The major short-term challenge is to maintain macroeconomic stability in the face of a commodities price boom that has boosted the terms of trade by around 30% over the last three years. Recent monetary tightening in the face of relatively weak output growth needs to be seen in the context of strong income gains due to the surge in the terms of trade and the prospective effect this is likely to have on spending. Unusually buoyant tax revenues related to the commodities boom also raise the question as to how ambitious short-term fiscal objectives should be. Recent budget tax cuts are also considered in the context of previous Survey recommendations and a recent study comparing Australia’s tax system with that in other OECD countries.