The 2009-10 Budget has been framed against the backdrop of the most challenging global economic environment since the Great Depression.
The global economy is expected to contract by 1½ per cent in 2009, with virtually every advanced economy sliding into recession.
Australia is not immune from the global recession. Our economy is expected to contract by ½ per cent in 2009-10. This will cost jobs and see a sharp rise in the unemployment rate.
The Rudd Government's nation Building Economic Stimulus Plan is helping to cushion Australians from the worst impacts of the global recession.
Without this action, the forecast contraction in the economy in 2009-10 would have been four times larger at 2 per cent.
Without this economic stimulus, it is estimated 210,000 more Australians would be out of work.
The Rudd Government's early and decisive action is one of the reasons Australia is expected to experience a much milder contraction than other advanced economies, which are forecast to contract by 3¾ per cent in 2009.
Commodity price increases which have strongly supported the Budget in recent years have gone into reverse as global demand has collapsed. Australia's terms of trade are expected to decline from recent record highs, taking $35 billion out of the economy.
The global recession and unwinding of the mining boom have led to the biggest downgrade in budget revenues in living memory, wiping around $210 billion from the budget.
These revenue write-downs have pushed the Budget into a temporary deficit and account for around two-thirds of the deterioration in the budget position over the four year estimates since the last Budget.
In these difficult times, a temporary deficit, along with temporary borrowing, is the only responsible course of action any Government should take. The alternative would be significant spending cuts or tax increases, which would only lead to a longer and deeper downturn and put more Australians out of work.
Despite the very difficult global environment, the Rudd Government has delivered economic stimulus in a responsible and sustainable way. It is investing in Australia's future and is positioning the Australian economy for recovery.
The Government has a clear and very focussed strategy that begins to return the budget to surplus as the economy recovers.
The 2009-10 Budget begins to chart the course back to surplus by putting in place structural savings that offset key reforms. Spending is fully offset by the final year of the forward estimates.
In recent times the failure of our predecessors to offset new spending with long-term savings – instead relying on temporary boosts to Government revenue in company and capital gains taxes – is a key underlying driver of the structural weaknesses this Budget seeks to start addressing.
The Government's strategy is currently expected to see the Budget return to surplus by 2015-16.
This has required hard decisions but these are the right decisions for Australia's future growth and prosperity. They are the responsible course of action and protect Australia's economic interests.
12 May 2009