Alternative 2015-16 budget

And I would cut indigenous programs, because race should not determine access to government services.

Commonwealth grants for regions, infrastructure and schools that are in annual appropriations bills would be cut, because they are areas of State responsibility. I would cut spending on climate change programs because, among other things, I see the reality of global inaction. And I would cut other areas of symbolic spending such as the Human Rights Commission, family studies, and gender equality.

Employing fewer Canberra public servants and paying them less

My spending cuts would mean at least 15,000 public servants lost their jobs, mostly in Canberra. While those affected obviously wouldn't appreciate such cuts, it is in everyone's long term interest to get people out of the unproductive public service and into the private sector where they produce things that people want.

The Government has a mandate for significant public service job cuts, given its election commitment to cut 12,000 public service jobs (rather than the 2,000 cuts it decided to pursue after the election). And there would still be more than 200,000 Commonwealth public servants after these cuts took effect.

For the public servants that remain, I propose to cut their pay by 10 per cent. After a decade in which pay and employment grew faster in the public sector than the private sector, this is a reasonable option. And yes, politicians' pay should be cut by the same amount.

Overall, my approach would deliver a surplus in the coming financial year, based on currently available numbers, without resorting to tax hikes.

No tax hikes

There is no justification for tax increases of any kind. Real (ie after inflation) Commonwealth tax per person has increased by more than 13 per cent since the introduction of the GST. As a result, our tax-to-GDP ratio is higher than in many countries with which we compete, like South Korea and the United States.

Tax hikes may not even succeed in sustainably raising revenue because they discourage Australians from working, saving and starting a business, encourage mobile Australians to leave the country, and discourage foreign investment and migration.

Julia Gillard and Wayne Swan acknowledged the growth‑detracting impact of tax hikes in 2010 when they proposed a cut in the company tax rate from 30 to 28 per cent. They cited independent modelling indicating that the tax cut would increase GDP by 0.4 per cent, with much of the benefit accruing to wage earners.

Treasury modelling in 2012 reiterated this, noting that a company tax cut would prompt new foreign investment and greater profit‑shifting to Australia, rather than to overseas. Modelling by the UK Treasury has since indicated that half of the revenue impact of a company tax cut would be offset by increased economic activity.

Of course, we should be cutting taxes anyway. The policy of the Liberal Democrats is to halve government spending, which would finance a $40,000 tax free threshold, a flat 20 per cent personal and company tax rate, and the abolition of special taxes on tobacco, alcohol, fuel and imports. But the Liberal Democrats do not control each House of Parliament (yet), so in the meantime we should achieve what spending cuts we can in annual appropriations bills, and avoid tax hikes. To paraphrase Kerry Packer, the Government is not spending our taxes so well that we should be paying extra.

The imperative for surpluses

While tax hikes are not justified, an immediate surplus most certainly is. When you're up to your eyeballs in liabilities, you should spend less than your income. The Commonwealth Government's liabilities currently exceed its assets by $229 billion, amounting to nearly $10,000 for every man, woman and child in Australia.