GOVERNMENTS across Australia are overspending by more than $60 billion a year, posing a risk of higher taxation, more debt and lower living standards for future generations, a think tank warns.
The Centre for Independent Studies (CIS) says government spending at all three tiers - federal, state and local councils - has been growing at an average rate of four per cent per year since 1972, and is now nearly 35 per cent of gross domestic product (GDP).
CIS research fellow Simon Cowan says the ideal size of government is less than 30 per cent of GDP, which means governments are overspending by as much as $63 billion a year.
"All government spending should be scrutinised to ensure taxpayers' dollars are not being wasted on inefficient, ineffective programs," Mr Cowan says in a new report 'TARGET30 - Towards smaller government and future prosperity'.
The report aims to prepare Australia for its future fiscal challenges by proposing ways to reduce government spending to less than 30 per cent of GDP within 10 years.
Health, welfare and education consume more than 60 per cent of government budgets, and with costs set to rise rapidly, mainly due to an ageing population and spiralling health care costs, there will be much higher taxation and enormous public debts.
"It is crucial that we act now to make these services more efficient, curb the uncontrolled growth of government, and stave off a fiscal and debt crisis like those afflicting big-spending, big-government countries in Europe," Mr Cowen says.
Much of the increase over the past 10 years has come from new spending programs.
Mr Cowen says governments should focus on finding savings from existing, lower priority programs, to pay for new spending programs and recent commitments like the Gonski education reforms and the National Disability Insurance Scheme.
"TARGET30 calls for a shift in cultural thinking. It asks Australians to think about what we really need governments to provide, and what individuals should be providing for themselves," he said.
Without action, government spending may exceed 50 per cent of GDP by 2050, he warns.
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