Commission accepts economy s fragility
Treasurer Joe Hockey

Before journalists had a chance to turn a page of Commission of Audit, chairman Tony Shepherd made clear what he had not handed Joe Hockey.

It was not a plan to slash Government spending so heavily as to drive the economy into recession.

The business leader, perhaps with an eye to the Budget in 10 days, made clear the overall economy was still fragile and still needed some support.

In the audit itself, the Commission makes clear its thinking.

"The Commission is not proposing a program of austerity. Far from it."

That’s why so many of the changes proposed by the Commission would take so long to be fully implemented.

A rise in the age pension access age to 70? But not until 2023.

A cut in the minimum wage? Phase it in over a decade.

Change funding arrangements for schools? We will wait until 2018.

Even the mass sale of public authorities or the merger or abolition of others is done over an extended period of time.

It’s much like how AFL teams sign marquee players like Buddy Franklin with the big dollars in the out years. The Commission of Audit has sought to put off the financial pain for as long as possible.

A back-of-the-envelope estimate by the Commission itself, that Commonwealth spending would be $60 billion lower a year in a decade, by itself constitutes a dramatic turnaround in the role of the Federal Government.

Much of these savings are achieved by cost-shifting.

Either the States (who would be compensated with their own income tax) or low-to-middle income punters have to take on the costs shed by Canberra under the plan mapped out by Mr Shepherd and his team.

One very large fiscal elephant in the room is the single largest spend by the Commonwealth not included in the audit.

That is tax expenditures – the concessional tax rates that are delivered largely to businesses or high income individuals (the largest of which is the $32 billion in reduced tax rates on superannuation).

Apart from proposing a lift in the superannuation preservation age (which itself would still be short of the age pension), and effectively ditching Export Market Development Grants, there’s barely a whisper about tax expenditures.

The question now is whether the Abbott Government will be willing or even able to implement many of these far reaching reforms. And that’s before it gets to its own tax white paper which is a little time off.

That might be the time necessary for the economy to strengthen to take on board the audit’s tough medicine.

The West Australian

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