The Commission of Audit's recommendations fall roughly into three categories.

There is the brave: cutting 22 industry assistance programs.

The crazy brave: imposing a Medicare co-payment of $15, and picking a fight with the powerful Pharmacy Guild by exposing chemists to competition.

And there is the politically suicidal: breaking a pledge by including the family home in a pension means test.

But this is not the Government's plan. What matters is what happens next. How it responds in its budget, due in just 11 days.

The commission's point is to make a compelling case for change and give the Government options. Its cures can be accepted, parked or discarded.

And the argument underpinning the 64 recommendations is compelling: the Commonwealth is living beyond its means and "business as usual" is not an option.

Most of this case has had a fair airing elsewhere, but the short story is that if the Commonwealth does not pull on the handbrake, costs will continue to outstrip revenue every year and by 2023 its net debt will top $440 billion. Outlays per person have been rising for 40 years, from $6,000 in 1975 to $15,000 today.

The audit argues that the only way to make big savings is to cut big programs. Of the $409 billion the Commonwealth spent this financial year, 88 per cent of it was "administered" payments, over which it has little control. Seventy per cent of the total growth in spending over the next decade is tied to the 15 largest programs.

The cost of each is huge and rising faster than inflation. The top four are: the aged pension, now $40 billion and growing at 6.2 per cent a year; Medicare benefits, $19 billion, growing at 7.1 per cent; hospital spending, $14 billion and expected to rise to $38 billion over the next decade; and the Pharmaceutical Benefits Scheme, growing at 5.4 per cent a year.

The audit argues that if the Government were to take up all its recommendations it would save $60 to $70 billion a year by 2023-24. But the Government will not do that. It will punt for milder medicine and a slower return to surplus and hope that, in the long run, tough choices will be seen as in the national interest and rewarded.

And they will be tough. Attacking big programs means risking the ire of lots of voters. And even though the flagged pension changes have been put off until after the next election, pensioners, and a sizeable chunk of the Coalition backbench, are nervous. Both pose a risk.

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Treasurer Joe Hockey and Finance Minister Mathias Cormann have been dispatched to quell the growing disturbance on the backbench. Much more work will be needed in the electorate before and after the budget, and one of the gripes coming from the ranks is that the Government has done a poor job so far in hammering the case for change.

Part of the problem is that Prime Minister Tony Abbott's pet project, the $5 billion paid parental leave scheme that is seen as completely at odds with the key message of the budget: a nation living within its means. He has already had to cut the ambition of the scheme from covering wages of $150,000 to $100,000. The commission says it should go lower, to average weekly earnings, which is currently just over $57,000 a year.

And for good measure it also says the Government should ditch Mr Abbott's pledge to give money to the Cadbury chocolate factory in Hobart.

Perhaps one of the most interesting ideas in the audit report is the proposed rebalancing of the relationship between the Commonwealth and the states.

Before World War II the states raised most income tax. Then the Commonwealth used its wartime powers to scoop up the revenue and then share it with the states. The Commonwealth was supposed to return tax powers after the war. Surprise. It didn't.

Over time High Court rulings further narrowed what the states could collect. In 1997 it struck down a state's ability to raise taxes on fuel, alcohol, and tobacco. So the states were left as dependents on an ever more complex system of Commonwealth grants. This goes by the title of vertical fiscal imbalance.

The audit commission wants some power returned to the states, but the existing system of raising personal income tax is very efficient and doesn't need change. What could change is that the Commonwealth could set aside, say, 10 per cent of a state's tax take for that state to spend as it wishes, replacing existing tied grants. The even more radical part of the proposal is allowing states to periodically vary the surcharge, within limits, which could allow different tax rates around the country.

This could supercharge the idea of "competitive" federalism.

That sits much better with the Prime Minister's worldview, because he has said that states should be sovereign in their own sphere. It will appeal to the states, but any change will be the work of years, as that kind of change always is.

But Mr Abbott might just be the first prime minister since 1901 to lead a push of power from the centre back to the states.

In passing, spare a thought for those who toil in the Government's employ. Public service jobs used to be considered safe. Not any more. The audit commission says there should be a cut in the general government sector employment of 5 per cent. That is roughly 15,000 people. Imagine the outcry if that many jobs were slashed in Adelaide.

Sadly, whether or not it is justified, that kind of cut to the public service will be one of the easier decisions for the Government from this audit report.

The rest will be hard. And once the budget decisions are made they will have to be sold to a sceptical electorate and wrestled past a fractious Senate. Then the Government and its backbench will have to hold their collective nerve all the way to election day 2016.

That will take some skill and greater powers of persuasion than this Government has displayed to date. Oh, and a great deal of courage, minister.