Friday, 11 January 2013

Mirror, mirror on the wall, who was the biggest spender of them all?...John Howard!

There is a fascinating IMF working paper out today from the International Monetary Fund entitled 'A modern History of Fiscal Prudence and Profligacy', looking at Government spending and debt levels over two hundred years.

On the whole, Australia, fares pretty well on international comparisons (certainly compared to countries like the US).  Our debt level has been declining since the 1930s, and the budget balance has been more or less stable for a long time.

But what is notable is that, as the Sydney Morning Herald's article on it points out, that the periods of 'fiscal profligacy' identified by the study weren't the Whitlam years, nor indeed under any Labor Government - but rather were under John Howard and the Coalition.

Source: SMH
There is actually nothing new about this finding - the Federal Treasury noted some time back that the Howard Government had outspent any other in recent times by a considerable margin.

Moreover, the Coalition, despite occasional, generally short-lived bursts of empty rhetoric, has long championed middle and upper class welfare (think private insurance rebate for example).

Still, it's a nice reminder.

Counter-cyclical policies vs middle class welfare?

The Shadow Treasurer has, of course, responded by pointing to the supposed horrors of the GFC counter-cyclical package (viz free installation of pink batts and school hall construction).

The reality is, however, that the problem with the insulation scheme was not, in principle at least, the expenditure itself  (it was something that could be done quickly, so was a genuine stimulus to the economy when it needed it, and did promise long term benefits in terms of lower electricity usage) but the failure to adequately consider the measure and regulate it from a safety point of view.

Similarly, while there was rorting by certain ever-unscrupulous elements of the  Australian private sector in the Building Better Schools program, the subsequent audit of the program found this was at the margin, and that in most States, the program was actually reasonably well managed.

That's not to say Labor hasn't spent money on silly things, or overseen maladministration of course.

Though in my view the blame for the erosion of the public service capability has to be shared by both sides of the House.  The so-called 'efficiency dividend', or use of across the board savings targets to fund new initiatives rather than targeted savings options, has now been in place for over 25 years; it is the lazy, easy option for Governments.  But keeping on just cutting regardless of the merits of the individual cases has inevitable consequences...


Martin S. said...

I hope you're head of a department somewhere.

Kate Edwards said...


I departed from that possible pathway a long time ago...