Budget spending not sustainable: Garnaut

Professor Ross Garnaut says Australians have to acknowledge the mining boom days will end. Source: AAP

ALL Australians have to accept the government cannot continue to provide services that it cannot afford in the long-term, a former senior economics adviser to former Prime Minister Bob Hawke says.

Prime Minister Julia Gillard told a conference on Monday that budget revenue in 2012/13 will be $12 billion less than forecast because of the continued strength of the Australian dollar.

As the end of the mining boom approached, Australians would have to deal with less revenue flowing into government coffers, Professor Ross Garnaut said.

"It depends on whether we can accept restraint all around in the interest of avoiding recession and avoiding high unemployment," he told ABC television.

Prof Garnaut, an adviser to Mr Hawke from 1983 to 1985, said federal governments had been spending the temporary largesse from the resources boom since it began in 2003.

"That has led to expenditure levels and cost levels in Australia that are substantially higher than is sustainable in the long term," he said.

Prof Garnaut said successive governments, coalition and Labor, had been spending too much since the prices of Australia's exports rose compared to imports - except for the year following the global financial crisis in 2008.

How Australia would endured the bumpy economic ride would depend on the central bank's setting of interest rates, on how governments set their spending and revenue plans, and on the community being ready to accept reforms to lift productivity in a high-wage economy, Prof Garnaut said.

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