Australians are suffering a ''reality gap'' over the state of the nation's finances, the head of Treasury, Martin Parkinson, has claimed.
Amid the ongoing backlash at the punitive first Abbott budget, Dr Parkinson highlighted what he believes is a failure by the ''political class'' to convince the community that the country's fiscal settings were unsustainable and spending would have to be cut.
''For the last three years I have been saying there is a gap between community expectations and what government can realistically do and there needs to be a frank and community-wide discussion to reset expectations,'' Dr Parkinson told a budget estimates hearing in Canberra.
''Second thing I've been saying there is a gap between what citizens want from government and what they are willing to pay for that.
''There is a reality gap confronting the Australian public and unfortunately the frank conversation that has been required has not been held.
''I've been saying this, the governor of the Reserve Bank has been saying this, the head of the independent Parliamentary Budget Office has most recently said this last week. If the two most senior economic bureaucrats in the country are saying 'people we have a challenge and it's about time we had a serious community discussion' and the independent head of the Parliamentary Budget Office says the same thing, it's actually in the hands of the political class.''
Dr Parkinson, who will be replaced as Treasury Secretary by Prime Minister Tony Abbott, appeared to back the government's decision to target a range of groups in the budget, including pensioners, welfare recipients and students.
He raised the idea of a ''reality gap'' unprompted during the hearing of the Economics Legislation Committee, saying there was an ''interesting issue that needs to be put on the table''.
''If you agree that you have to engage in fiscal consolidation and your concern is that its outlays that have grown ahead of everything else, then, inevitably, you've got limited choices in the outlay space if you're going to cut outlays. And inevitably those groups in the community that get most of the expenditure are likely to bear the most significant part of the burden,'' he said.
Shortly after the budget, Dr Parkinson said Treasury was assuming another 10 years of economic growth and ever-rising income taxes but there was not a budget surplus in sight.
Earlier in Wednesday's hearing, Dr David Gruen, executive director of Treasury's macroeconomic group, said Treasury had consulted with a number of major banks but not identified any change in consumer spending patterns since the budget was handed down.