SmitherKillough581

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 first main speech on the economy because his Labor celebration swept John Howard's conservatives out of office in November, Rudd pledged to slash government spending to create a large spending budget surplus.

The target would be a surplus of 1.5 % of gross domestic product in the financial year to June 2009, he said -- about 18 billion dollars (15.8 billion US dollars).

At the very 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 seems 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 having allowed these pressures to develop, Rudd mentioned his 5-point strategy integrated incentives to encourage private savings whilst tackling skills shortages and infrastructure bottlenecks.

Rudd, who described himself as a fiscal conservative during the election campaign, mentioned creating the budget surplus -- up from the 1. % target of the prior government -- would require discipline.

"That will require a determined, disciplined strategy 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 range of 2-three % this year, raising the prospect of further interest rate rises by the central bank.

Prices are at an 11-year high of six.75 percent following two 25 basis point increases final year, and the effect on mortgage-belt voters is believed to have played a element in the ouster of the previous government.

Rudd noted that the downturn in the economic outlook in the US, Europe and Japan comes as robust 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 economic conditions," he said.

"The Indian economy has turn into a single of our fastest expanding export markets and is anticipated to continue to post impressive rates of financial development.

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

This economic expansion in the region had heightened the want for careful management of the domestic economy, he stated.

"And the most pressing financial challenge domestically is inflation." http://www.shipyourpet.com