Budget surplus crucial shock buffer: RBA

Returning the federal budget to surplus is key to giving Australia a buffer against a future downturn, Reserve Bank Governor Philip Lowe says.

The already-announced income tax cuts were a positive development, but it was also important to balance the budget, Mr Lowe said in a speech in Sydney on Wednesday.

"It is really important that we are in a position to be able to respond in the case the economy does have a downturn in the future - which at some point we will - and getting the budget back to balance on a reasonable time scale is part of that," Mr Lowe said.