Federal Treasurer Joe Hockey has used a speech in Sydney to give some insight into his plans for next month’s budget, which will launch what he has termed the government’s “budget repair job”.
Speaking at a function for Spectator Magazine, Hockey all but confirmed a tightening of the eligibility for the age pension and the introduction of co-payments for welfare benefits will feature in his government’s first budget, to be delivered on May 13.
The Treasurer also flagged the government may be less willing to offer financial assistance to flailing industries down the track.
Hockey continued the government’s ongoing efforts to soften the public reaction to the budget, saying that he is asking Australians “not to judge this budget on what they get or lose today”. “This budget is about our quality of life for the years ahead,” he said.
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Hockey said the government will reveal a fiscal consolidation program to “establish a clear path back to a surplus of 1% of GDP by 2024”.
The government is aiming to eliminate the current budget deficit in the next five years by reducing real spending growth by 1.75%. It forecasts that the budget will return to a small surplus in 2019-2020.
“There is a strong economic and moral imperative to change course and to put the budget back onto a secure and sustainable footing,” said Hockey.
Hockey said “means testing must become an even more important part of Australia’s transfer system to ensure the sustainability of our income support payments,” while “more use of co-payments should be made to encourage moderation in demand for government-provided goods and services”.
“Nothing is free. Someone always pays,” he said.
Hockey used the occasion to reveal a number of findings from the government’s Commission of Audit, with the commission’s final report due to be released in full next week.
“The report makes it clear that Australia has a serious spending problem,” said Hockey, with government spending in welfare, health, education and defence the leading culprits.
Of the 15 areas examined by the Commission of Audit, the age pension is by far the largest, said Hockey. “The $40 billion we spend on income support through the age pension is much more than we spend on defence, or hospitals, or schools each year,” said Hockey. “It is our single biggest spending program.”
“And demand for the age pension will continue to increase as the population ages,” he said. “It would not be an issue if those entering their post-work years had the resources to support themselves, but increasingly, the burden of our ageing is being borne by other people.”
Hockey suggested the government will be less willing to offer financial assistance to the private sector, saying that it is unsustainable for the government to “keep devoting significant resources to industry assistance”.
“Too many taxpayers’ dollars have been spent on corporate welfare and too often previous governments have been drawn into areas that are better left to the private sector,” he said.
However, Hockey said that the structural problems with the budget could not be fixed by increasing personal taxes, with periodic tax cuts necessary to combat the effects of “bracket creep” whereby individuals are pushed into higher tax brackets by wage increases.
Despite the focus on spending cuts, Hockey reaffirmed the government’s commitment to its controversial Paid Parental Leave scheme, which is estimated to cost $5.5 billion a year.
He said the scheme “will help women to remain engaged with their employer, lift female workforce participating, and it will provide a boost to their retirement savings”.
“This scheme is also a huge benefit for many small and medium business which for the first time will be able to offer female workers a paid parental leave scheme that is as good as that enjoyed by employees of larger corporations or the public service,” he said.