Overview

Surplus to peak at $21.7b

$40b for nation building funds

Tax cuts of $46.7b

Spending growth 1.1%

Forecasts

GDP to slow to 2.75%

Jobs growth to slow to 1.25%

CPI to peak at 4%

Wages growth at 4.25%

Environment

$2.3b to fight CO2 emissions

$500 for green car fund

$300m for households

$150m to help region

Education

$11b for higher education

$5.9b for education revolution

$500m for universities

$1.2b for school computers

Family

Baby bonus up to $5000

Child-care tax rebate up to 50%

19,000 more carers benefit

$1.2b for first home buyers

Tax

Tax-free thresholds up to $14,000

Luxury-car tax raised

$1000 savings on $50,000

$8.76 tax loopholes to go

Health

$3.2b to slash elective waiting lists

$10b for hospitals

$249m for national cancer plan

$100,000 limit for Medicare levy

7.30pm update from Canberra

Labor has delivered a moderate budget that it hopes will "build the nation" by dedicating spending on health care, welfare and infrastructure while winding back the direct benefits to the nation's well-paid.

The first Labor budget in 13 years has maintained the tax cuts promised during the election and will now means-test welfare and the controversial baby-bonus which rises to $5000 from June.

"We were not elected to be popular, we were elected to do the right thing for the country," Treasurer Wayne Swan said ahead of delivering the numbers to Parliament.

The future-building emphasis of Labor's economic blueprint is seen in the establishment of a $10 billion Health and Hospitals Fund which will be used to rebuild and renew the nation's hospitals.

On top of that Labor will dedicate $20 billion in the Building Australia Fund over the next two years to fund the shortfall in spending on national roads and infrastructure in an attempt to ease the crippling capacity constraints.

The touted "education revolution" unveiled during the election will be boosted with $5 billion worth of fresh funding, of which $500 million will be spent on universities, and the fund will eventually be worth $11 billion.

The increased spending on three funds - of health, infrastructure and education - will be funded through this year's surplus of the better-than-expected $21.7 billion.

The bottom line represents 1.8 per cent of GDP - surpassing the Government's highlighted target of 1.5 per cent to put downward pressure on interest rates.

The first Labor budget by Mr Swan has met virtually all of the election promises and will boost the child-care rebate from 30 to 50 per cent and the payment will now be made quarterly instead of yearly.

The changes mean average working family with two children could now be up to $51.54 a week better off with the higher child-care refunds, education tax rebates and direct income tax cuts, which take effect from July 1.

Families with older children in high school could be up to $43.27 a week better off, while Treasury estimates that a single person on an average income will receive about $25 a week extra.

Mr Swan said the Government had delivered a "tough budget'' which he realised would not be particularly popular as the well-paid had welfare measures reduced.

"This is a budget which tips the scale back in favour of Australian families," he said.

"This budget does not have any rabbits but it does give a lot of commitments.

"There's more work to be done. We have only been in office for a short amount of time but the search for savings will keep going."

Mr Swan said the Government's priority had been to put downward pressure on inflation, which he thought would occur given the savings objective of the Government.

The spending cuts made by the Labor "razor gang" were more savage than expected, with savings of $33 billion made over three years, compared with the initial target of $10 billion over three years.

The previous target will be met in nearly the first year with the Government aiming to slash $7.3 billion in the year ahead.

Mr Swan was keen to emphasise that, in the next four years, $27.43 billion would be spent, compared with the $33 billion worth of savings, meaning the Government could hoard the cash for a rainy day.

However, on an economic front, the Government has painted a mixed picture for the next few years.

The Treasury has predicted that, the despite the welfare moves designed to have more people enter the workforce, the unemployment rate in Australia could start to shift higher.

It has forecast the jobless rate will move from its current rate of 4.2 per cent to 4.75 per cent by June next year, which Mr Swan said was the result of higher inflation eating into the economic fundamentals.

"High inflation is the enemy of economic growth," he said.

The budget shows the Government expects inflation to come back under control at a faster rate that forecast by the Reserve Bank.

Treasury has predicted the CPI will be at 3.25 per cent in June next year, while the RBA has forecast 3.5 per cent. Treasury believes that by June 2010 inflation will be at 2.5 per cent whereas the central bank has predicted 3 per cent.

The growth of the economy is also expected to moderate but again there are diverging predictions from the Government and the RBA. The central bank had predicted that economic growth would soften to 2.5 per cent in June 2010 but the Government is expecting it to come in at 3 per cent.