* Proposals include end of free universal healthcare,
* 99 govt bodies identified for sale, merger or scrapping
* Australia's debt and deficit position 'incredibly healthy'
(Adds quotes from commission, economist, treasurer)
By Matt Siegel
CANBERRA, May 1 A much-anticipated audit of the
Australian economy released on Thursday recommended broad
structural changes and a tight rein on costs aimed at stemming
what the government warns is a looming "fiscal crisis", setting
the stage for a tough Federal budget later this month.
The Report on the National Commission of Audit made 86
recommendations for changes to the 15 largest and fastest
growing sectors of government spending, which it says could save
A$60 billion-A$70 billion ($55 billion-$65 billion) a year
within a decade and return the budget to surplus.
Among the controversial proposals were changes to the
pension system and federal healthcare insurance, a raft of
privatisations, the devolution of power to state governments and
the abolition, sale or merger of 99 government bodies.
Australia's A$1.5 trillion economy sailed through the global
financial crisis, but a slump in mining investment and a
sluggish response to record low interest rates has hit
government tax income as expenditure continues to grow.
"The choices are to continue to believe in luck and hope
that we can achieve past record levels of growth and
productivity, or we can accept the evidence," Commission chair
Tony Shepherd said.
"We can make the decision to move carefully, incrementally
and fairly to put our fiscal policy back on its traditional
sustainable path while the economy is still in reasonable
Australian Prime Minister Tony Abbott and his treasurer, Joe
Hockey, have been girding voters for hefty spending cuts and
other measures in the May 13 Federal budget to tackle deficits
forecast at A$47 billion this year and totalling A$123 billion
over the next four years.
On Tuesday, Abbott flagged the prospect of a temporary
income tax levy on higher income workers to help tackle the
deficit, a proposal that was met with criticism from opponents
and a cool response from business groups.
The recommendations in the audit, which the government is
not bound to accept, could offer voters their best idea of what
to expect in the budget while also serving as a trial balloon
for tough measures under consideration by the government.
"Some of the recommendations the government will be
proceeding with in the budget, some of the recommendations the
government will not proceed with and some of the recommendations
are clearly in the public domain for debate and discussion,"
Among the most controversial recommendations are an A$15 fee
for doctors' visits, which have previously been covered by
federally administered healthcare insurance, and the mooting of
a U.S.-style healthcare model in which all Australians would be
required to buy private health insurance.
Other potentially thorny proposals are a change in the
calculation of the pension age that would see it rise from 67 in
2023 to around 70 years old in 2053, and a raft of
privatisations including naval shipbuilder ASC and the national
Some economists, however, have questioned whether Australia
needs to engage in the type of belt-tightening recommended in
the report and raised the possibility it could have a negative
impact on an economy still recovering from the financial crisis.
"If European countries had a debt and deficit problem like
Australia, they'd be lighting candles in every cathedral. People
outside of Australia would be astounded how much debate there is
over a non-problem," said Mike Rafferty, a research fellow at
the University of Sydney's business school.
"The deficit is largely meaningless, which is not to say
that debt is never a problem, but Australia's debt and deficit
position is incredibly healthy."
Although debt is expected to peak above A$400 billion, that
would be less than 30 percent of Australia's annual gross
In the United States and the euro area of 15 countries,
government debt accounts for more than 100 percent of GDP,
figures from the Organisation for Economic Co-operation and
Australia remains one of only a handful of countries that
still boasts a triple A credit rating, making its debt
especially attractive to foreign central banks and sovereign
($1 = 1.0793 Australian Dollars)
(Editing by Lincoln Feast and Chris Gallagher)