Budget Key elements

Key elements include:

Budget surplus

• Budget returning to surplus in 2012-13, three years ahead of schedule
• The forecast Budget deficit of $40.8 billion in 2010-11 is $16.3 billion less than expected one year ago
• Net debt is projected to peak at just 6.1 per cent of GDP; half of the level projected a year ago and less than one tenth of the average across the major advanced economies

Tax

• Delivering tax relief, including raising the effective tax-free threshold to $16,000 from 2010-11 
• Lower tax on savings — 50 per cent discount on up to $1,000 of interest income
• Standard deduction to simplify the tax system and leave more in the pocket for 6.4 million Australians
• Resource Super Profits Tax from 1 July 2012
• Company tax rate cut to 29 per cent from 2013-14 and 28 per cent from 2014-15
• Company tax rate cut to 28 per cent for small business companies from 2012-13
• Instant asset write off for assets under $5,000 for all small businesses from 1 July 2012

Skills and infrastructure, national savings, and renewable energy

• $661 million for the Skills for Sustainable Growth strategy
• $5.6 billion for a new infrastructure fund and $1 billion to renew rail networks
• $652 million Renewable Energy Future Fund

Superannuation

• Increasing the super guarantee to 12 per cent, assisting 8.4 million Australians
• From 1 July 2012, contributing up to $500 to offset contributions tax for those on incomes up to $37,000
• From 1 July 2012, allow catch-up contributions by older workers with super balances less than $500,000

National Health and Hospitals Network

• Total new investment of $7.3 billion over five years, and $23 billion over the rest of the decade 
• Additional $2.2 billion, including:
• $355 million for GP Super Clinics
• $417 million to enhance after hours services
• $523 million to train our nurses
• $467 million to introduce individual electronic health records

Economic forecasts: growth

The Budget forecasts stronger economic growth for 2010-11 than was forecast in the Government’s Mid Year Economic Forecast published in November: 3 ¼ per cent compared to 2 ¾ per cent.

According to the Budget’s economic forecasts, while recent developments in Greece and the rest of Europe are a risk to the outlook for the global economy, overall financial conditions have improved, and with the signs of economic recovery broadening, solid world GDP growth of 4¼ per cent is expected in 2010.

Australia’s real GDP is expected to grow strongly over the next two years, by 3¼ per cent in 2010-11 and 4 per cent in 2011-12.

The unemployment rate is expected to fall from its current level of 5.3 per cent, down to 5 per cent in late 2010-11, and 4¾ per cent in late 2011-12, around levels consistent with full employment.

The withdrawal of stimulus is estimated to subtract around 1 percentage point from GDP growth over 2010.

The terms of trade are expected to rebound by around 25 per cent by mid-2010 — injecting $30 billion into the economy. This injection of incomes will help reinvigorate the mining sector and economic activity more generally, the Budget Papers forecast.

Employment is expected to grow by 2¼ per cent through the year to the June quarter 2011 and 2 per cent through the year to the June quarter 2012, absorbing strong growth in the labour force associated with rapid growth in the working age population and an expected increase in the participation rate.

Wages growth is expected to recover after growing close to its slowest rate on record through 2009. The Wage Price Index is expected to grow by 3¾ per cent through the year to the June quarter 2011 and 4 per cent through the year to the June quarter 2012.

Headline inflation is expected to be 3¼ per cent through the year to the June quarter 2010 and 2½ per cent through the year to the June quarter of both 2011 and 2012. Underlying inflation is expected to stabilise at around 2½ per cent through 2010-11 and 2011-12.