Hawker Britton Occasional Papers and Media

Snapshot on Federal Budget
2008-2009

May 2008

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Overview

The Rudd Government’s first budget sought to honour its commitment to wage “War on Inflation”.  With underlying inflation reaching 4.2 percent in the March quarter, well above the Reserve Bank’s inflation target, the Government has delivered a Budget surplus of 1.8 per cent of GDP (well above the 1 per cent target established under the previous Government).

Growth in real spending will be 1.1 per cent in 2008-09, the lowest rate for nine years.  Over four years, the Budget makes savings of $33.3 billion.  Economic growth is forecast to slow in 2008-09 to 2 ¾ per cent.

Treasurer Swan identified four key principles of his first budget:

Key initiatives to deliver these principles include:

The Government’s spending initiatives have been offset by rigorous savings.  Savings announced by the Government ahead of the Budget include:

Further savings announced in the budget include:

The Government has also announced that it will be deliver its commitment to provide nearly $30 billion in tax cuts, with the first of those to kick in from 1 July.

A comprehensive summary of the Government’s election commitments as they relate to business can be found at: http://www.hawkerbritton.com/hawker-britton-media/public-affairs/
rudd-labor-government-and-business.htm

Budget Breakdown

Education Revolution

The Government has committed to its “Education Revolution” which includes:

Infrastructure

On infrastructure, the Government has announced the creation of a $20 billion Building Australia Fund in addition to its election commitments, which are to:

Health

On health, the Government has committed to:

Supporting business

This Budget confirms the Government’s commitment to a comprehensive agenda of regulation reform - cutting red tape and making it easier for business, particularly small business, to deal with government.  Initiatives include:

Climate change

The Government has allocated $2.3 billion over five years to tackle the challenge of climate change.  Initiatives include:

Environment

Budget initiatives for the environment include $12.9 billion for a ‘Water for the Future’ plan, including:

Community and welfare

Budget initiatives in the area of community and welfare include:

Housing

Budget initiatives in housing include:

Defence

The Government’s election commitments for defence include:

Working with the States

The Government is determined to ensure more co-operative relations with the state.  COAG reforms include:

What third parties say

Australian Industry Group – 13 May

The Rudd Government's first budget is well and truly on task. It has taken a hard-nosed approach to spending to address inflation and it makes ambitious investments in nation-building…The Government has backed up its promises in education, personal taxation, in developing business capabilities and in building infrastructure including broadband with sizable allocations over the next few years. This puts money behind a fresh start and should provide the foundation for a much-needed expansion of our national capacity and a lift in productivity.  The Government has the opportunity to build further on these directions with its reviews of taxation, innovation, regulation, industry policies and defence... By more than offsetting new spending with savings and by running a large surplus, the Government has adopted a responsible approach which should be helpful in addressing inflation… It is appropriate that the Government has left open the option of further fiscal tightening down the track.

ACCI – 13 May

The budget presses the right buttons, but could have pressed them harder. The budget is good on infrastructure and workforce skills, and has some good measures on government spending, such as means-testing and welfare targeting. These will kick-start the government’s five-point plan to fight inflation.

National Farmers Federation – 14 May

This Budget combines essential spending on building capacity across key areas that hamper economic growth – where Australia desperately needs to be more astute and efficient – with savings at the margins…It balances concerns that $31 billion in tax cuts may further fuel inflation against spending cuts while, importantly, also targeting investment to boost our climate change adaptation and drought mitigation response, developing and building our trade skills base, overhauling our rundown infrastructure and ensuring water-use efficiency reform is holistic and practical.

John Connor, Climate Institute Chief Executive – 14 May

This budget has delivered a solid start to unlocking the opportunities of a clean energy future. The key challenge remains to ensure that the climate policies and trading scheme due this year have a strong 2020 target.  Strong targets and policies will generate strong dividends to invest in the shift to a clean energy future ensuring that all new electricity load generation is clean.

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