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April 21st, 2013 
Treasurer Wayne Swan said he would not seek to offset a $7.5 billion hit to revenue with “savage cuts” even though experts warn Australia could face years of budget deficits without painful cuts in spending.
Source: The Australian
BUDGETS will be dripping in deficits for a decade unless governments unleash painful spending cuts and tax increases on every Australian, a new report warns.
Opposition leader Tony Abbott yesterday pledged to spend less than Labor in this election as the Treasurer, Wayne Swan, revealed a fresh $7.5 billion hit to the budget bottom line from falling commodity prices and a stubbornly high Australian dollar.
The new report by The Grattan Institute warns the end of the mining boom and spiralling health costs will knock the stuffing out of both state and federal government budgets. Spending cuts and tax hikes worth $60 billion a year will be needed to return budgets to balance.
“There is pain coming for everyone,” the Institute’s chief executive John Daley said.
“If any political leader tells you otherwise then you should not elect them.”
The battle lines of the upcoming September election are becoming clear as the Coalition vows to axe Labor’s big spending promises like schools funding, the Schoolkids bonus and a super boost for low income earners.
“The reckless spending must stop,” Mr Abbott told Sky News echoing the words of Kevin Rudd before the 2007 election.
Mr Abbott indicated he will not support the Gillard government’s proposed $14.5 billion new spending for Gonski education reforms, preferring “fine tuning” of existing funding instead.
“I do need to be truthful and realistic and in the short term at least, yes, we do have to understand that government is spending too much and government is going to have to spend less,” Mr Abbott said.
As he prepares his sixth budget in “very, very challenging circumstances”, Treasurer Swan said he would not seek to offset a $7.5 billion hit to revenue with “savage cuts” because this would lead to higher joblessness.
“My purpose in this budget is to make sure that we do everything that we possibly can to protect jobs, to make the smart investments for the future,” Mr Swan said.
Mr Abbott has also shied away from promising a surplus in his first term. “My position is that you need to get back to surplus as soon as possible. (But) there is a sense in which all bets are off until we have seen what their fiscal outlook is.”
The Grattan Institute report warns that if nothing is done to reverse the slide, budgets of Australian governments will be in combined deficit worth 4 per cent of GDP in 2023.
“At the current rate, it’s unlikely we will ever get to surplus,” Mr Daley said.
“The underlying position of the budget is much worse than we realise.”
Stimulus spending during the GFC was OK but “we have failed to be Keynesians on the way up”, Mr Daley said.
Expensive new promises from Labour would subtract about $17 billion from the bottom line in 2023, while Coalition promises would drain around $11 billion.
Health spending, which makes up a fifth of government budgets, will also rise due to greater use of expensive new technologies and drugs.
Mr Daley said the Goods and Services Tax and council rates were the most obvious targets for tax increases because they are relatively efficient taxes.
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