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Treasurer Joe Hockey has promised his coalition colleagues that savings in his second budget will be responsible and fair.


Mr Hockey gave a slideshow presentation to a government parties room meeting on Tuesday in an attempt to clear up any confusion among edgy backbenchers over his budget strategy.

Prime Minister Tony Abbott has clouded the run-up to the May 12 budget by predicting a “dull” affair, which business has taken to mean the government is going soft on reform.

The presentation shows the budget will aim to build a stronger economy through a small business package, childcare reform and infrastructure investment while reaping the benefits of recent free-trade agreements.

Mr Hockey argued the mid-year review showed the budget was on track to return to surplus, despite a weaker global outlook, a collapse in the iron ore price and the status of the Senate.

In this year’s budget, all new spending will be offset by savings that are responsible and fair, he said.

But he also said that monetary policy and fiscal policy must work “hand in hand”.

The Reserve Bank cut its cash rate to an all-time low of 2.25 per cent in February and economists expect more easing in coming months.

Even so, Mr Hockey promised to improve the budget bottom line “each and every year” through a continued sensible path of fiscal consolidation.

“We will get the budget back to surplus as soon as possible,” he said, he did not nominate a specific timetable for a surplus.

Mr Hockey’s intergenerational report shows that without further legislative action, the budget will come close to a surplus in about five years but then sinks into worsening deficits for the next 35 years.

It was the last scheduled meeting of government MPs before budget day.


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