthly survey of the prices for typical grocery baskets (for example, meat, vegetables and dairy products) across Australia, and to publish the survey results on a dedicated website. The monthly survey of grocery prices will help consumers locate the cheapest supermarket chain in their area.
The Government has also directed the ACCC to conduct a comprehensive inquiry into the competitiveness of grocery prices in Australia covering all aspects of the grocery supply chain - from the farm gate to the check-out counter.
By these measures, and by strict fiscal discipline to tackle inflation and interest rate pressures, the Rudd Government is delivering on its commitment to help working families under financial strain.