Joint Party Room meeting 24 March 2015

Treasurer Minister for Finance

1

The focus of the 2015 Budget will be to build a stronger

Australian economy

2

Initiatives in the Budget will be focused on jobs, growth and opportunity

• Small business package

• Childcare reform

• Infrastructure investment

• Free trade agreements

• Integrity in our tax and welfare systems

3

Main beneficiaries from the Budget will be families and small business

• The IGR showed that our future prosperity will rely on boosting workforce participation and increasing productivity

• PC Childcare Report showed that roughly 165,000 parents with children aged under-13 would like to work but are not able to

• Small business employs around 4.5 million people but could create even more jobs and innovation

4

State of the books

• MYEFO showed we are on track to return to surplus

– Despite weaker global outlook

– Despite historic iron ore price collapse

– Despite impact of the Senate

5

Falling global growth forecasts

6 Source: IMF January 2015 World Economic Outlook.

0

1

2

3

4

5

6

0

1

2

3

4

5

6

2000 2002 2004 2006 2008 2010 2012 2014 2016

Per cent Per cent

Forecasts

October 2014WEO

Iron ore

7 Source: Platts and Treasury.

45

60

75

90

105

120

135

150

45

60

75

90

105

120

135

150

Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15

2013-14 Budget - $121

2014-15 Budget - $95

US$/t, FOB US$/t, FOB

2014-15 MYEFO - assumption - $60

2012-13 Budget- $136

Today - $50.2

All new spending will be offset by savings that are responsible and fair

8

We will continue to improve the Budget bottom line each and every year

• MYEFO showed average of 0.6% of GDP consolidation

• Must continue a sensible path of fiscal consolidation

• Monetary policy and fiscal policy must work hand in hand

9

Pace of budget consolidation (MYEFO)

10 Source: MYEFO.

The cash rate and the pace of consolidation

11 Source: Treasury, RBA and ASX.

6

7

8

9

10

11

12

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2014 2015 2016 2017 2018

Cash rate (Per cent) Change in underlying cash balance ($b nominal)

Market Expectations of the RBA cash rate (LHS)

Change in underlying cash balance (RHS)

We will get the Budget back to surplus as soon as possible

12

Building a stronger Australia and getting back to living

within our means

13