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Hockey warned against big cuts

Federal Treasurer Joe Hockey.

Economists are warning Joe Hockey against deep cuts in the Federal Budget amid fears government austerity could hurt the overall economy.

The Treasurer has made clear he will deliver sizeable cuts in spending while arguing it will also help safeguard the country from a drop-off in mining-related investment.

The Royal Australian Mint will be sold to the private sector, a string of agencies axed and others merged in a Budget plan to save taxpayers $500 million.

The West Australian understands the Government will sell or ditch 36 separate agencies, tribunals and advisory committees as part of its plan to scale down the size of the public service.

Most of the planned changes have been taken from the recently released Audit Commission.

The Budget will reveal the Government will start scoping studies for the eventual sale of Defence Housing Australia, the registration arm of ASIC, Australian Hearing and the Mint.

Defence Housing manages about 18,300 properties worth an estimated $10 billion.

The Mint, operated out of Canberra, was listed by the Audit Commission as a “medium-term” option for sale post-2016.

Defence Housing was listed as a short-term sale priority to be completed before 2016.

Other sale options will be looked at including surplus properties held by various government agencies. The biggest single landholder is the Defence Department.

Apart from privatisations, the Government will ditch many longstanding entities.

They include the National Water Commission, the Prime Minister’s Business Policy Advisory Group and the Albury-Wodonga Development Corporation, created by the Whitlam government in the 1970s.

The administrative laws review system will be overhauled with a range of tribunals, including the Classification Review Board and the Administrative Appeals Tribunal, to be merged into one.

Another recommendation from the Audit Commission will replace the entities now overseeing health advice.

The Health Productivity and Performance Commission will take on the responsibilities of six bodies, including the Australian Institute of Health and Welfare.

Treasurer Joe Hockey said the Government was looking to make longstanding savings.

“You can see over the medium term the ways we are fixing the Budget in a structural manner but at the same time the economy is going to grow,” he told the Nine Network.

Among other plans, the Government will merge the National Blood Authority with the Australian Organ and Tissue Donation and Transplantation Authority.

It will carve up the Private Health Insurance Administration Council, with some of its operations moved to the ACCC and others to the Australian Prudential Regulation Authority.

Mr Hockey said yesterday an investment infrastructure, mostly in new roads, would boost productivity nationwide.

"It is unquestionably a growth Budget, it is a building Budget, but it's also a Budget that asks everyone to make a contribution," he told the Nine Network.

But economists fear cuts, on top of planned tax increases, could have the opposite effect.

AMP Capital chief economist Shane Oliver said by trying to build the case of a "Budget emergency", the Government may cut too deeply and hurt the economy.

"Our concern is that the Government has exaggerated the Budget problem - it's a problem, but far from an emergency," he said.

"Right now the economy is still a bit fragile with only tentative signs of improvement in the non-mining economy. But this could be snuffed out if the Budget is too tough."

Finance Department figures suggest the Budget is improving on the back of a lift in the economy.

The deficit at the end of March was $1.1 billion better off than had been expected in the midyear update. Receipts of the goods and services tax were at a record of more than $53 billion, a 6.6 per cent rise on where they were a year ago.

CommSec chief equities economist Craig James said the Budget was still in much better shape than elsewhere.

"It will be important for the Government to stress the medium-term Budget imperatives rather than the short-term situation to prevent community confidence levels deteriorating," Mr James said.

"To address future Budget issues, lifting revenues will be just as important as constraining growth of expenses."