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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 initial significant speech on the economy since his Labor party swept John Howard's conservatives out of office in November, Rudd pledged to slash government spending to produce a large spending budget surplus.

The target would be a surplus of 1.5 percent of gross domestic product in the economic year to June 2009, he mentioned -- 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 economic currents."

These had 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 substantial domestic inflationary pressures at residence."

Accusing the outgoing government of obtaining permitted these pressures to construct, Rudd mentioned his 5-point strategy integrated incentives to encourage private savings whilst tackling abilities shortages and infrastructure bottlenecks.

Rudd, who described himself as a fiscal conservative throughout the election campaign, stated creating the budget surplus -- up from the 1. percent target of the previous government -- would need discipline.

"That will demand a determined, disciplined approach to spending and a hardline-approach to savings," adding that his "razor gang" would cut wasteful spending.

Inflation is anticipated to exceed the Reserve Bank of Australia's target variety of two-3 percent this year, raising the prospect of further interest price rises by the central bank.

Prices are at an 11-year higher of 6.75 % after two 25 basis point increases last year, and the impact on mortgage-belt voters is believed to have played a element in the ouster of the earlier government.

Rudd noted that the downturn in the financial outlook in the US, Europe and Japan comes as powerful growth in the Asia-Pacific region is continuing to drive demand for Australia's wealthy mineral and power sources.

"Over coming years, developments in China will increasingly shape both worldwide and Australian financial conditions," he stated.

"The Indian economy has grow to be one particular of our fastest growing export markets and is expected to continue to post impressive prices of financial growth.

"Combined, China and India accounted for about 40 percent of Australia's export value development in 2006-07."

This financial expansion in the region had heightened the require for careful management of the domestic economy, he said.

"And the most pressing financial challenge domestically is inflation." go here for pet couriers investigation