Hockey warns of crisis without tough measures to cut budget spending

Treasurer Joe Hockey warns of tougher means testing ahead of Commission of Audit's release

(Translation of this article appears in Arabic section)

Treasurer Joe Hockey has warned next month's federal budget will introduce tougher means testing of support payments and more upfront costs for government services.

In a speech made in Sydney entitled The Case for Change, Mr Hockey began to unveil the findings and recommendations of the Government's much-anticipated Commission of Audit, which the Coalition is using to frame the May 13 budget.

The commission handed its final report to the Government late last month and the Treasurer will release it publicly next week.

Mr Hockey says the report makes it clear the nation has "a serious spending problem" and recommends "substantial spending restraint".

"Budget repair is going to require some difficult decisions, including winding back some spending that people have come to take for granted," he said.

"Means testing must become an even more important part of Australia's transfer system to ensure the sustainability of our income support payments. Support must be targeted to those in most need.

So if Australians ask themselves of the budget in May, 'What's in it for me?', my response will be, 'A better future'.

Joe Hockey

"More use of co-payments should be made to encourage some moderation in demand for government-provided goods and services. Nothing is free. Someone always pays.

"It is appropriate that those who use government services should contribute towards their cost."

There have been widespread reports the Government is poised to introduce a $6 co-payment for bulk-billed GP appointments, raise the age of the pension from 67 to 70 and address the growth in Family Tax Benefit B.

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Mr Hockey says there will be numerous instances where budget decisions will be implemented over time, but has warned that "every sector of the community - households, corporates and the public sector alike - will be expected to contribute".

"So if Australians ask themselves of the budget in May, 'What's in it for me?', my response will be, 'A better future'," he said.

"I ask 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."

Commission of Audit made 86 recommendations

Mr Hockey says the Commission of Audit has made 86 recommendations, some of which can be "actioned in the short term".

"Others will require further consideration, and some will be rejected outright," he said.

The report has focused on the 15 largest government programs and found they are also the nation's fastest growing.

The age pension tops the list with a cost this financial year of $39.5 billion.

In a further signal the pension is set for changes in the budget, Mr Hockey emphasised that is "much more than we spend on defence, or hospitals, or schools each year".

"It is our single biggest spending program," he said. "So the policies must be changed, either now or more dramatically in the future."

He says the Government will continue to support the "most vulnerable" people, but says there will be an "ongoing and relentless focus on fiscal discipline".

Mr Hockey has highlighted the Government's plans to introduce a wage-replacement paid parental leave scheme and infrastructure spending as key measures to boost productivity and economic growth.

Child care and paid parental leave are listed by the commission among the top spending programs, at number 12, and it is the second-fastest growing with average annual growth slated to be 11.5 per cent.

The Coalition's new scheme is due to begin in 2015 at a cost of $5.5 billion a year, partly paid for by a 1.5 per cent levy on big business.

But the Opposition has slammed the scheme - which pays mothers who earn up to $150,000 a year their full wage for six months - and says it should be dumped.

"If the Prime Minister is so desperate to cut, he should leave pensioners alone and start with his extravagant paid parental leave scheme," Opposition Leader Bill Shorten said in a statement.