Fiscal red ink poses challenges for Canberra

AUSTRALIA'S leaders have made it eminently clear that the next Budget, due shortly, will signal the time for austerity, especially for those dependent on government largesse. Indeed, there is much consternation among some older supporters of Prime Minister Tony Abbott's coalition that they have elected politicians who would require them to work until they are 70 before becoming eligible for an old-age pension.

But Canberra argues that the financial outlook is dire: the latest forecast is for a budget deficit of A$34 billion (S$39.7 billion) next financial year, followed by deficits of A$24 billion and A$18 billion in the following years. Australians are being warned that only by getting back to surplus can the country stop borrowing - which this year alone means an interest bill of A$12 billion or about the same as the country spends on higher education.

Thus, not only are workers who are nearing the current retirement age of 65 being warned that they might have to work longer before they qualify for the pension, other entitlements are being targeted as well. Australia's expenditure on Medicare, the universal health scheme, is seen to be growing at an unsustainable rate. The plan seems to be to cut demand for Medicare-funded services by making patients pay a certain amount for each consultation. Other proposed cuts seem to include industry assistance and funding for hospitals. The government argues that the volume of demand for these programmes is outstripping the capacity of taxpayers to fund them.