Statement 3: Fiscal Strategy and Outlook
The Government is returning the budget to surplus in 2012‑13, with surpluses growing across the forward estimates.
This delivers on the Government's fiscal strategy, first set out in 2009, to return the budget to surplus as the economy recovers. The fiscal consolidation will strengthen the long‑term position of the budget and provide a buffer against an uncertain global economic outlook.
Returning the budget to surplus in 2012‑13 is appropriate given domestic economic conditions and provides ongoing scope for monetary policy to respond to economic developments, if needed. A return to surplus, ahead of any major advanced economy, sends a strong message to international investors on the Government's commitment to fiscal discipline.
The economy is forecast to grow around trend, with low unemployment, contained inflation, record levels of mining investment and very low levels of government debt.
Government revenues continue to be affected by structural changes in the economy and the lingering effects of the global financial crisis. This has led to weaker‑than‑expected tax receipts compared to those anticipated at the Mid‑Year Economic and Fiscal Outlook 2011‑12 (MYEFO). Write‑downs in total tax receipts since the global financial crisis are now around $150 billion over the five years to 2012‑13.
In response, the Government has made $33.6 billion in targeted savings to: return the budget to surplus; spread the benefits of the resources boom to help low and middle‑income families and help businesses struggling with the economy in transition; and improve the long‑term position of the budget.
Following a revised underlying cash deficit of $44.4 billion (3.0 per cent of GDP) in 2011‑12, a surplus of $1.5 billion (0.1 per cent of GDP) is expected in 2012‑13, growing to $7.5 billion (0.4 per cent of GDP) in 2015‑16.
The Government's ongoing commitment to fiscal discipline will ensure Australia's balance sheet remains one of the strongest in the developed world. Net debt is expected to peak at 9.6 per cent of GDP in 2011‑12, reducing to 7.3 per cent of GDP by 2015‑16.
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