Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Hansard source

I thank Senator Lambie for that question. It is a fair question. What I put to Senator Lambie is this: our objective is to make sure that all of the Australian government benefits and services are affordable and sustainable over the medium to long term—indeed, forever. We want to ensure that the aged pension, disability pension, medical benefits, pharmaceutical benefits—all of the important benefits and services provided by government—are sustainable and affordable in the economy forever. The trajectory that we have been on as a country was taking us to 37 per cent government spending as a share of the economy. The highest level of revenue as a share of the economy ever, in the history of the Commonwealth, was 26.2 per cent, so there is a growing and rising gap.

Senator Lambie asked me: why don't we just increase taxes? If we were to chase an unsustainable spending growth trajectory, taking us to government spending of 37 per cent of a share of the economy with tax revenue at that same level, we would kill the economy, we would make our economy uncompetitive internationally and we would cause massive increases in unemployment. We would lessen opportunity and lessen living standards. These are not easy and happy decisions for governments to have to make. But if you have to make a transition to ensure that pension payments are sustainable and affordable in the economy, over the long term, then the best thing you can do is to make sure that you take people through that adjustment in a gradual, incremental way to ease the transition. And making adjustments to indexation arrangements—bearing in mind that CPI, right now, is running above male total average weekly earnings as an index—is an incremental, gradual way to help people through that transition to adjust to a more sustainable pension arrangement into the future. That is what we want to do. On the other side, we have also got a proposal in the budget, of course—(Time expired)