In this year’s budget in May, then-treasurer Joe Hockey revealed that the government in both 2014-15 and 2015-16 would be spending 25.9% of GDP — the highest level of spending as a proportion of the economy since Kevin Rudd’s massive stimulus program to combat the financial crisis in 2009, which totaled 26% of GDP.
Hockey’s replacement, Scott Morrison, has on a couple of occasions since becoming Treasurer flagged that spending had risen. Today, he confirmed that, when Tony Abbott and Hockey were removed, the government was spending 26.2% of GDP.
That is, the Abbott-Hockey government, which so often promised to end the profligate Labor years and restore fiscal discipline, was spending more as a proportion of the economy than Kevin Rudd did to fight the financial crisis — despite the lack of any global economic meltdown. The level of spending is a full percentage point above the average of the Labor years — 25.1% of GDP.
Morrison’s goal in the forthcoming Mid Year Economic and Fiscal Outlook is to get spending back to the budget level of 25.9% — still nearly the same level as Rudd, and still way above Labor’s average. It’s a pretty weak ambition for a so-far underwhelming Treasurer who insists the government doesn’t have a revenue problem, it has a spending problem.
Peculiarly, the array of critics of Labor’s spending in the media and the commentariat haven’t said a word about the Coalition going well beyond Labor’s spending levels. Fiscal hypocrisy isn’t just the preserve of parliamentarians.
It’s good to nail them for their hypocrisy, but the implied idea that higher spending as a % of GDP is inherently bad is one that needs a re-think.
It may be the current thinking in economic circles that taxation stifles productivity and innovation, but it is likelier that it has little influence, other than in the imaginations of econocrats, and there is no end of studies showing that a high level of social infrastructure correlates with high wealth, high wages and higher productivity. Perhaps the answer may be to have higher spending as a % of GDP.
The only rider would be that the money is well spent. there are many areas where are money is not well spent, and others where revenue can be gained with no effective disincentive (negative gearing and superannuation concessions at the top of that list).
There’s a bit of silliness to this argument, and to Dogs Breakfast’s claim of hypocrisy. You don’t unwind spending measures overnight unless you’re an economic vandal aka Dan Andrews or a treasurer hell bent on losing your job.
Labor committed to NDIS and Gonski – good ideas to be certain, but just two spending initiatives among many that will continue to impact expenditure levels.
That’s not hypocrisy. It’s just fact. On the other hand, a longer term productivity program for government spending would be good, but unlikely given that any cuts are always seen as ‘an attack’ on someone.
Good sense would indicate that a combination of measures to increase the tax take in logical areas (such as a reduction to tax breaks for very wealthy super-annuants) teamed with small, widespread real spending reductions (or maybe just no ‘real’ increases) present the best solution and may get past the ‘outrage industry’.
Fingers crossed that Turnbull and Morrison can tread the fine balance and deliver a smart, non-politicised budget next year along with some clues about the agenda for tax reform.
Philby, the hypocrisy claim is self-evident, on the basis that you come to government claiming a budget emergency and that you will fix it, and then you don’t, not at all at all.
But I agree, you don’t unwind spending measures overnight. Better still if you don’t spend years in opposition saying there is a budget emergency that will magically disappear overnight when you come to government, and then find you are incapable of doing what you promise.
True about NDIS and Gonski, and you would have to be a particularly hard-hearted right wing ideologue to argue against them. The response has to be to get more revenue, and perhaps to look at those areas where revenue is thrown away for no public good, and it seems we agree on that.
Which then goes to my point, that perhaps the revenue as a measure of GDP is a particularly poor measure to be looking at anything. In fact, GDP on its own is a particularly poor measure, may as well get rid of it altogether. GDP per person is clearly a better measure of growth.
Regards
You would reckon a worse treasurer than the innumerate Hockey would have been difficult to find but somehow the nimbley agile Mr Turnbull has achieved this feat at his first attempt..just because a bloke can bring you a few numbers doesn’t mean he’s good at them..
JayB – too true, and Two true too. SilverMal’s judgement again on show but the real mystery is what recommended Morriscum to the position – no past record of numeracy, certainly not grasp of detail nor integrity. Nothing.
Except a dirty deal, purely about overweening ambition/s on several parts, which completed Lady Penelope’s transition to Lady Macbeth. (Though given her prev. career I’d always found her more like Morticia which was not helped by that truly scary pic of her shrouded to meet an ayatollah but with broad, blonde quiff adorning her discerning forehead.
It is one of the political questions, not just here but UK & US, how is it that Tory/Cons (never mind neocons)ride on a reputation of balancing books when the evidence is entirely to the contrary.
At the same time they tend to enter foreign wars, unsuccessfully in recent generations.
Odd that.