Audit back to haunt budget preparations

Colin Brinsden, AAP Economics Correspondent

It seemed like a good idea at the time.

Back in late 2013, a fresh-faced coalition government led by Tony Abbott ordered a commission of audit to help put together his treasurer Joe Hockey's first budget.

It mimicked the initial direction of what turned out to be a successful Howard-Costello Liberal government 17 years earlier, so it must be a good thing to do.

The budget was in "crisis" after the deficit blowout under Labor during the 2008-2009 Global Financial Crisis, and people needed to know the depth of the problem.

Prominent businessman Tony Shepherd was appointed to head the audit panel, saying everything was on the table to combat potentially years of deficit and growing debt.

The panel's final report was handed over to the government as promised in March 2014, but much to the annoyance of Shepherd was not released until just a fortnight from the May budget.

Shepherd had wanted the audit debated well before the budget; instead, it appeared to muddy the water.

Some would say some of the audit's 86 recommendations were brutal, including raising the pension age to 70, slowing the rollout of the national disability insurance scheme and co-payments of $15 for doctor visits.

It aimed to save between $20 billion and $30 billion a year by 2017/18 and between $60 billion and $70 billion by 2023/24.

Proposed savings in health, ageing and defence would help lower public debt and separately save $15 billion to $20 billion a year by 2023/24 in interest costs.

Come the budget, the government went for things like raising the pension age to 70 but toned down others, such as dropping the GP co-payment to $7.

The 2014/15 budget went down like a lead balloon and soured both Abbott and Hockey's reputations among voters.

Three years on and Shepherd has taken it upon himself to brush off and update his audit through the Menzies Research Centre.

He released a paper this week highlighting the challenges facing the Australia so people understand where the real country stands.

He wouldn't go as far as saying Australia has reverted to a 'banana republic', a label once given by former Labor prime minister Paul Keating.

"But I think we do risk a genuine crisis," he says.

He says an ageing population is creating a bubble in terms of the cost of the pension and aged care and believes including the family home in the pension test is an option.

There is also a feeling companies are ripping the country off by not paying their taxes.

"We have to get these myths off the table that are being perpetuated, get the people to understand exactly where Australia is and what needs to be done to ensure our ongoing prosperity," he says.

The report believes Treasury's assumptions for a balanced budget by 2021 are "heroic" because they rely on the maintenance of an expanding economy and the Senate passing measures to support fiscal consolidation.

The burden of national debt makes Australia increasingly vulnerable to external shocks and puts the nation's triple-A rating at risk.

"Its loss would reverberate throughout the economy, notably through Australia's banking system, which would hurt," the report says.

But Treasurer Scott Morrison insists the government is getting the budget under control.

He says the projection to get it back into balance in 2021 "hasn't shifted a day" since he became treasurer.

"We remain very focused on that," he says.

Morrison will probably be relieved Shepherd won't be releasing his final recommendations until September, allowing significant space between his second budget on May 9 and his next in 2018.