Cap spending growth, business urges

The Abbott government must end the politicking over the budget and make significant structural changes to curb spending and reform the tax system, the Business Council of Australia says.

The business group has proposed a 10-year strategy to fix the country's finances in its submission to the budget, top of which is capping spending growth at two per cent of gross domestic product.

Complaining that the former Labor government committed major spending while "relying too heavily upon optimistic revenue forecasts", the council says the coalition has been left with net debt and deficits amounting to the tens of millions of dollars.

Council chief Jennifer Westacott says fiscal discipline was "bigger on promise than delivery" under Labor, noting it committing itself to an expenditure cap of two per cent, but presided over a real spending increase of four per cent.

"What we have to see urgently is a credible plan for returning the budget to a decent surplus over a decade, with action that starts now," she said in a statement on Monday.

"It's clear over recent years we have lost control of the fiscal strategy."

The business group's 10-year plan called on the government to correct commonwealth spending through structural change to existing expenditure programs.

Comprehensive tax reform should be undertaken, as should an agenda to cut red tape, "reorient" workplace laws, and push ahead with free trade agreements.

Other fiscal rules recommended by the BCA are a cap on commonwealth taxation of 23.7 per cent of GDP.

It also wanted the government to outline plans for privatisations, outsourcing and reduction of commonwealth-state duplication.

Citing the deteriorating economic outlook, Ms Westacott said now was the time for fiscal discipline and for an end to politicking over the budget.

"If politicking ends up kicking the can down the road on dealing with our significant economic challenges, future governments will inevitably be forced to take more drastic actions," she said.

Treasurer Joe Hockey has flagged a major overhaul of health, welfare and other spending in the May budget, complaining the country is living beyond its means.

BCA president Tony Shepherd is heading the government's commission of audit into the government's finances, which has been charged at reviewing commonwealth spending.

"The government should use the audit to craft a structural solution to our weakening fiscal position that can be carefully implemented over a decade," Ms Westacott said.