This Budget was always going to be an important one.
Delivered against the backdrop of global economic uncertainty, it was also the K.Rudd Government's first Budget, with Treasurer Wayne Swan charged with the principle responsibility of making sure he delivered on election promises.
More importantly, economists (globally) were keeping a keen eye on the fiscal strong-arm tactics needed to help the Reserve Bank of Australia (RBA) curb inflation. As well as ensure that the fiscal surplus is properly used to propagate a stronger, more resilient economy.
Australia is by default, subject to the rapidly slowing European and US economies.
However, we are also uniquely fortunate in that we are surrounded by the economic opportunities on offer in Asia and other emerging markets.
As a result, we needed a Budget that would maintain Australia's relative economic strength, but also build a platform to protect us from the impact of a US lead, global recession.
Add to this scenario the complexities of global economic unrest, continuing global stockmarket volatility, the well-publicised sub-prime and credit crisis's, record breaking oil prices, a slowing domestic economy artificially propped up by the China-lead resources boom, 12-year highs in domestic interest rates, volatile commodity markets and inflation well outside the RBA's target band (a 16-year high) - and one could easily be forgiven for confusing this years Budget for a death-defying high-wire balancing act.
Balancing the Budget
Thanks largely to increasing wages, nearly full employment, over three years of solid stockmarket growth plus the resources boom - income tax was the single largest contributor to the $319.46 billion of revenue collected by the Government and will account for more than 68 per cent of all revenue to be accumulated.
Of this, more than 60 per cent of total income tax came directly from individual earnings.
Of the indirect taxes, sales tariffs and excise duty are still the second largest contributors, totalling $48.1 billion and $25.180 billion respectively and accounting for 58 per cent and 30 per cent of total indirect taxes respectively.
So it obviously begs the question, what is the Government going to do about the increasing cost of fuel, and the apparent pump price fixing, when they earn 25 per cent of their indirect taxes from fuel excise?
On the expenditure side, Treasurer Swan cut spending by $33 billion to $292.47 billion, creating a record surplus of $21.7 billion or 1.8 per cent of GDP - limiting spending growth to only 1.1 per cent on the previous Budget.
This represents the largest proportion of GDP since the 1999/2000 Budget at 1.5 per cent.
Interestingly, the largest bill is that of social security and welfare, which accounts for 35 per cent of expenditure and was increased by 5.4 per cent on the previous Budget.
However, the most noticeable difference was the more than 25 per cent reduction in spending on agriculture, forestry and fishing as a result of a claw back on drought provisions and equine flu relief.
So you could easily forgive the farmers for being a little unhappy, when it's broadly reported that the drought is still far from over in many areas.
Crystal ball gazing
Most interesting was the Government's economic outlook, which not only provides a snap-shot of how they see us weathering the looming global financial storm, but also the impact that their fiscal policy will have going forward.
Most noticeable amongst the forecasts was the reduction in CPI, down to 3.25 per cent from it's 4.2 per cent high, as reported by the Australian Bureau of Statistics (ABS).
Furthermore, we can expect a reduction in Real GDP down to 2.75 per cent and an increase in the Unemployment Rate up to 4.5 per cent or 75,000 less jobs (still low by historical standards).
So what does this really mean?
Simply put the economy will continue to grow at 2.75 per cent, but inflation will continue to remain the key risk. In what Swan calls a 'mild tightening Budget', some believe he has left most the 'dirty work' to the RBA in fighting inflation.
As a result it simply ensures that the RBA will now be forced to increase rates further, or keep them higher for longer.
And importantly, this is likely to have a negative flow-on effect to those already suffering increasing mortgage stress as a result of the 12 consecutive increases in interest rates - that's one for each budget surplus.
Combine the rate rises with the effects of the continuing global credit squeeze, and the hand of many home owners will likely be forced in the coming months as wage pressures are also driven down.
In contrast, inflation and the cost of living will continue to increase.
So you have to wonder whether the Budget will in fact do enough to support the 'working families', or whether it will drive them out of their homes and jobs.
One thing that is for certain is the situation is likely get worse, before it gets any better.
So who gets what?
In what Treasurer Swan described as a 'tough but fair Budget', it's worth taking a look at who will receive the most benefit.
Family first
The biggest beneficiaries of the Budget are the 'working Australians'.
And with a $55 billion tax package, including the $46.7 tax cuts over the next 4 years, it would certainly appear that the "backbone of the economy" has been best served.
New income tax cuts to become effective from 1 July will save the Government $47 billion over 4 years.
There has also been some reshuffling in the tax thresholds with the 30% tax bracket raised from $30,001 to $34,001, the 40% bracket up from $75,001 to $80,001 and the 45% bracket increased from $150,001 to $180,001.
However, in what appears to be a rare move, the highest tax bracket of 45 per cent will be slashed to just 40 per cent in 6 years time.
Amongst the other measures introduced by the Government was a means test for the Baby Bonus and the Family Tax Benefit Part B.
Any household earning more than $150,000 will no longer be eligible for the $5,000 Baby Bonus, which will now also be paid quarterly.
The impact of the means test on the Family Tax Benefit B is reported to affect an estimated 50,000 families, who will now be out of pocket by $40 a week from July 1.
The Child Care Tax Rebate for out-of-pocket expenses will also be means tested and only households earning less than $150,000 will receive the full 50 per cent rebate and up to a maximum of $7,500 per child.
Those earning more than $150,000 will only be eligible to claim up to 30 per cent.
In a move clearly designed to get mums back to work, part-time tax was lowered and it's now possible to earn up to $14,000pa without paying tax - up from $11,000.
Health
Health reform has been on the new Prime Minister's agenda for a long time.
Most notable is the planned $10 billion Health and Hospitals Fund to help refurbish 750 hospitals. And whilst it is yet to be determined how, by whom and when the money will be spent, the industry has been assured they will receive new medical equipment and technology as a priority.
Always on the Budget radar, Medicare will likely prove to be one of the Budget initiatives most discussed.
Firstly, the Medicare Levy Surcharge threshold was increased from $50,000 to $100,000 for singles and from $100,000 to $150,000 for couples.
The likely impact is that private health insurance may be abandoned by as many as 780,000 singles and couples according to PricewaterhouseCoopers.
Importantly, an extra $8.6 million will be spent to reduce Medicare queues and the States will also receive $300 million over next three years to assist funding up to one million dental treatments.
Infrastructure
Improving Australia's infrastructure came in a close third with the bulk of the surplus being pumped into a $20 billion, Building Australia Fund.
Aimed at increasing and improving reserves attributed to roads, rail and transport, the package is designed to break-down congestion, improve the viability of our role as a major trading partner to the emerging markets - and also allow the existing infrastructure to keep up-to-date with growth levels.
And whilst $20 billion dollars might seem like a lot of money, most still question whether it is enough to solve the long-term congestion issues that already create bottlenecks for importers and exporters.
Education
With 20 per cent of our school students failing literacy and numeracy benchmarks, a reasonable 'war-chest' has been established, with $11 billion donated to the Education Investment Fund for schools and universities.
Families are also eligible to increase their refunds on school education costs, with an estimated 1.3 million families with kids at school increasing their education refund as soon as 2008/2009.
Excluding school fees, this equates to roughly $375 for each primary student and $750 for secondary student and covers laptops, computers, software and textbooks.
Financial Services
Although not expecting too much from the Budget, the financial services industry was pleasantly surprised with the reduction in Withholding Tax from a flat 30 per cent down to 7.5 per cent from 1 July 2010 - primarily to further stimulate foreign investment into Australian industry.
Focused almost solely on the already massive $1.4 trillion dollar managed funds industry, it will provide significant opportunities for Australia to maintain and improve its position as a financial services hub for South-East Asia.
Homebuyers
The government also delivered greater clarity on the First Home Saver Account with its introduction pushed back to October.
The Accounts will now attract a 17 per cent Government contribution at the concessional tax rate of just 15 per cent and all draw-downs will be tax free if used to buy a home.
However, it is likely that this is simply a cheaper alternative to removing Stamp Duty, which was supposed to be phased out after GST was introduced.
Superannuation
After the major industry overhaul resulting from the introduction of Simpler Super last year, most financial planners and advisors were generally happy that there were no more changes to superannuation.
However, what will likely affect most of their clients is a mild expansion in the definition of 'income', with salary sacrifice contributions now included as income.
It also appears that baby boomers will have to dip into their family home equity to fund their retirement, after pension ages remained the same.
Small businesses and Industry
It was certainly a case of mixed feelings for small businesses, which received the good news that $251 million will be delivered to Enterprise Connect Innovations Centres.
However, on the other hand, the Government has dumped the Australian Industry Productivity Centres, Institute for Trade Skills Excellence, Innovations Ambassador Program, New Industries Development Program and Global Opportunities Program.
Environment
To fast-track the reduction of green house gas emissions, establish a national emissions trading market, implement the Kyoto protocol, invest in renewable energies and rescue the Great Barrier Reef, Swan outlined a $300 million five year plan green loans program.
This was further complemented by $12.9 billion ear-marked for improved water management plans.
When you add it all up, what are we left with?
So whilst economists and analysts continue to discuss whether the Budget will deliver the long-term taxation reform necessary to ensure consumer spending retreats to a reasonable pace, there is no doubt that the Government has at least taken the first step in delivering on its principal election promises.
However, the question of whether the Budget's fiscal strong-arm tactics will be sufficient to neutralise the China fuelled resources boom will certainly be closely monitored by us all for some time to come.
If not, then inflation will continue to rise and the RBA will be forced to increase interest rates further.
Ultimately, it's going to be Treasurer Swan's 'working Australians' who will not only be subjected to the pressures of increasing unemployment, grocery and fuel prices, but also bare the brunt of further increases in the mortgage rates.
And whilst it seems that the Australian equity markets viewed the Budget as mostly favourable, with the S&P/ASX200 returning back above the 6,000 mark, the true test will be what fiscal reform Brendan Nelson and the coalition block in the Senate on July 1 - and its possible because they certainly appear to have the numbers.
Accusing the Government of splashing out at the taxpayers expense, it seems the coalition want to block several major fiscal initiatives, which will add up to about $6 billion.
These include reducing the fuel excise by five cents a litre, removing the tax on alcopops, blocking the increase on the Medicare Levy and the increased tax on luxury cars, as well as relaxing the salary sacrifice constraints.
So could more have been done to improve our long-term economic survival and propagate a soft landing?
Only time will tell.
Happy Investing.