Treasurer Joe Hockey will next week release the long-awaited commission of audit that is helping him frame his first budget.
The report makes 86 recommendations for improving the efficiency of the government sector and restoring the health of the budget.
But Mr Hockey told a Sydney audience on Wednesday he will not automatically accept all the recommendations.
“Some can be actioned in the short term, others require further consideration and some will be rejected outright,” he said in a speech hosted by the Spectator Magazine.
The commission finds government spending has almost tripled in the past 40 years.
Over the medium term the commission expects the 15 largest and fastest growing programs are in welfare, health, education and defence, and in most cases growing considerably faster than the economy.
Mr Hockey said the age pension is the largest program “by a fair margin” and already takes up 10 per cent of all commonwealth spending.
Four out of five Australians aged over 65 receive a full or part pension, and when the concessionary health card is taken into account, just 14 per cent receive no government payments.
And despite spending billions of dollars in taxation benefits for superannuation, this situation is unlikely to be much different in 2050.
On top of this, aged care is the eighth largest spending category and the pharmaceutical benefits scheme is 10th.
“The reality is that faster economic growth by itself will not be enough to put the budget back in the black,” Mr Hockey said.
The economy would have to grow at 5.25 per cent annually to get back to surplus in five years, a rate that hasn’t been sustained since the 1960s and is double the government’s current forecasts for the next two years.
Neither will the problem be solved by increasing taxes.
In the absence of personal income tax cuts, Australians will face an increasing burden as inflation gradually pulls them into higher tax brackets.
A fiscal consolidation program will be revealed in the May budget that will establish a clear path back to a surplus of one per cent of GDP by 2024.
“But I want to emphasise that the May budget will not be the end of our efforts, it will only be the start,” Mr Hockey said.
He said the commission of audit would be released next Thursday.