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Budget pain

The government says it's not the budget, but its Commission of Audit is recommending sweeping spending cuts.

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Australians born after 1965 will have to work until they are 70 before they are eligible for the age pension, Treasurer Joe Hockey has announced, as he warned there was "no such thing" as a free visit to a doctor or free welfare.

Mr Hockey confirmed on Friday that while nobody currently on the pension would be hit by a rise in the pension age, the Abbott government would raise the retirement age in coming years.

Treasurer Joe Hockey confirmed the change on Friday morning.

Treasurer Joe Hockey confirmed the change on Friday morning. Photo: Alex Ellinghausen

The Treasurer called on the Labor opposition to offer bipartisan support for the move.

In what is expected to be his final major speech before handing down his first federal budget on May 13, Mr Hockey said the Coalition would deliver a document that is "not going to be an austerity budget, but it is going to be a prudent budget" which would prepare Australia for the demographic challenges posed by an ageing population.

"What we are going to do is to deliver a fairer system for the aged pension that is going to focus on the sustainability of the system with a reasonable quality of life. The aged pension expenditure today is currently more than we spend on defence,'' he said.

Tandberg.

Illustration: Ron Tandberg.

"It's rising to $72 billion rapidly, that's over 6 per cent growth. One of the reasons why is because we're ageing … but the pension kicks in currently at 65. When Labor increased it to 67 by 2023 we gave them bipartisan support. When we introduce legislation to increase it to 70 by July 2035,  ... we expect that there will be bipartisan support." 

"The aged pension needs to be a safety net by 2035, not a cargo net."

Doctor visit fee

The Treasurer signalled at the Australia-Israel Chamber of Commerce in Melbourne the government was carefully considering Audit Commission recommendations to scale back the approximately $5 billion annually doled out in industry assistance and introduce some form of fee for GP visits.

The Commission recommended $15, while a payment of $6 has also been mooted.

"Government should only provide services where the private sector can't provide enough of them at an affordable price. And in the private sector no-one questions the concept of user pays ... and yet over the years, we seem to have developed an attitude that this principle should not apply to government services,'' he said.

"Government services are somehow deemed to be magically free but of course they're not free, they are paid for by the taxpayer. And so asking those who use government services to at least make some contribution to their delivery seems a logical and equitable step. There is no such thing as a free visit to a doctor. There's no such thing as free welfare."

Paying off debt and returning to surplus remained "critical for the long-term sustainability of the budget", Mr Hockey said, but added: "I am not committing to achieve a surplus in the near term as a benchmark of my budget strategy."

"The last budget update projected the gross debt for every Australian will increase from $13,000 per person to $25,000 per person by June 2024 ... the interest costs on this debt by 2024 will be $34 billion,'' he said.

Public service cutbacks

Mr Hockey also took aim at duplication and waste in government agencies and services, an area highlighted by the Commission of Audit's report on Thursday as it called for a reduction in the public service of 15,000 jobs and for the abolition of government agencies and bodies.

"The Commission of Audit identified a need to rebuild the institutions of government,'' he said, arguing that there had been massive waste of taxpayers money in programs such as the National Rental Affordability Scheme and that some agencies appeared to have been created "simply to create the appearance of action". 

"The Commission of Audit found that of the nearly 700 government bodies in existence at a federal level, 93 non-principal bodies exist to provide advice to 194 principal bodies. 238 bodies exist to facilitate discuss ions between the State and the Commonwealth,'' he said.

Some recommendations from the Commission would be taken up immediately and others would be assesed against the backdrop of the coming tax white paper, financial system inquiry and an intergenerational report.

In the longer term, Mr Hockey re-committed the government to achieving a surplus of 1 per cent of GDP by 2024 while paring back spending growth.

"The end of the age of entitlement will facilitate greater personal responsibility, where individuals with their own financial capacity can no longer expect other Australians to be responsible for all the bills. This means redefining the role of government in society,'' he said.

Earlier on Friday, Mr Hockey emphasised that infrastructure spending would underpin the government's drive to bolster the economy, as would measures to get more Australians into work.

MP entitlements face cut

Mr Hockey also signalled the MP Gold Pass, which entitles parliamentarians to some free plane travel, could also be pruned back in the budget.

"I can't confirm where we're heading with that, because that is a matter for the budget, but I hear what you say and we hear what you say."

The retirement age is already scheduled to rise from 65 to 67 by 2023 under changes introduced by the former Labor government. The government's policy shift would ensure the age continues to slowly rise through until 2035.

The rise to 70 by 2035 is quicker than the shift suggested by the government's own Commission of Audit, released on Thursday, which recommended the rise be put in place by 2053.

Opposition spokesman for disability reform Jenny Macklin accused Prime Minister Tony Abbott and Mr Hockey of breaking their promise before the election to make no changes to pension.

"Tony Abbott and Joe Hockey are saying to Australian pensioners that you're going to have to work longer, no matter what the promise was they made before the election," she said.

The announcement also comes as Prime Minister Tony Abbott and state premiers and chief ministers meet in Canberrra on Friday to formally sign up to the federal government's proposed asset recycling package.

That package is designed to spur the states to sell their old assets and plough the money back into new infrastructure investment by providing states an extra 15 per cent of the sale value of their assets.

NSW Premier Mike Baird has already rejected the Audit Commission's proposed slow-down in the roll out of the National Disability Insurance Scheme before the COAG meeting on Friday, but WA Premier Colin Barnett suggested it was an idea that had merit.

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