This week, the Commission of Audit (CoA) delivered five kilograms of uncomfortable truths. The message is simple: government has been living beyond its means, providing benefits and services that cannot be supported by our taxation base. And now, the free ride must end.
Despite our strong economy, Australia has run a string of consecutive budget deficits. The CoA predicts we'll make at least 16 deficits in a row if we don't change, and these deficits will all occur before the full effect of our ageing population hits the budget. Australia is facing a future fiscal crisis, and as the CoA has made clear, we are not prepared.
The savings proposed by the CoA are worth between $60 and $70 billion per year and are overwhelmingly driven by the need to target our services at those truly in need and ensure that those who can pay their own way do so. The message is changing the way that Australians relate to government.
In healthcare, introducing a co-payment on Medicare services (similar to the one recommended in our Emergency Budget Repair Kit), will shift some of the costs off our front-loaded health system. In addition, means testing Medicare (another CIS recommendation) will constrain some of the recent explosion in health costs.
The proposed reforms to Family Tax Benefits are also aligned with suggestions in our Emergency Budget Repair Kit: abolishing the poorly targeted Family Tax Benefit Part B while refocusing Family Tax Benefit Part A on those with incomes below the average. It is also heartening that the CIS' ground-breaking work on the NDIS is being heeded. We must ensure that this important scheme is fiscally sustainable and delivered well.
The CoA's reforms continue: corporate welfare is savaged (as we have long advocated); while the proposed pension and superannuation reforms start to address some of the flaws in Australia's current retirement planning.
The CoA report sets out the kind of savings necessary to get the budget back onto a sustainable footing. The reaction has been predictably over the top.
But we need to be clear about the alternatives. Finding $70 billion in taxes would involve doubling the company tax take, or increasing the GST to well over 20%, or increasing income tax rates (likely by more than 50%). The argument that there are tens of billions of dollars just waiting to be found by making the rich pay their share, or in the chimeric world of tax expenditures, is flawed.
The CoA makes clear that business as usual is not an option. We now have a choice: smaller government or bigger taxes. We can only hope the Treasurer picks the right option in the upcoming budget.
Simon Cowan is a Research Fellow at The Centre for Independent Studies.
Home > Commentary > Opinion > Puncturing our naive bubble
Puncturing our naive bubble
Despite our strong economy, Australia has run a string of consecutive budget deficits. The CoA predicts we'll make at least 16 deficits in a row if we don't change, and these deficits will all occur before the full effect of our ageing population hits the budget. Australia is facing a future fiscal crisis, and as the CoA has made clear, we are not prepared.
The savings proposed by the CoA are worth between $60 and $70 billion per year and are overwhelmingly driven by the need to target our services at those truly in need and ensure that those who can pay their own way do so. The message is changing the way that Australians relate to government.
In healthcare, introducing a co-payment on Medicare services (similar to the one recommended in our Emergency Budget Repair Kit), will shift some of the costs off our front-loaded health system. In addition, means testing Medicare (another CIS recommendation) will constrain some of the recent explosion in health costs.
The proposed reforms to Family Tax Benefits are also aligned with suggestions in our Emergency Budget Repair Kit: abolishing the poorly targeted Family Tax Benefit Part B while refocusing Family Tax Benefit Part A on those with incomes below the average. It is also heartening that the CIS' ground-breaking work on the NDIS is being heeded. We must ensure that this important scheme is fiscally sustainable and delivered well.
The CoA's reforms continue: corporate welfare is savaged (as we have long advocated); while the proposed pension and superannuation reforms start to address some of the flaws in Australia's current retirement planning.
The CoA report sets out the kind of savings necessary to get the budget back onto a sustainable footing. The reaction has been predictably over the top.
But we need to be clear about the alternatives. Finding $70 billion in taxes would involve doubling the company tax take, or increasing the GST to well over 20%, or increasing income tax rates (likely by more than 50%). The argument that there are tens of billions of dollars just waiting to be found by making the rich pay their share, or in the chimeric world of tax expenditures, is flawed.
The CoA makes clear that business as usual is not an option. We now have a choice: smaller government or bigger taxes. We can only hope the Treasurer picks the right option in the upcoming budget.
Simon Cowan is a Research Fellow at The Centre for Independent Studies.
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