Watch this space: Treasurer Joe Hockey's first budget will be delivered in two weeks. Credit:Alex Ellinghausen Weasel words can help in these situations. There's that possibility of a "debt reduction levy" rather than a tax increase, borrowing Gillard's Queensland floods trick. It's the mirror image of insisting on calling a carbon price a carbon tax and in the general ball park of Greg Hunt wanting everyone to think there's no tax involved in raising the $2.55 billion for his "Direct Action" emissions reduction fund. Axing the Family Tax Benefit Part B could be packaged up with the generous paid parental leave as far-sighted workforce participation policy, as Part B favours families with a single breadwinner when the government wants double-income families. Then again, it's much easier politically to indefinitely extend the freeze on family tax benefit indexation – a way of saving billions over time without the punters feeling any immediate loss. Freezing the age pension altogether is definitely in the too-hard basket, but the timing is right to save a few more billions by scrapping the present best-of-all-worlds indexation method. The pension now rises by the highest of the three measures - the CPI, male ordinary time weekly earnings and a special aged pensioner cost of living index, the latest instalment of which will be released on Wednesday. With male weekly earnings growth muted, it would be a convenient time to limit pension increases to that specifically targeted pensioner cost of living index, while the much-sought-after health card looks to be in line for tighter means testing, given the way Hockey has stressed how many reasonably well-off Australians get it.

A problem for the government if it wants to be seen to be equitable about the pain is that unfortunate pledge of no superannuation changes before the next election – so ordinary folk are being promised trimming while the retired wealthy will continue to live in an extremely generous tax haven. Hockey should deeply regret the election promise to scrap Labor's mild effort to impose a 15 per cent tax rate on retirees' super fund profits of more than $100,000 a year. It's also unfortunate that the government has already ruled out including the family home in the pension means test. There was a delicate moment during the 2011 tax forum when, as the session chairman, I seemed to have unanimous agreement by the nation's federal and state treasurers plus the taxation industry, business, union and social sector representatives that the family home should be included, but then Wayne Swan realised the political disaster opening before him. The transcript records the words, but not the pauses: Pascoe: That gets us into the sharp end of means testing as well. Does it make sense to anyone that taxpayers are paying pensions to millionaires, people living in multimillion dollar properties? Can anyone defend the family home being exempt from the pension test? No-one? No-one except the Electorate, who is outside this room. Pressure. (Treasurer Swan raises his hand.) We found the one man who wants to give pensions to millionaires. Swan: I wanted to make the sensible point that we do exempt the family home and there is a very good reason for it. The family home is something which goes very much to the core of what I see is the Australian way, which I was talking about before. I don't think we are paying that many pensions to millionaires living in million dollar homes. I think I could talk to the social security minister here and I don't think there are that many." And thus the moment passed as the political reality dawned of the fear campaign that the opposition would run if he had remained silent. The government is now the opposition and the opposition is the government, but nothing has changed.

As to what the government might use from the Commission of Audit report, Hockey last week seemed to be stressing one of the commission's three "guiding principles": that the government should do for people what they cannot do, or cannot do efficiently, for themselves, but not more. Presumably that means the government doesn't need to provide incentives for rich people to invest and save – that's what the wealthy do anyway to become and stay wealthy. But being consistent on that score runs into the superannuation no-go area. The principle does support the idea of co-payments, which have certainly received an airing, mainly through the Medicare bulk billing proposal. If the government is to be consistent, there's a major opportunity in another of the growing cost areas: education. There are quite well-off people choosing to send their children to "free" government schools, but the Treasurer has told us nothing is free. There's room there for a means test while a weekly school fee "co-payment" would be much the same as paying $6 to visit a doctor. Loading The great thing about the co-payments is that they don't break the election promises of no cut-backs to health or education – there's no cut, it's just an adjustment to the means of paying for the service. It's a bit like a levy not being a tax increase. Michael Pascoe is a BusinessDay contributing editor.