Australia's budget is deteriorating, says commission of audit head

http://www.theguardian.com/world/2014/jan/15/australias-budget-deteriorating-audit-head

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The business leader appointed by Tony Abbott to rein in government spending has described Australia’s current financial position as “good” but deteriorating and stressed the need to impose conditions to safeguard public services if assets are privatised.

The commission of audit chairman, Tony Shepherd, also offered an apology to a Senate committee after he was accused of misleading it about the extent of government instructions.

Labor and the Greens initiated the Senate inquiry to question the team charged with examining the size and scope of government, finding savings, recommending asset sales and reducing duplication between different levels of government.

Shepherd revealed he might miss the January deadline for the commission’s first report to the government, blaming the disruption of appearing before the Senate hearing. But he said he preferred to get it right than to rush it.

The Coalition promised to spend $1m on the audit to improve the budget after years denouncing Labor waste, debt and deficit.

But Shepherd – the president of the Business Council of Australia – told the inquiry the nation’s key financial indicators were “good” and his concerns related to the trajectory.

“We recognise that our fiscal situation, while deteriorating, is not bad by OECD standards and we have a relatively well-educated, healthy and happy society,” he said.

Shepherd added, however, that his concern was about ensuring the nation was capable of responding to future economic shocks and Australia should not compare itself only with OECD countries. The example of some of those countries showed the need to “be wary of deficits and too much debt”.

In an apparent attempt to counter criticism from Labor and the Greens that the “commission of cuts” would cause pain to vulnerable community members, Shepherd said his team would be guided by “the importance of fairness”, which he said was “important for the country and for our ability to work effectively together”.

Early in the questioning, Shepherd indicated that the terms of reference were the only instructions the five commissioners had been given and the government had made clear it was not imposing “no-go areas”.

The Labor senator Sue Lines asked about the Coalition’s policy of cutting 12,000 jobs. She pointed to comments the finance minister, Mathias Cormann, made in November that the government’s public sector jobs policy would now be handed to the commission of audit.

Shepherd said the commission had not received a specific request, but the commission’s secretariat head, Peter Crone, disclosed the existence of a letter from Cormann and the treasurer, Joe Hockey, “further to the terms of reference … to provide guidance to the commission on the government’s approach to public sector resourcing”. The 21 November letter, addressed to Shepherd, referred to recent advice from the finance department suggesting the former government’s policies were estimated to result in about 14,500 total job losses across the public service, and described those reductions as “largely untargeted”.

“Accordingly, I request that all of the commission’s proposed reforms are based on effective staffing and that these are linked to efficient services,” Hockey and Cormann said in the letter.

Shepherd told the committee he did not regard the letter as a direction and was simply drawing attention to a statement made around the time of the mid-year economic and fiscal outlook.

“I apologise for my earlier statement; if that was misleading it certainly wasn’t intended on my part,” Shepherd said.

The letter did not state a specific target for job cuts.

Labor and Greens senators tried to press Shepherd on his attitude to specific proposals, such as a fee for visits to a doctor, increasing the GST and privatisation. But he replied that he could not rule any proposals in or out ahead of the commission reporting to the government.

Shepherd said past privatisations had been “mixed” but generally “successful” and he spoke of the need to impose strong obligations on the buyer to safeguard the quality of services.

“When you do privatise you should ensure that you retain, in terms of public service, the level of services that have already been provided,” he said.

Asked by the Labor senator Sam Dastyari about his previous support for increasing the GST, Shepherd said he came to the commission with an "open mind". Shepherd said his past comments did not mean the five-member team would recommend such a course of action.

The commission has received about 300 submissions but they have not been published in a central location. Some groups have released their submissions but others have not. Shepherd said some organisations had specifically requested confidentiality.

Hockey had earlier likened the Senate inquiry process – initiated by Labor and the Greens which retain the numbers in the upper house until mid-year – to a “show trial”. The opposition leader, Bill Shorten, said Hockey’s comment that he expected to adopt a large number of the recommendations showed he must know what cuts were planned.

The other commissioners are Peter Boxall, Tony Cole, Robert Fisher and Amanda Vanstone. They dismissed claims of excessive BCA influence over the process.

Vanstone, a former Liberal minister, said Shepherd did not have inordinate influence over the commission. “Certainly not. I’m not flying to Canberra to do what someone else says,” she told the inquiry.

Fisher said: “If there’s a secret agenda it’s secret from us.”

Crone, who heads the commission’s secretariat, said he was on a leave of absence from the BCA and he might return after the project was completed. But he dismissed claims of a conflict of interest, saying the commission had received feedback from a wide range of groups and the influence of the BCA submission had been “quite minimal”.

The chair of the committee, the Greens senator Richard Di Natale, stressed the need for transparency, saying the commission's recommendations would feed into the May’s budget and had the potential to hurt people. The Liberal senator Dean Smith countered that the recommendations may also "improve the living standards and real income of Australians".

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