Time to pull back spending, says Rudd

Prime Minister Kevin Rudd says it is time for the government to "pull back", after delivering a $40.8 billion deficit budget.

Selling the "no frills" budget in the lead-up to an election, Mr Rudd said after spending up big during the global recession last year, now was the time for the government to tighten the purse strings.

The 2009/10 budget projected deficit was $57.6 billion.

"Remember the job of government when the private economy is under stress is to expand the role of government so that we keep people in jobs," he told Fairfax Radio Network.

"But now that we've got signs of recovery, despite what's happening around the world at the moment, it's time for the government to pull back."

He said the government's spending last year to keep people in work meant it would soon be able to return to budget surplus in three years time.

"We've kept... close to a quarter of a million people in jobs, that means they're still paying taxes," he said.

"If that wasn't the case and they were unemployed, which in view of the unemployment rates around the world is what would have happened, then they would be also not only not paying taxes but we'd be paying them unemployment benefits.

"So these things together add up to our ability to bring the budget back to surplus."

He said the move back towards a surplus in three years was happening at a time when "most other governments around the world will be swimming in deficit for many, many, many years to come".

Mr Rudd denied Australia was relying solely on the boom in China to sustain its wealth.

"It's not just China, we're talking about our huge markets in Japan and Korea, increasingly India as well," Mr Rudd said.

He said treasury estimates of commodity prices on the mineral resources being sold to these countries were conservative and that the proposed resource super tax had nothing to do with the surplus predicted for three years time.

"The surplus is entirely funded within the budget itself, the resource super profits tax is used to fund three or four other measures," Mr Rudd said.

These were the Henry tax review measures of bringing down the company tax rate to 28 cents as well, creating a new tax break for small business, boosting superannuation and investing in infrastructure.

However, the proposed resource tax would also be used to fund one budget measure, the 50 per cent tax cut on up to $1000 in interest on bank savings, Mr Rudd said.

This measure was designed to encourage people to help boost the national savings through their own savings.

"There's not a whole lot of tax incentive for people to have money in a bank account," Mr Rudd said.

"Therefore we're trying to actually make it more advantageous for people, often older people, who prefer to keep their money in bank accounts. It all contributes to national savings."