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Australian gov’t warns of tough budget

By AFP - May 04,2014 - Last updated at May 04,2014

SYDNEY — The Australian budget later this month will involve "tough decisions" to put the economy back on track, a senior minister said Sunday as a poll revealed a voter backlash against any new tax to cut debt.

Australia has enjoyed more than 20 years of annual growth, sidestepping the worst of the global financial crisis due to a mining boom fuelled by Asian demand.

But the government elected in September has said it is facing a deficit of A$47 billion ($43.6 billion) this fiscal year due to the previous Labour administration, and that the debt will only mount in coming years.

House Leader Christopher Pyne refused to comment on whether a new tax reportedly under consideration to plug the deficit — on workers earning more than A$80,000 a year — would be unveiled as part of the budget on May 13.

"I think they [Australians] fully understand we have to make the tough decisions necessary... to get the economy back on track again," he told the Australian Broadcasting Corporation.

"They know it won't be easy and it is important that everyone shares in that burden of repairing the damage Labour did to the economy and to the budget," he said.

A Galaxy Poll in The Sunday Telegraph found 72 per cent of voters felt that introducing the levy would amount to a broken promise by Abbott, who before the election had pledged no new taxes.

The poll of the 1,391 voters also found support for Abbott's coalition had dropped significantly since the election, from 53.5 to 48 per cent, meaning it would lose an election to Labour if a poll were held now. 

Pyne dismissed the poll, saying the government had been elected to fix the budget and Australians understood this was a priority.

"There's no easy way out from the debt and deficit disaster left for us by the Labour government," he said.

"We don't want to end up in the situation that Europe and the United States are in — and we don't have to as long as we have a government that is prepared to take responsibility and make the decisions now that will set up the economy and our society in the years ahead," Pyne added.

In a statement, Prime Minister Tony Abbott stressed that the nation must live within its means and try to reduce debt.

"Beyond a certain point, you don't control debt; debt controls you," he said.

Opposition Labour leader Bill Shorten said his party would oppose any deficit levy.

"Increasing taxes on working-class and middle-class Australians is a terrible mistake, and people will not forgive Mr Abbott for breaking this very big promise," he said.

Separately, the Australian government said Friday that it wants to lift the pension entitlement age to 70 — the highest in the developed world — by the year 2035 to help cope with an ageing population.

Treasurer Joe Hockey said the previous Labour government planned to raise the age from 65 to 67 in 2023 and the new Abbott administration wanted to take it further by 2035.

"Increasing the pension entitlement age to 70, we are intending for that to occur in 21 years' time," said Hockey.

Australia has no statutory retirement age but men have been entitled to the pension at age 65 and women at 60 since it was introduced in 1908.

While no members of the Organisation for Economic Cooperation and Development (OECD) group of rich countries yet have an official retirement age as high as 70, the effective age for men in Japan and South Korea is close to this despite an official retirement age of 60, a recent report by the OECD said.

Hockey said any Australians getting the pension now would not be affected but he stressed the government's view that the "age of entitlement" was over.

"It is hugely important we have long-term planning out of this budget," he said.

Australia has for years grappled with how to plan for its ageing population, and in 2009 the former government said it would gradually push back the age at which people could claim the state pension to defuse a "demographic time-bomb".

Over the next 30 years, the number of Australians aged 65 or over will double from 3.5 million to 7 million, accounting for 22 per cent of the population, the Actuaries Institute of Australia has forecast.

Meanwhile the number of those aged over 85 will almost triple from under 0.5 million to 1.4 million people in that time, placing pressure on the health system, it said.

Australia currently has a population of 23.4 million, and the life expectancy at birth is 79 for males and 84 for females, according to official Australian Bureau of Statistics figures.

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