The Rudd Government has two stated goals in health policy: to end the cost shifting and the blame game between the Commonwealth and the states and territories, and an increased focus on prevention and primary care in order to address the predicted impact of a growing burden of preventable chronic illness on acute care costs and resources. Good health policy is seen as part of good economic policy. The aim is to see measurable improvements in a range of health, economic and budget indicators over time. While it is too early to judge how successful the new Government has been in meeting these outcomes, it is possible to assess their actions and funding commitments to this point against the stated policy. This bulletin provides some overall budget context and analysis (including spending trends) and examines the impact of the budget measures on health policy and programs.