Australian Budget 2008

Treasurer Wayne Swan delivered one of the biggest budgets ever for the nation today for the Australian Budget 2008. Economists and business groups hailed the budget and expressed their confidence in the budget. The Australian financial market also expressed their confidence and expected that the proposed budget shall help to reduce interest rates and benefit the financial markets as well. It is wise to understand that the budget surplus is heavily contributed by the boom in resource prices which is being fuelled by demand in China.

The budget has been clearly given the Labor touch by targeting higher income earners (for example, cutting the baby bonus at $150,000 and increasing taxes on luxury cars) and helping working families. However, while the Government had said that the budget released last night was to take the pressure off inflation and interest rates. However the budget handed down was inflationary, which means it won't reduce the risk of another interest rates. The last Howard budget spent $275 billion, this first budget from the Rudd government is set to spend $288 billion. These are both measures which will stimulate demand and add to inflation.

The 2008 budget also gave positive signals to the investors and the record surplus of $21.7 billion projected by the Federal government boosted their confidence in the market. The surplus also represented 1.8% of GDP which was larger than Mr. Swan’s 1.5% target. This is one of the biggest shares of GDP since 1999-2000.

On the note of tax cuts: While the Treasurer, says its a budget to "fight inflation first", yet the budget has a little political flavour to it. The Government will proceed with tax cuts. It will honour $8.3 billion in tax cuts pledged by the Howard government, plus it will enact $7.1 billion in the first year's Rudd tax cuts that were promised before the election.

"It's got a very strong sense of economic responsibility about it, the surplus sends very positive notes to our financial markets and in the long run this will help put downward pressure on interest rates and prices," said Richard Gilbert, Chief Executive Officer, Investment and Financial Services Association. He also added that it would make Australia as one of the most favoured destinations for capital investments. It would also result in more employment which means more jobs.

Other industry groups in Australia also expressed that the proposed budget and norms would increase productivity which would enable strong foundation for country’s capacity.

Economists also hailed the budget and said that Australian treasurer Mr. Swan announced bigger than expected spending cuts that would keep inflation under check. Some economists, however, warned of continuing pressure on escalating prices.

The 2008 Australian Budget surplus would cater to expenditures on health care, welfare and infrastructure. It shall be dedicating towards building national roads and infrastructure to ease the capacity constraints. There would be a total funding of $5 billion on education of which $500 million would be spent on universities. The child care rebate will be increased from 30 percent to 50 percent and shall be paid quarterly unlike annual payments earlier.

The tax rebates would be effective from July 1 and for an average family it would mean that an average family with two children would be $51.54 a week better off, family with children in older schools would be $43.27 a week better off and a single person would receive approximately $25 extra per week.