Government urged to target seniors, families in budget cuts by economics group Macroeconomics

Updated

An economic forecaster is urging the Federal Government to "cut hard and cut early" in next month's budget, targeting seniors, families and businesses.

In its annual pre-budget forecast, Macroeconomics has backed the numbers in the Government's most recent fiscal update handed down in December.

The group is urging the Government to target the middle and upper classes with cuts to assistance to seniors and families with children, as well as corporate welfare.

A director at Macroeconomics, Stephen Anthony, has told the ABC the Government must act quickly.

"We would say to the Government to cut hard and cut early in your term," he said.

"It's possible to achieve the adjustments that we have in mind and to phase it over time, for example to implement cuts over a three-year period.

"The point being that the Government needs to make a credible announcement on budget night as to how it's going to address these structural issues."

The forecast comes after Treasurer Joe Hockey flagged possible changes to the eligibility age and indexation of the age pension as measures to help improve the budget bottom line.

Macroeconomics says the Government needs to axe up to $16 billion in spending a year to bring the budget back to a sustainable surplus.

It says family homes above a certain value should be part of the assets test for the age pension and also supports changes to the indexation of the pension.

Mr Anthony says the cuts should be aimed at those who can most afford it.

"We're not talking about cutting programs, we're talking about better targeting," he said.

"So what we want to see, for example with the age pension, we want to see the needy receiving the age pension and we don't want to see people with their own resources receiving the benefit.

"What we'd suggest is that over time the means-testing arrangements include the family home."

Mr Anthony says he would also like to see the family tax benefit income test lowered, the Pharmaceutical Benefits Scheme to take a tougher approach with big drug companies, and a broadening of the GST.

Changes would hurt those most in need: Yates

The retirement age is already set to climb from 65 to 67, and Mr Hockey has pointed to the United Kingdom, where it will be lifted to 70 in future decades.

He has also discussed the option of indexing the pension to inflation, which would be lower than the current link to male total average weekly earnings.

The Treasurer says too many people are relying on government payments and the issue needs to be addressed.

"Obviously we've got to have a sustainable welfare system and there is a serious question as to whether our current welfare system, which was designed in the 20th century, is sustainable in the 21st century when we have significant demographic challenges," he said.

Ian Yates from the Australian Council on the Ageing says lifting the pension age will disadvantage those most in need of support.

"The vast bulk of people who are on the pension, 62 per cent of them, are on a full pension. They're not sitting on millions of dollars of assets," Mr Yates told ABC News Breakfast.

"They are people with very little other assets and income.

"That's nearly 1.5 million people, and they are in need. They have planned for, and they have been promised that Australia would have a pension system."

Age discrimination a problem in workplaces

Mr Yates says expecting older Australians to remain in employment is problematic due to age discrimination in the workplace.

"Study after study has showed that if you become unemployed in your 50s or 60s, it is very, very difficult to get back into the workforce. Age discrimination is alive and well, regrettably, in Australia," he said.

"At the same time as we see the reverse trend, which is more and more people voluntarily working well past 65. That's happening voluntarily.

"People don't have to be forced to do it, but a lot of people have great difficulty. Long-term unemployment among older Australians is rife."

Employment Minister Eric Abetz says it is the Federal Government's responsibility to get the budget back in shape, and has again warned it will be a tough budget.

But he says a lot of the budget cuts being speculated about were actually decisions made by the previous government.

"A lot of these are in fact Labor budget cuts, which we weren't told about, and we only found out about those 14,500 cuts in the Commonwealth public service after we won office," he said.

However, the Opposition says the Government is about to break an election-eve pledge not to change the age pension.

Opposition families spokeswoman Jenny Macklin says if Prime Minister Tony Abbott makes any changes it would be a breach of trust.

"He chose to say before the election there will be no changes to the pension," she said.

"He must keep his promise to Australian pensioners, not break it in the way that Tony Abbott and Joe Hockey are preparing to do.

"It's very serious for a lot of very vulnerable people."

The Greens say it is unreasonable to expect people with physically demanding jobs to work until they are 70 before they are eligible for the pension.

Topics: budget, business-economics-and-finance, federal-government, government-and-politics, australia

First posted