Over the last twelve months the Australian economy has continued to strengthen despite significant offshore headwinds.

Economic growth has increased over the last twelve months from 1.9% to 2.7%.

Export volumes have increased significantly.

Job creation across the economy is running at around 15,000 new jobs a month. This is three times larger than the average of around 5,000 jobs a month last year.

Despite many challenges the Government has made a good start on Budget repair.

There is more work to be done but we are on the right track.

As a result we have better jobs growth and greater prosperity.

And a more resilient Budget helps us to better cope with unexpected adversity.

So we need a strong Budget to help us have a strong economy.

In the last six months unforeseen events have hit the Australian economy.

In particular, we are now witnessing the largest fall in the terms of trade since records began in 1959.

This has been faster and deeper than anyone expected.

Our nation’s export income has not been what we expected. For example iron ore, which is one fifth of our nation’s export dollars, has fallen from $120 a tonne at the beginning of this year to around $60 a tonne today.

The price of wheat, which is one of our largest agriculture exports, has fallen 20% since the Budget.

In agriculture and resources Australians produce far more than we consume.

So we use the export of excess produce and services to build our nation’s income.

Income volatility from exports can however have a negative impact on our economy and on the Budget bottom line.

When external events turn against us our domestic Budget strength needs to cushion the blow.

As a result of these recent events tax receipts are expected to fall by $6.2bn this year and a total of nearly $32bn over the next four years.

Company tax receipts are expected to be $2.3bn less this year ($14.4bn over 4 years).

Income tax is expected to be $2.3bn less this year ($8.6bn over 4 years).

To try and recover these falling revenues now, through new or higher taxes would unquestionably harm the Australian economy.

Falling wage growth has also had an impact on both revenue and expenditure.

Means tested payments such as Family Tax Benefits ($3.2bn) and income support payments ($1bn) have had larger than expected increases as families remain in lower income thresholds and therefore claim more benefits.

Child care payments ($2.4bn) have also increased on the back of more parents looking to participate in the workforce.

We will announce a comprehensive families’ package in the new year, including child care and parenting leave initiatives. This package will deliver greater work participation opportunities for parents.

Although the Senate has passed the great majority of the Government’s Budget (75% of the over 400 measures) there are still a number of outstanding structural savings.

These initiatives in health, education and welfare are essential for the medium and long term benefit of the Australian people.

Negotiations in the Senate this year for the repeal of the Mining Tax package have cost $6.6bn over the next four years but the costs are more than recovered by the end of 2023.

The failure of the Senate to accept all the Government’s policies has cost the Budget $10.6bn. There is a further $34bn still to be legislated including $5bn of savings announced by the previous Government.

Where the Government has made new spending decisions we have more than offset the costs with new savings.

In particular, Defence and national security commitments totalling $1.3bn are more than offset by savings in our foreign aid Budget of $3.7 bn.

Where we have made savings we have worked hard to ensure that there will be no negative impact on the Australian economy.

The Commonwealth Budget is stronger today than it was last year.

This is despite a fall in expected revenue of around $100bn since the 2013/14 Budget.

Debt is projected to be almost $170bn less than expected one year ago.

This means $6,000 less Government debt for every man, woman and child in Australia within ten years.

Rather than never ending deficits the Budget is on track for a credible surplus.

Deficits will decline each and every year at the same pace that we expected in the May Budget (an average 0.6% fiscal consolidation each year).

We continue to be disciplined on spending with real spending growth limited to just 1% per year over the next four years.

Our response to the current economic challenges is not to spend more money but to spend what we have carefully.

2014 has been a better year for the Australian economy than last year. We have more jobs and greater wealth.

We need to lift economic growth to 3% and beyond to create more jobs and reduce unemployment.

We need to pursue structural reform to lift our growth rates to levels that Australians expect.

2015 will be a better year for the Australian economy.

Lower energy prices, a lower Australian dollar and interest rates at historic lows continue to facilitate stronger economic growth.

Massive investment in new and upgraded roads, and in transport and business infrastructure, will strengthen the productive capacity of the Australian economy.

In addition new trade deals with Korea, Japan and China will deliver broader and deeper market access, particularly for Australian small businesses.

We also expect housing construction to strengthen which will further boost economic activity.

I say directly to the Australian people that whilst we have faced many challenges we have made a good start fixing the Budget.

There is still much work to do but we are on the right track.

Over the months and years ahead, we are determined to strengthen the Budget and the economy so that all Australians benefit through more jobs and greater prosperity.