Poverty relief, service delivery, education and health remain the national budget priorities, says Finance Minister Trevor Manuel.

Almost R81.5 billion is to be added to government's projected spending over the next three years, bringing spending growth to 6.4 percent a year in real terms, he said in his Medium-Term Budget Policy Statement (MTBPS) in the National Assembly on Tuesday.

Government spending is now projected to increase from this year's revised estimate of R604.8 billion, to R672.7 billion in 2008/09, R747-billion in 2009/10, and R820.1 billion in the outer year.

The emphasis will be on investment-supporting growth and job creation, and boosting critical social and human development programmes.

Priorities include further investments in infrastructure, with the focus on broadening access to basic household services, public transport, education, health, labour-intensive employment initiatives, industrial policy initiatives to raise productivity and employment, fighting crime, and improving service delivery.

Manuel said the past four years had been good for the economy, with GDP growth averaging about five percent a year.

Per capita income had grown by 22 percent since 1999, and 1.3 million jobs created since 2003, boosting employment by about 2.7 percent a year.

Fixed investment had increased sharply since 2002, by over ten percent a year.

"These are substantial steps towards our medium-term economic goals -growth of six percent a year or more, an unemployment rate of below 14 percent by 2014, and an aggregate poverty rate half that recorded in 2004."

Foreign reserves now stood at over $30 billion, Manuel said.

Yet, as the economy grew more rapidly, it had started to show signs of strain, reflected in rising inflation and a high current account deficit, the MTBPS document says.

To achieve growth of more than six percent, a series of micro-economic reforms were required to raise productivity, lower the cost of doing business, cut red-tape, invest more in skills, and increase the number of jobs in the economy.

Spending on social and economic infrastructure also had to be increased to remove constraints to growth and share the gains of this expansion more widely.

In terms of the MTBPS, projected spending on transport and communication would increase from R46.1 billion this year to R57.4 billion in 2008/09, and to R76.3 billion in 2010/11 - a whopping average annual growth of 18.3 percent.

The corresponding figures for housing and community development were R47 billion, R55.4 billion, and R70.7 billion - growth of 14.6 percent.

Education spend went from R106.4 billion this year to R148.6 billion in 2010/11 (11.8 percent), health from R63.1 billion this year to R87.3 billion in 2010/11 (11.4 percent), and welfare and social security from R89 billion this year, to R117.5 billion in 2010/11 (9.7 percent).

The budget for justice, police and prisons was projected to increase from R58.6 billion this year to R78.1 billion in 2010/11 (10.1 percent).

Next year's budget would contain a 2010 FIFA World Cup host city operating grant to help municipalities commission new stadiums, prepare training facilities, improve signage, and develop fan parks.

Regarding inflation, the document says higher oil and food prices have also put pressure on domestic inflation.

But, SA Reserve Bank rates increases since 2006 - totalling 350 basis points - should lead to moderated domestic demand and contain inflation expectations.

CPIX inflation should average 6.2 percent this year, before returning to within the three to six percent target band over the medium-term.

Household consumption, having averaged 5.5 percent a year since 2002, leapt to 7.4 percent in the first half of this year, but was expected to slow to a more sustainable four to five percent a year over the forecast period.

While job creation has been consistent with economic expansion over the past three years, labour absorption needed much more attention, the document says.

The current account deficit - about three percent of GDP in 2004 - was expected to hit 6.7 percent this year, 6.9 percent in 2008, 7.7 percent in 2009, and 7.8 percent in 2010.

However, capital inflows, which have for several years more than covered the deficit, are expected to remain healthy.

The budget surplus is expected to average 0.6 percent of GDP over the next three years.

Total tax revenue collection -- revised from R556.6 billion to R566.1 billion (up R9.5 billion) this year -- is projected to reach R632.4 billion in 2008/09, R699.3 billion in 2009/10 and R764 billion in 2010/11.