From the Board Minutes yesterday:
"According to the Australian Government Budget for 2011/12, fiscal policy was expected to exert a significant contractionary impulse on aggregate demand over the next two years. The underlying cash balance was forecast to move from a deficit of 3.6 per cent of GDP in 2010/11 to a deficit of 1.5 per cent of GDP in 2011/12 and a small surplus in 2012/13. This forecast consolidation reflected both growth in tax revenue and a fall in expenditure as a share of GDP, resulting from a cap on spending growth and the wind-down of fiscal stimulus programs, as had been intended. State government budgets also pointed to some contractionary effects on the economy. These developments in fiscal policy were broadly in line with what had been assumed in the Bank's forecasts for economic activity and inflation in the May Statement on Monetary Policy."
