The Commission of Audit has designed a program to deliver $60 billion or more in savings per year within ten years, centred on the principles of living within our means, being more efficient and getting rid of waste.
The changes, according to commission chairman Tony Shepherd, are designed to be slowly introduced, without sudden shocks or burden to individuals, to prevent rough handling of an already fragile economy.
Shepherd says the recommended program isn’t one of austerity and can be implemented gradually without harming the economy.
“The choices are to continue to believe in luck and hope that we can achieve past record levels of growth and productivity or hope that the global economy will recover or some other miracle will save the day,” he says.
“Or we can accept the evidence. We can make the decision to move carefully, incrementally and fairly to put our fiscal policy back on its traditional sustainable path while our economy is still in reasonable shape.”
The commission makes 86 recommendations with the aim of substantially reducing net debt over the next decade and ensuring tax collection remains below 24% of GDP.
Whether or not the recommendations will be incorporated into the federal budget on May 13 remains to be seen. Treasurer Joe Hockey has been careful to point out that these are recommendations only.
The target areas in the pursuit of a 1% GDP budget surplus within ten years are the fastest growing areas of government spending including:
Aged pensions, Medicare Benefits Schedule, hospitals, Pharmaceutical Benefits, National Disability Insurance Scheme, Disability Support Pension, school funding, higher education, Family Tax Benefits, defence and foreign aid.
The commission also wants to return responsibility to the states and end overlaps in services provided by both the states and the federal government.
And it wants to release billions of dollars in capital by privatising a string of government bodies including Defence Housing Australia, Australian Postal Corporation, the Royal Australian Mint and, in the long term, NBN Co Limited.
- Co-payments for all Medicare funded services of $15 per visit for the first 15 visits and then $7.50. Concession card holders would pay $5 and then $2.50. Pharmaceutical co-payment increase $5 from $36.90 to $41.90.
- Sweeping away middle class welfare with eligibility for Family Tax Benefits tightened. This benefit costs $19 billion and makes up close to 5% of all Commonwealth government spending and 70% of families get something from Family Tax Benefits.
- Single people under age 30 would be required to relocate to higher employment areas after 12 months on a benefit. The minimum wage definition would be shaved to 44% of Average weekly Earnings and recognising that the definition of a minimum wage would be lower in lower cost states.
- Increasing the interest payable on the Higher Education Loans Program from the current rate which is equal to the CPI to one reflecting the full cost to the government.
- Cutting the higher education loan repayment threshold to an annual wage of $32,354 per year from $51,309.
- Making it harder to get a Commonwealth Seniors Health Card which gives concessions to senior Australians.
- Gradually increase the age eligibility for an aged pension until it hits 70 years old by about 2053. People born before 1960 will not be affected. The superannuation preservation age would be pegged at five years below the Age Pension age. The preservation age would reach 62 by 2027.
- Include the value of the family home in the age pension means test from 2027-28.
- Over a 15 year period, peg the age pension at 28% of Average Weekly Earnings.
- Paid Parental Leave wage capped at Average Weekly Earnings which is currently $57,460.
The Commission of Audit says taking no action is not an option.
Shepherd says: “The commission has found Australia confronts a substantial budgetary challenge – the fiscal situation is far weaker than it should be and the long-term outlook is ominous due to an unsustainable increase in expenditure commitments.”
In the current 2013-14 financial year the underlying cash balance is projected to record a deficit of $47 billion or 3% of GDP (Gross Domestic Product).
“This is the sixth consecutive budget deficit,” Shepherd says. “We have spent beyond our means for too long.”
Continuing business as usual would mean 16 consecutive years of budget deficits with net debt rising from $190 billion today to $440 billion in 2023-24.
“If we don’t fix the budget, Australia will have little or no buffer to meet future economic and financial shocks,” Shepherd says.
On making a more efficient government, the commission has a hit list of 99 government bodies, among the almost 900 investigated, which it says need action.
Of those, seven should be abolished. They are: the Australian Institute for Teaching and School Leadership; the Australian Reinsurance Pool Corporation; the Clean Energy Finance Corporation; the Climate Change Authority; the Export Finance and Insurance Corporation; Innovation Investment Funds Investments Pty Ltd; and Low Carbon Australia Limited.
And it recommends stopping the funding for the Australia Network and that a planned review of diplomatic resourcing be undertaken by an independent reviewer rather than the Department of Foreign Affair.
The need for embassies in high-cost locations should be re-assessed and greater use made of arrangements to share resources overseas with like-minded countries.
The commission proposes:
- Establishing a single, integrated border agency, to be known as Border Control Australia, through the merger of the border control functions of the Department of Immigration and Border Protection and the Australian Customs and Border Protection Service;
- consolidating crime intelligence capability by merging CrimTrac with the Australian Crime Commission; and
- consolidating Commonwealth health-related bodies by establishing a National Health and Medical Research Institute to better embed health and medical research in the health system. The Commission separately proposes that seven agencies within the Health Portfolio be consolidated into a new Health Productivity and Performance Commission. This new body should help to drive improved performance across Australia’s health care system.
It also recommends rationalising Indigenous-specific programmes, bodies, committees, councils and boards.
The existing 150 Indigenous programmes and activities should be consolidated into no more than six or seven.
The Commission recommends the privatisation of: Australian Hearing Services, Snowy Hydro Limited, Defence Housing Australia, Australian Postal Corporation, Moorebank Intermodal Company Limited, Australian Rail Track Corporation Limited, Royal Australian Mint, COMCAR, NBN Co Limited.
For industry, the commission recommends rationalising, phasing out, abolishing or reducing funding for 22 existing industry assistance programmes.
And some government functions could be outsourced visa processing which is high volume (4.7 million a year) and low complexity.
There are no specific recommendations for the Australian Broadcasting Corporation and the Special Broadcasting Service.
However, the commission there may be opportunities for greater efficiencies. The ABC and SBS should be independently benchmarked, both against each other and the commercial broadcasters, to determine efficiencies and savings which don’t compromise their capacity to deliver services to remote and regional Australia.
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