1 May 2014
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Deep cuts to welfare and basic government services are being urged in a five-volume plan to slash $70 billion a year from federal outlays.
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Deep cuts to welfare and basic government services are being urged in a five-volume plan to slash $70 billion a year from federal outlays.
The “formula for the future” from the National Commission of Audit outlines savage cuts to the age pension, unemployment benefits, family tax benefits, the Medicare Safety Net, the Pharmaceutical Benefits Scheme, education and other programs used by millions of Australians.
The audit report calls on the Abbott government to retreat from health and education and other services to avoid duplication with the states while warning against the cost of new initiatives like the National Disability Insurance Scheme, which it seeks to delay by three years.
It sets out 10 major asset sales including short-term proposals to sell Snowy Hydro and Defence Housing Australia, along with long-term plans to sell Australia Post, the Royal Australian Mint and the Australian Rail Track Corporation.
The report suggests giving states the power to raise income tax and dividing $50 billion in annual GST revenue according to the size of each state’s population.
15 key areas recommended for cuts
The 15 keys areas recommended for cuts are the aged pension, Medicare benefits, hospitals, Pharmaceutical Benefits Scheme, National Disability Insurance Scheme, carers’ payments, aged care, the Disability Support Pension, childcare and paid parental leave, family tax benefits, job seeker payments, school funding, higher education, defence and foreign aid.
Big changes would also be made to the health system with high-income earners obliged to take out private health insurance for basic health services in place of Medicare.
The expansion of private health insurance would at a minimum, under the Commission’s proposal, see all Medicare and hospital services covered by private health insurance.
It recommends a two per cent increase in the Medicare levy surcharge – which currently sits at 1 to 1.5 per cent – be put in place to encourage the shift to private insurance.
The Commission’s proposal to allow the states to collect income taxes represents a radical shake up that would require the Commonwealth to reduce its income tax take.
The end to the principle of ”horizontal fiscal equalisation”, which ensures all states can fund a similar level of services through a weighted distribution of the GST, is also proposed.
Victoria, NSW and Western Australia would be the big winners under the proposal that would see per capita paymentstopped up by the Commonwealth.
Against a backdrop of a sixth consecutive deficit, of $18.8 billion, in 2012-13, or 1.2 per cent of GDP, which is predicted to rise to $47 billion or 3 per cent of GDP in 2013-14, the Commission warns that Australia has “spent beyond our means for too long”.
Commonwealth payments of $409 billion in 2013-14, or 25.9 per cent of GDP, are projected to rise to $690 billion over the next 10 years.
Audit Commission chairman Tony Shepherd said: “If we don’t fix the budget, Australia will have little or no buffer to meet future economic and financial shocks … this will strengthen our fiscal position and give us the flexibility and reserves to future-proof our economy.”
See
Report lays path for deep cuts
Higher education arrangements
Experts respond
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The Commission of Audit’s recommendations fall roughly into three categories.
There is the brave: cutting 22 industry assistance programs.
The crazy brave: imposing a Medicare co-payment of $15, and picking a fight with the powerful Pharmacy Guild by exposing chemists to competition.
And there is the politically suicidal: breaking a pledge by including the family home in a pension means test.
– Chris Ulman, ABC
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