Chris Richardson is speaking more frankly about the need for Federal spending cuts, than Kevin Rudd.

The Prime Minister has been delivering a rather obtuse message over the past week, warning that Australia’s productivity must rise over the years ahead, to offset the challenges that Australia’s rapidly ageing population will present to the Federal budget.

That baffled many people because productivity is a technical economists’ word meaning the relationship between output and industrial units of things like labour and capital.

Mr Richardson, a  former Treasury official, who now guides the private forecaster,  Access Economics,  would, certainly knows that. But the many of the people he might meet, on his  bus to work, would not.

Access, though, clearly endorses growing calls for cuts in Federal spending, saying they will be needed in both this year’s Federal budget and  the next,  noting that the first will come before the next Federal election and the second afterwards.

Make no mistake.

If the Federal government does make big cuts in its spending  this year, as Access recommends, your family’s finances will be affected too, one way or another.

In the private forecaster’s latest Business Outlook, published today, Richardson says this all comes down to a single word.

“Courage.”

Richardson has been around Canberra long enough to know that this word will set off alarms.

He would remember, too, that  Sir Humphrey Appleby, of the Yes Minister series,  defined “a courageous decision” by any government, as as one that will cost it the next election.

The forecasster’s message, on Federal spending, was blunt.

“There is a big need to save taxpayers’ money, because longer term Federal finances are skint,” it said.

In a string of speeches delivered around the nation, in the week leading up to Australia Day, Mr Rudd, virtually accepted that.

And, while he isn’t saying  much about spending cuts, his government has, in fact, already started to rein in its spending.

It has done that very quietly.

The cuts also go well beyond the gradual phasing out of its stimulus package, which is already well under way, as the Federal Treasurer, Wayne Swan, has noted.

Some changes go right to the heart of the system.

Australians, who believe they might be entitled to some payments from Centrelink,  for example, could once arrange a private meeting with an adviser from this welfare agency,to find out precisely what their entitlements are.

Now, people seeking that agency’s advice, are told to go to its website, instead,  to review their situation.

That’s no easy task, for a 63 year old Italian woman, who is not  all that familiar with English, let alone the internet.

The government will have no shortage of ideas, though, if  it does decide to cut spending in its May budget.

That’s because a Razor Gang, headed by the Federal Finance and Deregulation Minister, Lindsay Tanner, has been working quietly on proposed spending cuts, since last September.

Access says the Federal opposition, too, has responsibilities, when it comes to Federal spending cuts.

“…it is always…easy to argue for spending cuts in in general and to disagree with them in the particular,” it warns.

“So let’s hope that Canberra’s New Year resolution, on both sides of the Hill, is for a little extra courage, it adds.

What else, then, does Access see ahead?

• A “mild” recovery this year, rather than a “wild”  boom, for one thing.

That might dampen hopes in some places, like Western Australia, where the local newspaper is already predicting a return to roaring times, in the near future.

• Access says, too, that Australia will benefit from  a resurgence in China, which chalked up very strong growth last year.

But there will be a price, in the form of greater exposure to China, if anything goes wrong there.

“If China sneezes, Australia will catch pneumonia,” Access  says.

• Recovery in the retail sector will be muted, Access says, noting that Australia’s shopkeepers have already benefited greatly, from Federal stimulus spending.

• It says, too, that business will continue to be restrained by the banks, as they struggle to overcome setbacks suffered in the global financial crisis.

• It warned also that Australia’s interest rates would gradually return to  more normal levels, as the Australian economy gradually recovers.

More at www.accesseconomics.com.au