In 15 days time the Government will hand down its fifth Budget.
It will be a Budget that responds to Australia's current challenges, and that is appropriate for the economic circumstances both globally and at home.
It will be a Budget that recognises the importance of getting the fiscal settings right.
Because this is a time of rapid change; change which brings real challenges for business and government alike.
And it is change that cannot be avoided nor wished away.
Managing change, preparing for the future, making the most of our opportunities in this Asian Century, require us to have the building blocks of our economy right.
Just as the businesses you lead and represent will be preparing for the coming years, so too is the Gillard Government.
And fiscal policy is key to this.
 
As we finalise the 2012-13 Budget, the real test in economic management will be how well we deal with the circumstances we face.
As we all know, theres plenty of uncertainty about the path that the global economy will follow.
Weve seen some promising signs that global financial conditions have improved somewhat this year, but serious challenges remain.
Sovereign funding problems are less acute but some governments remain under pressure.
The US economic recovery has become more enduring but unemployment remains unacceptably high.
The global recovery remains fragile and substantial risks remain as countries rebuild.
In contrast, Asia continues to be the powerhouse of global growth.
All of these dynamics the continued rise of Asia and the transformation in the global economy are reshaping Australias economy.
But Australia faces the challenges ahead from a position of strength.
Just last week, the IMF in its World Economic Outlook Update confirmed that the Australian economy is expected to outperform every major advanced economy over the next two years.
I want to stress this point because there has been some political comment that Australias economy is underperforming.
Yes, the impact of the Global Financial Crisis and the effect of the cautious consumer still lingers.
But to say we are underperforming is to talk down our strength in this time of global uncertainty.
We should be proud of our economic fundamentals.
We are on track to return to around trend growth.
Since 2007, nearly 790,000 jobs have been created and unemployment remains steady at 5.2 per cent.
This compares to 10.8 per cent unemployment in the Euro zone, and 8.2 per cent in the United States.
We have a strong investment pipeline of some $450 billion.
And our net debt is expected to peak in 2011-12 at 8.9 per cent of GDP, less than one tenth of the average of the major advanced economies in 2016.
Whereas many advanced economies have not fully recovered from the effects of the GFC, with GDP levels below their pre-crisis output, the Australian economy is now 7 percent larger than before the crisis.
The difference is stark.
And we need to remember the role getting fiscal policy settings right played in achieving that result.
The Governments decision to provide fiscal stimulus to the economy kept Australia out of recession and ensured jobs and businesses were protected.
The collective response from government, business and workers in the face of the global downturn was something for which we can all be proud.
Just as the right fiscal settings were central to supporting jobs and growth at that time, so too are they central at this time of change.
 
Its important to recall the promise that the future holds.
We should see a transitioning economy also as an opportunity.
According to the RBA, Australias main trading partners are estimated to grow by 1 percentage point more than global GDP, as forecast by the IMF, in 2012 and 2013.
There are approximately 500 million people in the Asia-Pacific, excluding North America, who would currently be categorised as middle-class, and this is forecast to rise to around 1.7 billion by 2020 and 3.2 billion by 2030.
Thats 3.2 billion people who will be looking to purchase increasingly sophisticated goods and services.
This represents real opportunities for Australia; opportunities to continue to grow our economy, to create jobs, to secure our future prosperity.
Indeed, our proximity, our existing relationships and our export potential, puts us in a unique position to further benefit from the advancement of Asian economies.
 
In just over a fortnight, the Gillard Government will hand down a budget surplus because it is the right thing to do given our economic circumstances.
Its the right thing to do at this time when our economy is returning to around trend growth.
Because when we have a $450 billion investment pipeline thanks to the mining boom, government shouldnt be adding to price pressures.
Stepping back and giving more room for the private sector to grow gives the Reserve Bank the flexibility to cut interest rates should it see fit, which is good for Australian families and good for Australian businesses.
A budget surplus creates a buffer against future uncertainties should the global economy worsen.
And a budget surplus sends a signal of strength to investors at home and abroad.
For these reasons, at this time of change, returning to surplus is good economic management.
 
Of course, returning the budget to surplus will not be easy.
We have seen $140 billion in revenue write downs over five years and we expect there will be further substantial revenue downgrades in this Budget.
Compared to previous decades, revenue flows have structurally changed.
The Commonwealth tax-to-GDP ratio fell four percentage points to 20 per cent during the GFC, and although its expected to return to around 22.8 per cent over the next few years, its still one percentage point lower than the long-term average.
That represents about $17 billion a year in revenue that will no longer be received.
This structural change in receipts means there is an imperative to be disciplined with the use of Commonwealth resources.
This discipline is heightened as we will also have greater demands for services and fewer taxpayers to fund them in the years ahead.
And while Governments budget for the upcoming four years, it is the long term by which they should be measured.
In past Budgets weve acted to improve fiscal sustainability by better targeting of assistance.
While others talk, the Gillard Government has delivered.
Weve put in place measures to better target family payments and increase the age pension age.
One of our long established policies to improve the sustainability of the health system, the means testing of the private health insurance rebate, finally passed the Parliament in March.
Without this reform, projections out to 2050 show that private health insurance expenditure reaches 75 percent of the Medicare Benefits Services payments, which is quite clearly an unsustainable proposition. Currently expenditure is 32 percent.
It is our job as responsible economic managers to make the right decisions now to ensure the budget is able to meet the needs of Australians for the long term.
And well be continuing this task in the forthcoming Budget.
 
Australia truly is a patchwork economy ... a two-speed economy.
Indeed, you in this room know first-hand just how differently sectors and different regions are performing at the moment.
In Western Australia, we are seeing the biggest investment boom in our generation.
Many businesses in the west are thriving.
From 2011 to 2013, investment in mining alone has gone from $47 billion to $95 billion to $120 billion.
In contrast, we are seeing businesses and manufacturers in my home state of South Australia, for example, under pressure with the high dollar.
So were hearing about job losses and business closures, while at the same time were seeing record profits in some sectors.
In ACCIs pre-budget submission you spoke of a greater focus on competitiveness and productivity as one of the key means by which these challenges can be met.
Indeed, they are the priorities competitiveness and productivity which underpin the government's investment in skills, innovation and infrastructure.
97 per cent of Australias businesses are small to medium sized and the contribution they make to the economy is fundamental.
As we know, the global economy is changing and Australian businesses must innovate and adapt in this transitioning economy if they are to remain competitive.
Thats why the Gillard Government is focussed on investing in the skills, education and training required to see our economy prosper over the coming generations.
In the last Budget, we announced a $3.5 billion investment in skills, and at COAG just two weeks ago, the Prime Minister secured agreement with the States and Territories to enhance access to qualifications and training, including for 375,000 additional students over five years.
We have doubled the amount spent on schools nearly $65 billion over four years and an additional 100,000 students are now attending university, with places uncapped from this year forward.
In March, the Parliament passed the Minerals Resource Rent Tax, which will see mining companies pay their fair share for the natural resources they profit from and spreading the benefits of the boom.
The revenue raised under the MRRT will see a reduction in the company tax rate, and for 2.7 million small businesses, an instant asset tax write-off will be available.
And, of course, just two weeks ago, ACCI week joined Prime Minister Gillard and myself at the Business Advisory Forum here in Canberra, to discuss regulatory reform and the current Seamless National Economy agenda which is focused on reducing compliance costs for business.
16 of the 27 deregulation reform priorities of the Government including standard business reporting, a National Consumer Law including product safety and a national system of trade measurement have already been completed.
The benefits from these reforms are significant.
The Productivity Commission found that just 17 of the deregulation reforms alone will lower business costs by $4 billion each year when fully implemented, and improvements to productivity could increase GDP by about 0.4 percent.
The National Broadband Network rollout is underway, and will provide the backbone of a modern, high skill and high productivity economy.
And this morning the Minister for Infrastructure and Transport, Anthony Albanese, and I announced details for the Moorebank Intermodal Terminal project; a project which will improve national productivity and which will see benefits over the 30-year period valued at $10 billion.
These reforms and investments are all about ensuring that Australia is in the best position to deal with the opportunities of the future and to prosper in a transitioning economy.
 
Now, there has been much commentary in recent weeks about whether or not a surplus should be delivered or not.
For this Government, it comes down to this:
Our vision is to strengthen the economy through investing in skills, through infrastructure while staying true to the values Labor has always stood for supporting jobs, helping those who need it most, tax relief for low income-earners and small businesses.
We believe that a budget surplus is the right thing for the economy.
And were not looking just to the short term.
Our budget will deal with todays challenges and build tomorrows foundations.
As a Labor Government, we understand that fiscal sustainability is a social responsibility.
Balancing the budget is not only important for the economy in the medium term; it is also the discipline which grounds sustainable policy in the years ahead.
Australias economy is strong.
To trash talk it is economically reckless.
And to oppose savings measures while calling for a surplus is simply dishonest.
Such negativity has the potential to wreck the surplus.
A surplus that will give the Reserve Bank the flexibility to move on interest rates.
A surplus that will support our growing economy.
A surplus that will give us a buffer in case the global economy gets worse and will mean we can protect jobs.
It is incumbent upon those who would oppose our savings measures to put forward their alternatives.
If not, then they are just wrecking the surplus in their political interests when the focus should be on whats in the best interests of Australians.
Managing the budget is about making difficult choices.
It is not calling for a surplus yet blocking responsible savings measures.
Managing the budget is about prioritising policies.
It is not about making promises you cant afford.
Managing the budget is about ensuring Australia is in a strong fiscal position, not just in the financial year ahead or over the forward estimates, but for the decades ahead.
That is what the Gillard Government is committed to doing, and on May 8 we will deliver on this.
Thank you.