Balanced budget still possible: CEDA

Reduced industry assistance, an efficiency dividend from higher education, and a big reduction in the public sector headcount are among the recommendations in a report by the Committee for Economic Development of Australia released today.

About $500 million of federal savings would be generated by a 10 per cent cut to industry assistance, while the higher education efficiency drive would be worth $300 million, the report found.

Changes to the pharmaceutical benefits scheme would save $1.6 billion, and a headcount reduction of 10,000 would save $2 billion.

Improving cost effectiveness in the Medicare benefits schedule was the biggest idea to curtail spending, worth $2.1 billion.

A range of major tax hikes, including on petrol, luxury cars, alcohol and tobacco were additionally suggested in a report that was heavy on revenue enhancing measures but reasonably light on ideas to reduce spending.

Nonetheless, it would balance the budget by 2018-19, Ceda says.

Such moves, including consolidating work-related tax deductions (worth $4 billion), could generate revenue for company and income tax cuts, however.

The report, prepared by Ceda’s balanced budgets commission, said that while running deficits in recessions was warranted, continuous deficits during sustained expansions meant the government would crowd out private savings that would  otherwise support productive investment.