A leading industry group has warned that Australia will need to raise taxes in the future to avoid the European-style problems of debt and deficits.
But Australian Industry Group chief executive Innes Willox told a conference that he also believes governments should first exercise new levels of discipline over all new and existing spending, as well as taxation levels.
Mr Willox said governments and opposition from both sides of politics will always be tempted to respond to demand for spending, especially in election years.
"There is no shortage of worthy areas of expenditure," Mr Willox told the 2012 Economic and Social Outlook Conference in Melbourne.
While the ageing population attracts a lot of attention in inter-generational reports, rising costs and expectations of health services are also very important.
There are also pressures from disability, child-care, paid parental leave, services for the aged, financing education aspirations, capability development in the context of the Asian century, and infrastructure for a growing population, he said.
Mr Willox said the 2010 inter-generational report warned of a projected fiscal gap between spending and revenue of three per cent of gross domestic product in years to come.
"We do face challenging fiscal questions," he said.
"In the absence of action, and to avoid European-style problems with debt and deficits, we would have to raise taxes."
"However, we should first exercise new levels of discipline over all new and existing spending and taxation measures."
He said while the Charter of Budget Honesty has been a good step, it is open to political misuse and abuse that will erode trust, but an independent budget office is a "very good idea".
Mr Willox also said there is a growing reliance on inefficient taxes and less on more efficient taxes.
"We have this the wrong way round," he said.
