The slowing of big government conservatism

Last December I was complaining, at length, about the rise of big government conservatism. But the release this week of the ABS’s Government Finance Statistics for 2005-06 shows some welcome spending constraint.

Overall, spending was up 5.5% on 2004-05. But inflation of 3.2% accounts for some of that (directly relevant because of the indexation of benefits). Also, as I did before, I calculated spending on a per person basis, as the approximately quarter of a million extra Australians would have added to expenditure regardless of spending policy decisions. This brings the increase down to 3.8%, .6% above inflation. It’s not a great record, but by the standards of the current government it is not bad.

The pattern of spending increases also looked a little more like we would expect of a conservative government than previous years, with ‘defence’ and ‘public order and safety’ receiving larger percentage increases than health or social security. However, education enjoyed strong growth (8.5% per capita), and unusually this was driven more by universities than schools. The most spectacular increase was the 1,973% lift in per capita spending on ‘water supply’. But as spending was only $1 per person per year previously this still left water as one of the cheapest items in the federal Budget (at least before the $10 billion Murray-Darling plan that failed to impress Treasury Secretary Ken Henry).

Alas, the ABS Tax Revenue publication, also released this week, shows that per capita Commonwealth taxes continued their steady rise, up 5.6% per person between 2004-05 and 2005-06. As Stephen Kirchner and others have pointed out, it’s far from clear that the government should be stashing the difference between per capita tax increases and per capita spending increases away for the benefit of future taxpayers (or, if Labor wins, future broadband users) rather than reforming the tax system now. Despite tax cuts in the last couple of Budgets, the government remains rather reluctant to let Australians keep their money.

5 thoughts on “The slowing of big government conservatism

  1. I think it would be fine for the government to stash the money if they could run countercyclical budgets. However, I think the probability of that is around zero.

    I also don’t think there should be any relationship between tax take and tax reform. You could delete the rest of the article and just have the words “reforming the tax system now” and it would be all fine by me.

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  2. To repeat a point I’ve made before, while this is all interesting, it seems to me to miss half the picture – ie, what’s been happening to (off-budget) regulation.

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  3. You probably know this, but most income support payments paid by the Federal Gov’t increase faster than CPI, as they are also benchmarked to Male Total Average Weekly Earnings.

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  4. Sorry, when I said most, I meant numbers getting them. I think the pensioner population (eg, age, disability, carer, single parenting payment) exceeds the benefit population (eg, Newstart Allowance, Austudy).

    Family Tax Benefit (Part A) is also benchmarked to MTAWE, but the ad-hoc increases the Government has given over the years has kept its rate above the benchmark, so CPI increases have applied instead.

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