The new budget for next year holds spending increases down to 2%. Taxes are cut on interest earned and extra deductions for work-related expenses. Those earning less than $16,000 pay no taxes at all. Any surplus revenue must be applied to paying down sovereign debt. Sounds great? It’s all true! Yes, a responsible administration cutting taxes and limiting spending increases. A sound recipe for economic growth. In fact, they already have an unemployment rate of only 5.3%. Oh, did I mention I’m not talking about the United States? Sorry! Yes, I’m talking about that land down-under, Australia!

Nice to see a national government actually practicing some sound management. Australia has suffered as other developed nations have during this global recession. Last year, their GDP only grew 1.4%. The rest of the planet shrank 3.2% on average. The new budget holds deficit spending down to just 2.9% of GDP, and estimates the overall sovereign debt load to peak at a mere 6%. Incredible! They even expect to have a budget SURPLUS within two years.

Keep in mind that Australia is a ‘progressive’ country. They have it all. National health care, strict gun-control laws, strong pro-union business climate and a generally center-left attitude across the board. But also keep in mind that Australia has been a key ally of ours since 9/11, especially after suffering many casualties from the Bali resort bombing attack.

Labor Party Prime Minister, Kevin Rudd, has been practicing (dare I say it?) conservative fiscal policy since taking office in 2007. He did benefit from the previous government, run by Liberal Party PM, John Howard. In Australia, the Liberal Party is the conservative one. In the 1980s, just as in the UK and America, Australia under went a major shift towards deregulation.

The past few years have been difficult ones, as Australia faces it’s own housing bubble as well as a decline in exports. But demand has picked up recently, and projections for this year show a possible increase of up to 25% in exports, especially of commodities and raw material, such as iron. Due to the high use of coal (Australia has one of the highest percentages of coal-based electricity) an earlier plan to implement a cap and trade program was put on hold till 2012.

But the future for Australia is looking brighter, especially after this new budget. The estimates for GDP growth and debt reduction show much promise that Australia dodged the bullet and the worst may be over for them. Unemployment is expected to decline to 4.75% and inflation will also been kept in check. The Reserve Bank of Australia intends to keep interest rates at around 2.5%. Economy Watch has placed Australia as the 13th largest economy in the world and as having one of the strongest laissez-faire policy. With strong ties to China, Japan, U.S., UK and EU, and abundant resources, like gold and natural gas, Australia seems poised to weather the storm and a good place to invest in.