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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 first significant speech on the economy given that his Labor party swept John Howard's conservatives out of workplace in November, Rudd pledged to slash government spending to generate a huge spending budget surplus.

The target would be a surplus of 1.5 percent of gross domestic product in the financial year to June 2009, he mentioned -- about 18 billion dollars (15.eight billion US dollars).

At the 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 have been: "A international 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 property."

Accusing the outgoing government of getting allowed these pressures to create, Rudd said his five-point program included incentives to encourage private savings whilst tackling expertise shortages and infrastructure bottlenecks.

Rudd, who described himself as a fiscal conservative throughout the election campaign, stated producing the budget surplus -- up from the 1. % target of the previous government -- would need 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 anticipated to exceed the Reserve Bank of Australia's target variety of 2-three percent this year, raising the prospect of additional interest rate rises by the central bank.

Prices are at an 11-year high of 6.75 percent soon after two 25 basis point increases last year, and the effect on mortgage-belt voters is believed to have played a portion in the ouster of the earlier government.

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

"More than coming years, developments in China will increasingly shape each international and Australian financial conditions," he stated.

"The Indian economy has become one particular of our fastest increasing export markets and is expected to continue to post impressive rates of financial development.

"Combined, China and India accounted for around 40 % of Australia's export worth development in 2006-07."

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

"And the most pressing financial challenge domestically is inflation." pet relocation to australia