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SYDNEY (AFP) Boom in Asia and bust in the United States are buffeting Australia's economy, Prime Minister Kevin Rudd warned Monday as he outlined plans to rein in inflation.

In his first key speech on the economy given that his Labor celebration swept John Howard's conservatives out of office in November, Rudd pledged to slash government spending to generate a huge spending budget surplus.

The target would be a surplus of 1.five % of gross domestic product in the financial year to June 2009, he said -- about 18 billion dollars (15.eight billion US dollars).

At the exact same time, the government has vowed to honour election pledges for 31 billion dollars in tax cuts.

Rudd told enterprise leaders at a breakfast meeting in Perth that Australia faced "conflicting financial currents."

These have been: "A worldwide economy (led by the United States) which appears to be slowing. An ongoing terms of trade boom driven by Asia Pacific economies. And important domestic inflationary pressures at property."

Accusing the outgoing government of having permitted these pressures to create, Rudd stated his 5-point program integrated incentives to encourage private savings even though tackling expertise shortages and infrastructure bottlenecks.

Rudd, who described himself as a fiscal conservative in the course of the election campaign, mentioned generating the budget surplus -- up from the 1. percent target of the preceding government -- would demand discipline.

"That will demand a determined, disciplined approach to spending and a hardline-approach to savings," adding that his "razor gang" would reduce wasteful spending.

Inflation is anticipated to exceed the Reserve Bank of Australia's target variety of 2-3 percent this year, raising the prospect of further interest price rises by the central bank.

Prices are at an 11-year higher of 6.75 percent right after two 25 basis point increases last year, and the effect on mortgage-belt voters is believed to have played a element in the ouster of the preceding government.

Rudd noted that the downturn in the economic outlook in the US, Europe and Japan comes as robust development in the Asia-Pacific region is continuing to drive demand for Australia's wealthy mineral and energy resources.

"Over coming years, developments in China will increasingly shape both international and Australian financial situations," he mentioned.

"The Indian economy has become one of our quickest growing export markets and is expected to continue to post impressive rates of economic development.

"Combined, China and India accounted for about 40 percent of Australia's export value development in 2006-07."

This financial expansion in the region had heightened the require for careful management of the domestic economy, he said.

"And the most pressing economic challenge domestically is inflation." compare taking pets to australia