MYEFO: 175 government agencies to be cut as Joe Hockey warns of worsening budget deficit

Updated

The Federal Government is planning to axe another 175 agencies in a bid to save more than half a billion dollars over four years.

Finance Minister Mathias Cormann is set to make the announcement as part of the Government's budget update on Monday.

Among those agencies set to be abolished are the Diabetes Advisory Group, Anzac Centenary Public Fund Board and the Local Government Ministers Forum.

Other agencies including the Australian Government Solicitor and the Australian Sports Anti-Doping Authority Advisory Group will be merged into Government departments.

Senator Cormann said the Government wants to streamline agencies and avoid duplication.

"The goal is to ensure the Government is as big as it needs to be but as small as it can be," he told Sky News.

"We believe that we inherited a bloated public service from our predecessors and part of our effort to repair the budget is to ensure that the administration and the operations of government are as efficient and as effective as possible so that they deliver the best possible services to people across Australia, at the lowest possible cost.

"A lot of these bodies are responsible for similar areas of responsibility. There's a lot of overlap, a lot of duplication... what we've set out to do is, wherever possible, ensure these functions are streamlined."

The Coalition has already axed 76 government bodies since coming to office last year.

Opposition Leader Bill Shorten criticised the proposal saying now was not the time for the Government to be cutting jobs.

"The Finance Minister's talking gobbledegook... it's a cliche masquerading as an economic policy," he said.

"All the smart economists around the world say that when you have an economy that's in danger of contracting, it's not the role of government to speed up the contraction."

The proposed scrapping of agencies comes after Treasurer Joe Hockey revealed the budget deficit would be worse than the Government had previously forecast when it releases the Mid-Year Economic and Fiscal Outlook (MYEFO) on Monday.

Mr Hockey said the drop in iron ore prices and others factors such as Labor blocking spending cuts would ensure the budget did not return to surplus in 2018 as previously forecasted.

He said more cuts would be announced next week.

"They're modest savings overall because our expenditure is very modest," Mr Hockey said.

"New spending - we're offsetting with new savings.

"The savings we're announcing are not going to have a negative impact on the Australian economy."

Last May's budget forecast a $30 billion deficit this financial year, and the Treasurer said that figure would now be much worse.

A vast majority of agencies to be streamlined were identified by the National Commission of Audit (NCOA) as in need of abolition, amalgamation, transformation or further auditing.

There is a further category of government organisations that will have their back office support systems provided by a Federal department in the future.

These organisations are the Australian Sports Anti-Doping Authority, the Professional Services Review, the National Health and Medical Research Council, the Australian Office of Financial Management and Cancer Australia.

Government will wear 'political embarrassment'

Department Consolidated Abolished Merged Agriculture 0 20 2 Attorney General's 1 5 2 Communications 2 0 0 Defence 1 4 2 Education 1 13 2 Employment 0 3 1 Environment 5 16 0 Finance 0 4 2 Foreign Affairs and Trade 0 3 2 Health 2 5 2 Human Services 0 5 0 Industry 0 20 3 Infrastructure 2 10 2 PM and Cabinet 0 5 0 Social Services 0 7 0 Treasury 1 2 0 Veterans 0 16 6 Total 15 138 26



Merrill Lynch Australia chief economist Saul Eslake said he expected the deficit to have increased by about $5 billion or more.

"There's no doubt given the faster than expected decline in commodity prices and the slower than expected wages growth compared with what was forecast in May, that the deficit will be bigger than had previously been forecast," Mr Eslake said.

He said the Government was unlikely to make any significant changes like tax hikes.

"Given that the economy is weaker than expected to have additional discretionary fiscal measures that is spending cuts or tax increases would only serve to weaken the economy at an inappropriate time," he said.

"So the Government's going to have to wear the political embarrassment of the deficit being bigger than it had forecast and taking longer to return to surplus than it had previously promised.

"Compared with the alternative of raising taxes again or cutting spending which would adversely affect the economy, I think they're making the right choice."

Mr Eslake said the Treasurer's May forecasts were not conservative enough and iron ore prices had fallen considerably more than the Government and other experts had expected.

"When the budget was brought down, the iron ore price was something like $US120 a tonne and the Treasury had forecasted it would be around $90 a tonne in the current quarter that was lower than most people were forecasting at the time," he said.

"I don't think it's there to be critical of the Government's ... numbers, you can make judgements about whether the measures the Government was proposing to correct the budgetary situation were the best that could have been chosen but that's a separate argument altogether."

Topics: budget, government-and-politics, hockey-joe, australia

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