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SYDNEY (AFP) Boom in Asia and bust in the United States are buffeting Australia's economy, Prime Minister Kevin Rudd warned Monday as he outlined plans to rein in inflation.
In his 1st main speech on the economy given that his Labor celebration swept John Howard's conservatives out of workplace in November, Rudd pledged to slash government spending to generate a huge price range surplus.
The target would be a surplus of 1.five % of gross domestic product in the economic year to June 2009, he said -- about 18 billion dollars (15.eight billion US dollars).
At the exact same time, the government has vowed to honour election pledges for 31 billion dollars in tax cuts.
Rudd told enterprise leaders at a breakfast meeting in Perth that Australia faced "conflicting financial currents."
These have been: "A global economy (led by the United States) which appears to be slowing. An ongoing terms of trade boom driven by Asia Pacific economies. And considerable domestic inflationary pressures at home."
Accusing the outgoing government of having permitted these pressures to construct, Rudd mentioned his five-point strategy included incentives to encourage private savings although tackling skills shortages and infrastructure bottlenecks.
Rudd, who described himself as a fiscal conservative during the election campaign, mentioned making the price range surplus -- up from the 1. % target of the previous government -- would demand discipline.
"That will require a determined, disciplined approach to spending and a hardline-method to savings," adding that his "razor gang" would cut wasteful spending.
Inflation is expected to exceed the Reserve Bank of Australia's target variety of 2-3 % this year, raising the prospect of additional interest rate rises by the central bank.
Rates are at an 11-year high of 6.75 percent soon after two 25 basis point increases last year, and the impact on mortgage-belt voters is believed to have played a component in the ouster of the previous government.
Rudd noted that the downturn in the economic outlook in the US, Europe and Japan comes as sturdy development in the Asia-Pacific area is continuing to drive demand for Australia's wealthy mineral and energy sources.
"Over coming years, developments in China will increasingly shape both global and Australian financial circumstances," he stated.
"The Indian economy has turn out to be one particular of our fastest developing export markets and is expected to continue to post impressive prices of financial growth.
"Combined, China and India accounted for around 40 % of Australia's export worth growth in 2006-07."
This financial expansion in the area had heightened the need for cautious management of the domestic economy, he mentioned.
"And the most pressing economic challenge domestically is inflation." view site
