Bad news ... Australian Treasurer Joe Hockey reveals pre-Budget horror. Picture: Rod Lamkey Jr Source: AFP
THE annual cost of delivering the aged pension will rise to a staggering $72 billion within 10 years, dwarfing expenditure on defence, schools and hospitals, the Government's Commission of Audit has warned.
The cost of providing Medicare will also almost double within the decade to $38 billion a year, suggesting both were now on an unsustainable path.
But the fastest rising area of government spending will be the roll out of Labor's National Disability Insurance Scheme, which is forecast to grow by 50 per cent by 2024 to $11 billion a year — a growth rate four times higher than any other government sector.
Treasurer Joe Hockey has forewarned that in the face of alarming long term spending projections revealed in the audit, tighter means testing and clawing back indexing would be rolled out across just about every area of income support provided by the government.
BUDGET 2014: Joe Hockey urged to cut deep
This would include pensions, family payments and other forms of income support or welfare which had to be scaled back if Australia was to avoid a Greece style fiscal disaster.
He signalled more widespread co-payments would also be applied to a range of government services — beyond the most likely area of Medicare.
In a pre-Budget horror story of what was to come, Mr Hockey released several key findings of the independent Commission of Audit. The full report containing 86 recommendations is due to be released next Thursday.
He singled out the aged pension as now being the single largest expense item on the Government's books, and if not arrested, would virtually bankrupt the future generation.
Mr Hockey said that government spending had tripled since the 1970s to an average of $15,000 a year for every Australian.
Defence was still the second largest expense item followed, however, by family tax payments, Medicare, the Disability Support Pension, Hospitals, Schools, aged care and the dole.
"The Report makes it clear that Australia has a serious spending problem," Mr Hockey said in a speech to The Spectator function in Sydney.
The speech was used to put numbers around his recent rhetorical warnings about cuts to aged pension, Medicare and the NDIS in the budget.
"At a cost of more than $40 billon a year, more was spent on the aged pension than defence, health or education and schools," he said.
"It is our single biggest spending program.
"Spending on the Age Pension already takes up 10 per cent of all Commonwealth spending.
"And demand for the Age Pension will continue to increase as the population ages."
Mr Hockey said the audit focused on the 15 largest and fastest growing Government programs "predominately across welfare, health, education and defence".
"They are, in almost all cases, projected to grow faster than average growth in total government expenditure. Most are also expected to grow considerably faster than the economy," he said.
Mr Hockey said while living longer was a good thing, the cost of providing comfortable retirement was increasingly being borne by others.
"We spend more on aged care than we do on higher education or child care," he said.
In a hint at the budget pain needed to address the problem, he said spending growth had to be contained to 1.75 per cent a year for the next decade.
"Means testing must become an even more important part of Australia's transfer system to ensure the sustainability of our income support payments," he said.
"Support must be targeted to those in most need."
Mr Hockey stressed that the government would not necessarily adopt all the audit's recommendations.
"I ask Australians not to judge this Budget on what they get or lose today. This Budget is about our quality of life for the years ahead," he said.
