Great stuff can be done on budget gear. What can never be replaced is good musicians, with good material, through good instuments, and a good engineer. Expensive equipment is not mandatory, but i believe that anyone who can do a good job on budget gear, can do a much better job with high end gear. I don't reccomend just going out and buying expensive stuff right away though. Cut your teeth on something that is monetarily feasible for you, and expand as your ability demands. The better you get, the more you will appreciate really good gear, and the more you will realize how and when it will make a difference.