Lenore Taylor political editor

theguardian.com, Wednesday 23 April 2014

Bill Shorten accuses the government of 'cynically trying to soften the ground for massive cuts to pensions'

Treasurer Joe Hockey says the aged pension is in the sights of budget cutters. Photograph: Alan Porritt/AAP

Joe Hockey is warning Australians to brace themselves for a new era in which government services they have taken for granted will require a co-payment or be means-tested or provided by the private sector.

In a speech ahead of next week’s release of the commission of audit’s 86 recommendations for reining in government expenditure, the treasurer has made it clear that the $40bn a year the government spends on the aged pension is squarely in the budget razor gang’s sights.

The government has already flagged raising the pension age, over time, to 70, but in the speech to the Spectator magazine in Sydney on Wednesday night, Hockey signalled the changes might be broader, possibly targeting the large number of people on part-pensions or receiving government health concession cards.

“The $40bn we spend on income support through the age pension is much more than we spend on defence, or hospitals or schools each year. It is our single biggest spending program,” he said, pointing out that between 2010 and 2050 the number of people age 65 to 84 is expected to quadruple.

And the vast majority of over-65s receive some form of government payment.

“Of Australians over the age of 65, four out of five receive a full or part pension. If we also take into account the concessionary health card, then only 14% of older Australians receive no government payments,” Hockey said.

“And the pharmaceutical benefits scheme is the tenth largest category of spending. Nearly 80% of the scheme’s expenditure is attributable to concessional recipients.”

The seniors health card is available to pensioner couples with an income $80,000 a year or singles with an income of $50,000 but has no assets test.

But prime minister Tony Abbott is also insisting that the government will keep its election promises, one of which was “no changes to pensions”.

“We will keep our commitments, because the point I keep making, if there is one thing that we learnt from the fate of the former government, you cannot say one thing before an election and do the opposite immediately afterwards,” Abbott said when asked about mooted budget cuts Wednesday.

The government appears intent on resolving the apparent contradiction between Hockey’s signals and Abbott’s promises by phasing in the budget cuts over time.

“There will be numerous cases where our policy principles can only be implemented over time,” Hockey said in his speech.

The opposition leader, Bill Shorten, accused the government of “cynically trying to soften the ground for massive cuts to pensions” but predicted “pensioners will see through their weasel words”.

“The Abbott government created their own budget emergency, and now they are telling pensioners to pay for it. If the prime minister is so desperate to cut, he should leave pensioners alone and start with his extravagant paid parental leave scheme,” Shorten said.

Hockey also suggested the long term changes could be significant and would be spread across households, the public service – where sweeping cuts are planned – and the private sector.

“Means testing must become an even more important part of Australia’s transfer system to ensure the sustainability of our income support payments. Support must be targeted to those in most need,” he said.

“More use of co-payments should be made to encourage some moderation in demand for government-provided goods and services. Nothing is free. Someone always pays. It is appropriate that those who use government services should contribute towards their cost.

“On unemployment benefits, government should provide assistance that helps the jobless move into employment, rather than a system that traps them.

“The difficult decisions that will underpin our movement to a new age of responsibility must also include the corporate sector. Too many taxpayers' dollars have been spent on corporate welfare and too often previous governments have been drawn into areas that are better left to the private sector,” he said.

But he insisted that the government would not be cutting back on its generous and much-criticised paid parental leave scheme, offering women six months leave on up to $75,000, and the budget will contain an increase in infrastructure spending, with the government saying both measures are important to increasing productivity and economic growth.

Assuming personal income tax cuts to return “bracket creep” as taxpayers enter higher tax brackets, the commission of audit says that without a major shift in government spending Australia will still have a deficit of around 1.5% of GDP by 2024.

The government announced the commission of audit last October, headed by the president of the Business Council of Australia, Tony Shepherd, with the broad brief of “assessing the role and scope of government, as well as ensuring taxpayers’ money is spent wisely and in an efficient manner”. Also on the commission were former Liberal adviser and departmental head Peter Boxall, former public servants Tony Cole and Robert Fisher and former Howard government minister Amanda Vanstone.

The Labor party says the commission’s make-up means the government has effectively “outsourced the responsibilities of government to big business”.

Among budget savings widely discussed are a $6 co-payment for bulk-billed visits to the doctor, reducing or abolishing the Medicare Locals system, raising over time the eligibility age for the pension to 70 and changing its indexation to a less generous formula.

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