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Canberra to be cut to bone in audit report

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Peter Martin and Mark Kenny

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Commission of Audit report to be released

The extent of potential federal budget cuts will become clearer today with the release of a review into government spending. Nine News.

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Tony Abbott's Commission of Audit has recommended massive cuts to the size of government, with whole agencies to be abolished, privatised, or devolved to the states, in what would be the biggest reworking of the federation ever undertaken.

Among its 86 recommendations, to be finally revealed on Thursday afternoon, are calls for the axing of multiple agencies and the surrender of huge swathes of responsibility back to the states in education, health, and other services.

The Abbott government is now in the final week of pre-budget deliberations.

The Abbott government is now in the final week of pre-budget deliberations. Photo: Penny Stephens

Among the small group of ministers and bureaucrats granted access to the report, there is an acceptance that some ideas will be adopted, others can be modified or placed into a longer-term planning framework, and some will be regarded as politically untenable.

Senior ministers concede the report contains the kind of suggestions to be expected from "economically dry" business types, but admit many are just not achievable in the real world or politics.

The National Preventive Health Agency is the largest in a string of small so-called ''orphan'' health agencies marked for abolition. Under heavy attack from the alcohol industry, it releases its long-awaited report into a minimum floor price for alcohol on Thursday.  The report has been gathering dust now for a year and it is to be released under a clause in the agency's act that requires the automatic release of reports if a year has elapsed since they were presented to government.

Also marked for privatisation or abolition is Defence Housing Australia, which manages and owns properties for defence families. It turns an annual profit before tax of $1 billion and employs 600 people. The government has commissioned Ernst & Young to advise on whether it should be sold.

The closely guarded Commission of Audit report is built around the theme of competition, according to a source who has seen it. It calls for competition between the states to provide services currently subject to some oversight from the Commonwealth. It also calls for competition between private firms to provide within-government services presently provided by the government itself, such as building management and Commonwealth cars.

The Audit Commission report, to be released publicly at 2.00pm on Thursday, proposes dumping Kevin Rudd's favoured notion of cooperative federalism in favour of competitive federalism and financial contestability criteria whereby services are provided against value-for-money indices.

Although asked specifically to recommend how the government could achieve a budget surplus of 1 per cent of GDP by 2023-24 the commission has interpreted its mandate much more broadly and attempted to identify the activities the government should vacate.

Like the 1996 Commission of Audit report commissioned by the Howard government, it finds that in many areas where state and Commonwealth responsibilities overlap, the responsibilities are best handed to the states.

The 1996 report recommended that the Commonwealth abandon all involvement in preschool, primary and secondary education, funding the states for it by untied rather than tied grants. The Commonwealth would cease grants to private schools, allowing the states themselves to grant money to private schools if they thought it was necessary. If adopted, the recommendation would have abolished large sections of the Commonwealth Department of Education. If recommended again it could unwind more recent initiatives such as the Gonski school funding reforms and NAPLAN.

It suggested the Commonwealth maintain control of Medicare and the Pharmaceutical Benefits Scheme, using its weight to contain costs through the introduction of co-payments.

If adopted the recommendations would undo years of Commonwealth centralisation, returning to the states responsibilities surrendered in the early decades of federation. The theory behind the decentralisation is known as "competitive federalism". It says that free of constraints, the states and territories will compete with each other to provide the best services at the lowest cost.

Although the 1996 review proposed handing more responsibilities to the states, it also proposed extra funding in the form of untied grants. The grants would be less than the Commonwealth would have spent had it continued to provide the services itself.

The recommendation to axe the National Preventive Health Agency is awkward for the Coalition, coming after its assistant health minister Fiona Nash pulled the plug on a healthy eating website set up by the Council of Australian Governments hours after it went live. If adopted it would leave it open to charges that it wasn't serious about reining in long-term health expenditures on diseases such as obesity and alcohol-fuelled violence.

The government is into the final week of pre-budget deliberations.

As well as a controversial deficits tax, and a scaled-down paid parental leave scheme, the unemployed can expect tougher rules regarding eligibility for Newstart with a renewed push to "earn or learn". There will also be cuts to ABC and SBS funding through the extension of the government wide 2.25 per cent efficiency dividend.

Finance Minister Mathias Cormann said on Thursday that the audit would show that the spending growth projectory inherited from the previous Labor government was unsustainable.

He also played down claims that the government would be breaking an election promise if it went ahead with a proposed a ''debt tax'' on workers earning more than $80,000 a year.

''We're not making any excuses,'' Senator Cormann said. ''We're not doing any of this out of fun.''

Opposition finance spokesman Tony Burke accused the government of confecting a budget emergency and of deliberately waiting to reveal cuts until after the polls in Griffith, Western Australia, Tasmania and South Australia.

"They'll then release what will simply be a guidebook on how to break every election promise Tony Abbott made," Mr Burke said.

Mr Burke said half of the $123 billion deficit referred to by Senator Cormann on Thursday morning was created by the Liberal government.

"They doubled the deficit when they first came in," he said.

"They added $60 billion to it, more than doubling the deficit. If you're in an emergency, why on earth would you do that?

"The truth is they wanted to confect or manufacture a budget crisis because these are the sorts of cuts they actually want to bring in."

Shadow treasurer Chris Bowen said it was ''unconscionable'' for the government to have sat on the report for so long.

With Lisa Cox

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383 comments

  • The NPHA is the Climate Change Authority of the alcohol industry – supposed to be an objective research organisation, but in reality a vocal and partisan social-left player. No loss there.

    Rudd-Gillard took the number of government agencies up to something like 900. You could probably chop 20% without any noticable impact on government services.

    Commenter
    Hacka
    Location
    Canberra
    Date and time
    May 01, 2014, 7:06AM
    • This is the worst Government in history. Australia has entered the dark ages. Australia is known around the world as a country that does not care about climate change. This Government, Tony, the leader is not a leader. He is a ideology inspired individual that should be running a business instead of Government. Not long now and as the comments all start to reflect the unhappy people in society we will be able to move him out. I mean, he doesn't even care about equality? There are so many countries ending discrimination and 14 states in America as well. What a backwards person. You all voted for this.

      Commenter
      The Other Guy1
      Date and time
      May 01, 2014, 7:36AM
    • I doubt it will be unnoticeable, but what about the impacts on the unemployment rate and the local economy. Tea Party Liberals can only see the short term, they are hopeless as seeing the longer term big picture. I hope you are one of the cuts Hacka - it's time for you to get a REAL job.

      Commenter
      JJ
      Date and time
      May 01, 2014, 7:40AM
    • All we have to do is sack 30,000 people, then imagine how many over-priced obselete toys we could buy for Defence then. "You just never know".

      Commenter
      Mouse
      Date and time
      May 01, 2014, 7:49AM
    • How many political spin masters do they have now hacka there not doing a very good job in the last 2 weeks. How safe does your job feel with the audit. Safe I sirpose thay will just get 200 more to help dig that hole deeper.

      Commenter
      Robin Hood
      Location
      Sherwood Forest
      Date and time
      May 01, 2014, 7:50AM
    • Hacka,
      Good morning.

      You could probably cut the number of MP's by 30% AND have an improvement in the political debate.

      Commenter
      Bendou
      Location
      Sydney
      Date and time
      May 01, 2014, 7:52AM
    • By "social-left", I'm going to assume in this instance you mean "interested in people's health" rather than interested in the profits of alcohol companies among others. Also glad to hear that your back of the envelope calculations reveal that 20% could be chopped. Although, of course you have no evidence for this and could possibly just be dead wrong.

      Commenter
      Dags
      Date and time
      May 01, 2014, 7:55AM
    • Is that a scientific opinion or just a number you've picked out of the sky? There are people's jobs and livelihoods associated with all this, which needs to be considered, even if they are deemed to be not necessary.

      Commenter
      Jas
      Location
      New Farm
      Date and time
      May 01, 2014, 8:00AM
    • What's that? A new tax, cuts to the ABC AND back-flipping on the conditions of PPL? Now that would be breaking three election promises, wouldn't it?

      Commenter
      Guybrush Threepwood
      Location
      Brisbane
      Date and time
      May 01, 2014, 8:01AM
    • Yes Hacka deflect and lie, I see the incompetents are on target for the 1 million jobs, we all thought Tony said he would create1 million jobs instead he meant to lose 1 million jobs. At least he is on track to achieve something. Keep banging on about climate change and Rudd/Gillard (yawn) in the vain hope someone still believes.

      Commenter
      Pieron
      Date and time
      May 01, 2014, 8:04AM

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