Parliamentary Budget Office warning

Parliamentary Budget Office warns that something’s got to give with our national spending



AUSTRALIANS need to lower their demands for generous government payments if the nation is to bring its finances under control, the Parliamentary Budget Office has warned, as it forecasts a surge in new programs over the decade ahead.
Ringing the alarm on the budget challenge, the independent agency predicts that the cost of major programs — such as childcare, schools and aged care — will keep growing faster than the economy unless parliament votes to curb the outlays.
The report sheds new light on the cost of the Senate impasse on budget reform by predicting that the commonwealth would save $116.6 billion over the coming decade if the government could legislate all its changes.
Critics of Tony Abbott’s paid parental leave policy could seize on one new estimate: that his scheme would cost $7.5bn a year in 2025.
However, the findings also counter Labor’s rhetoric about “cruel” cuts by showing that key programs will keep growing even if the Senate approves the government plan to slow the rate of increase.
Spending on the Age Pension will total $601.3bn over the next 10 years, an annual growth of 2.8 per cent, even after budget changes that save $23.4bn over that period, according to the data underpinning the PBO analysis.
Spending on the Medicare Benefits Schedule — the scheme that could see a new $7 fee on GP visits — will total $287bn over 10 years, growing by 2.7 per cent a year, even after budget savings worth $18.6bn over the same time.
The PBO, which reports to federal parliament rather than the government, warns that Australians will have to accept an “even greater share of the burden” through higher taxes if political leaders do not cut outlays.
Federal spending rose by 3.8 per cent a year over the past decade to outpace the 3 per cent growth in the overall economy.
This could be brought under control over the next 10 years — with spending growth of 2.4 per cent compared with economic growth of 3 per cent — but only if the budget reforms are passed.
But the PBO says that heavy spending over the past decade has lifted the Australian community’s expectations for government services and payments.
“Elevated community expectations are likely to put ongoing pressure on governments to increase discretionary spending on major programs over the medium term,” it says. “It is difficult to see how governments could continue to meet these expectations while containing spending growth to the level currently projected.”
The PBO lists Labor’s decision to limit rebates for private health insurance as one of the significant savings. Labor Treasury spokesman Chris Bowen said that showed “things would have been a lot worse if the Coalition had gotten away with blocking our important budget-sustainability measures such as means-testing the private health insurance rebate and raising the pension age”.
A spokeswoman for Joe Hockey said the report showed spending would grow faster than the economy unless this year’s budget changes were approved.
The PBO concludes that Australians cannot rely on the recovery in tax revenue to balance the budget, because of the risk of economic downturns.

http://www.theaustralian.com.au/nat...ational-spending/story-fn59niix-1227033742285