Pension cuts likely centrepiece to Audit's recommendations

CUTS to the aged pension are likely to form the centrepiece of the Commission of Audit's 86 recommendations, when Treasurer Joe Hockey releases the delayed audit report next week.

But while the audit's recommendations will be heeded, Mr Hockey said on Wednesday night the Abbott government will not "automatically accept all of its recommendations".

While the Treasurer's speech aimed to prepare voters for a tough budget, election promises from Prime Minister Tony Abbott ruling out cuts across a range of spending areas have hampered the potential impact of Mr Hockey's first budget.

Rather, the May budget is more likely to set the scene for further medium-term spending cuts and restraint across government spending, with a gradual tightening over coming years.

In his speech in Sydney, Mr Hockey said the audit highlighted that the government's "biggest costs are also our fastest growing", recommending vast changes to the Commonwealth budget.

"The problem we have is that the volume of demand for these programs is outstripping the capacity of taxpayers to fund them," he said.

"So the policies must be changed, either now or more dramatically in the future.

"Nothing is free. Someone always pays."

While the budget's lack of sustainability is well-known, Mr Hockey said the audit confirmed the budget would remain in deficit for at least decade under a "business as usual" situation."It is a recipe for disaster to never even get to surplus despite having a foundation of 32 years of continuous economic growth," he said.

While he did not release the specific recommendations of the audit, he intimated health, education, welfare and defence were the top of its agenda.

Mr Hockey also effectively confirmed the expected co-payment for GP visits; saying co-payments and increased use of means-testing on government payments, such as family tax benefits, would be needed.

The warnings of likely budget cuts sparked opposition from the community sector and the federal Opposition, both of which warned pension changes would hit Australia's poorest.

Australian Council of Social Services chief executive Dr Cassandra Goldie said despite the government's rhetoric, the budget measures proposed already "disproportionately target those with the least in our community".

"The proposed 1.75% cap on growth in spending would freeze spending for a decade once growth in the population is taken into account," she said.

"That means a 10 year spending freeze in government benefits and services everyone relies upon, including basic health services, pensions and benefits, community services and schools."

Labor finance spokesman Tony Burke told ABC Radio the budget crisis was "confected" and that "none of the information Joe Hockey's referring to there is new".