The mid-year budget update, brought forward due to the election, shows that the government has $59 billion more to spend than when the budget was announced in May. The booming job market sees income tax receipts being $2 billion more than expected for 2007-08, and as a result savings of over $1 billion in unemployment payments. Treasury has now forecast growth over the financial year to be 4.25 per cent, up from 3.75 per cent, and jobs growth to jump from 1.5 per cent to 2.25 per cent.
All this good news places further pressure on the Reserve Bank to raise interest rates sooner rather than later, with the predicted 5.25 per cent growth in private demand well above the "three-point-something" that the RBA governor has said is a sustainable growth level.
The federal treasurer, Peter Costello, has said that large parcels of commonwealth-owned land will be released for residential development in a bid to counter Labor's campaign on housing affordability. Mr Costello has stressed that land availability is the key to improving affordability and rejected the concept of using tax reforms to promote investment in low cost housing. "If you get further investment into the housing market, you could actually push housing prices up," he said. According to Mr Costello the government has completed an audit of commonwealth-owned defence and CSIRO land which has identified substantial blocks around cities that he hopes can be on the market soon.