Treasurer brings down the axe in Australian Budget

Joe Hockey, Australia's treasurer.

Aussie Treasurer's stringent Budget makes wide cuts across government spending.

The Australian Government will today start selling one of the nation's most unpalatable Budgets in decades.

Leavened by a handful of sweeteners, Treasurer Joe Hockey's axe has hewn through almost every area of Government spending.

"Doing nothing is not an option," Hockey said. "The days of borrow and spend must come to an end."

The Budget aims to cut the deficit from almost A$40 billion ($43.3 billion) to A$29.8 billion next year, falling to A$2.8 billion in 2017-18.

By 2024 Hockey predicts surpluses of more than 1 per cent of GDP.

Budget forecasts also predict federal debt will fall from A$667 billion to A$389 billion over the next decade.

But while spending is hauled back, the Government will begin massive, multibillion-dollar programmes for the nation's infrastructure and for medical research.

Hockey plans to do this against the background of a fragile economy.

Treasury projections say the "extraordinary period of transition" from the mining investment boom to other sectors will not be easy.

New private business investment is forecast to fall by 5.5 per cent in 2014-15 and 3.5 per cent the following year. The current account deficit is expected to widen from 3.25 per cent of GDP to 4.2 per cent in the coming year.

Unemployment is forecast to rise to 6.25 per cent for the next two years, although the economy is expected to expand by 3 per cent in the next 12 months and by 4.75 per cent in 2015-16.

Business will be hit by the axing of about A$850 million in assistance programmes, and companies' costs will rise with twice-yearly indexation of the fuel excise levy to inflation.

Large businesses will pay a special levy to help fund a new paid parental leave scheme, offset by a 1.5 per cent cut in company tax.

People earning more than A$180,000 a year will face a three-year "budget repair levy" of 2 per cent on defined portions of their income.

The pension age will be progressively increased to 70 by 2035.

Access to the dole will be restricted for young unemployed people, and many will be required to join work-for-the-dole programmes.

New charges will be made for subsidised medicines, and patients will pay A$7 for previously free GP visits.

The axe has also swung heavily on the public service, with forecast job losses of more than 16,000.

But Hockey announced a new A$11.6 billion infrastructure growth package which, supported by spending from the states and private business, will finance major road, rail and port projects.

A massive A$20 billion fund will also be established to fund medical research.