Stephen Kirchner points out this rather strange post at the Adam Smith Institute blog defending Peter Costello against charges that the Coalition has turned to ‘big government’.
Adam Smith Institute blogger Fred Hansen, like the Treasurer, focuses on government spending as a proportion of GDP. As I have argued, with strong economic growth that measure can conceal a multitude of spending sins.
But even if we accepted spending as a proportion of GDP, the government’s record isn’t as good as Hansen says it is. As Robert Carling explains, the Commonwealth’s own-purpose outlays (ie after deducting general purpose grants to the states, now funded by the GST) are forecast to consume 1.5% more of GDP in 2007-08 than 1995-96.
Nor is the reduction over time in the percentage of GDP consumed by all levels of government anything impressive by international standards. As OECD statistics show, many other countries reduced spending as a share of GDP more than Australia did – including most European countries, the home of big-spending social democracies.
Hansen is right that the Howard government’s record is better than that of the US in recent years, but it wouldn’t be hard to put in a better performance than the reckless extravagance of the Bush administration.