The link between the Treasurer’s decision to increase the debt ceiling to $500 billion and the government’s commission of audit goes beyond the mere fact that they were announced together, though the joint announcement was likely driven by political considerations.
A (mostly) apolitical commission of audit will be a circuit-breaker to compel politicians to re-examine the role of government in society.
The continued expansion of that role has driven much of the recent increase in debt and deficits (three-quarters of the increase in federal government spending over the last decade has come from new or expanded programs).
There is much that is positive in the commission’s terms of reference, especially the wide remit to address the overlap between state and federal governments. If there is political will to follow its recommendations, the commission can make a serious difference to the effectiveness and efficiency of government in the long term.
Yet, by committing to take the commission’s recommendations to the public at the next election before implementing them, the government will find it challenging to reduce the deficit in the short term – hence the need to dramatically increase the debt ceiling now when it can be blamed on the previous government.
Despite the rhetoric, it is clear that government has been developing a spending problem for a few years now. The 2012-13 Budget showed expenses at $382.6 billion from revenue of $360.2 billion. In 2006-07, expenses were $221.6 billion from revenue of $235.5 billion. In six years, revenue grew by more than 50 per cent, but expenses grew more than 70 per cent ($160 billion) with little to show for it.
Commentators warning of a budget revenue problem are right, but only in the sense that the government can’t rake in money fast enough to stay ahead of its spending problem (and it’s not for want of trying). To combat the deficit needs a straightforward but politically tough approach. Low-priority spending programs, such as middle-class welfare, and poorly targeted initiatives, such as ineffective industry assistance, should be cut as soon as practical.
New middle-class welfare initiatives, especially those with badly defined objectives like paid parental leave, should not be introduced in the current fiscal environment.
A commission of audit can advise on the long-term structural issues causing increased government spending, but the Treasurer must deal with the day-to-day reality of living within our means and he shouldn’t wait until after the next election to do so.
Having repeatedly described Australia’s budget as an ‘emergency’, the Coalition cannot then ignore potential solutions for three years. Nor should it wait three years to address the fundamental problems of excessive government spending and productivity roadblocks in the Australian economy.
Having castigated the previous government over the carbon tax, it seems the Coalition wants to move slowly on reform and is naturally wary about a similar ‘broken promises’ campaign from the current opposition. However, another worrying rationale for this relative inaction is the increasing focus on what actions the government has a ‘mandate’ for.
The idea that a government needs to point to a specific electoral mandate for each of its actions is a furphy. The merits of government policy are not determined by whether it was announced during the previous election campaign.
Far from needing prior approval for each action, the government has an overriding mandate to govern the country to the best of its ability given the circumstances that confront it.
The obsession with what is within (or outside) some supposed prior mandate will create a straitjacket that will severely hamper the government’s ability to deal with the serious spending issues facing the country.
Australia has a troubling trajectory of debt and deficits in the short term and is facing future fiscal challenges caused by an ageing population and spiralling healthcare costs.
The Commonwealth Intergenerational Reports have been warning successive governments about these long-term issues for many years, yet to date neither side of politics has introduced the structural fiscal reforms needed so Australia can afford a safety net for vulnerable citizens in the years ahead.
Australia must prepare for those future challenges now, while our economy is still strong. Implementing the reforms necessary to deal with the looming crisis is a crucial task for the new Treasurer and it will not be an easy one. We can’t afford to put it off for three more years.
Simon Cowan is a research fellow at The Centre for Independent Studies. Treasurer Joe Hockey will speak for the CIS at a business lunch in Sydney on 8 November 2013. A limited number of tickets are available at www.cis.org.au/events.
Home > Commentary > Opinion > Memo to Abbott: Time is money we can’t afford
Memo to Abbott: Time is money we can’t afford
The link between the Treasurer’s decision to increase the debt ceiling to $500 billion and the government’s commission of audit goes beyond the mere fact that they were announced together, though the joint announcement was likely driven by political considerations.
A (mostly) apolitical commission of audit will be a circuit-breaker to compel politicians to re-examine the role of government in society.
The continued expansion of that role has driven much of the recent increase in debt and deficits (three-quarters of the increase in federal government spending over the last decade has come from new or expanded programs).
There is much that is positive in the commission’s terms of reference, especially the wide remit to address the overlap between state and federal governments. If there is political will to follow its recommendations, the commission can make a serious difference to the effectiveness and efficiency of government in the long term.
Yet, by committing to take the commission’s recommendations to the public at the next election before implementing them, the government will find it challenging to reduce the deficit in the short term – hence the need to dramatically increase the debt ceiling now when it can be blamed on the previous government.
Despite the rhetoric, it is clear that government has been developing a spending problem for a few years now. The 2012-13 Budget showed expenses at $382.6 billion from revenue of $360.2 billion. In 2006-07, expenses were $221.6 billion from revenue of $235.5 billion. In six years, revenue grew by more than 50 per cent, but expenses grew more than 70 per cent ($160 billion) with little to show for it.
Commentators warning of a budget revenue problem are right, but only in the sense that the government can’t rake in money fast enough to stay ahead of its spending problem (and it’s not for want of trying). To combat the deficit needs a straightforward but politically tough approach. Low-priority spending programs, such as middle-class welfare, and poorly targeted initiatives, such as ineffective industry assistance, should be cut as soon as practical.
New middle-class welfare initiatives, especially those with badly defined objectives like paid parental leave, should not be introduced in the current fiscal environment.
A commission of audit can advise on the long-term structural issues causing increased government spending, but the Treasurer must deal with the day-to-day reality of living within our means and he shouldn’t wait until after the next election to do so.
Having repeatedly described Australia’s budget as an ‘emergency’, the Coalition cannot then ignore potential solutions for three years. Nor should it wait three years to address the fundamental problems of excessive government spending and productivity roadblocks in the Australian economy.
Having castigated the previous government over the carbon tax, it seems the Coalition wants to move slowly on reform and is naturally wary about a similar ‘broken promises’ campaign from the current opposition. However, another worrying rationale for this relative inaction is the increasing focus on what actions the government has a ‘mandate’ for.
The idea that a government needs to point to a specific electoral mandate for each of its actions is a furphy. The merits of government policy are not determined by whether it was announced during the previous election campaign.
Far from needing prior approval for each action, the government has an overriding mandate to govern the country to the best of its ability given the circumstances that confront it.
The obsession with what is within (or outside) some supposed prior mandate will create a straitjacket that will severely hamper the government’s ability to deal with the serious spending issues facing the country.
Australia has a troubling trajectory of debt and deficits in the short term and is facing future fiscal challenges caused by an ageing population and spiralling healthcare costs.
The Commonwealth Intergenerational Reports have been warning successive governments about these long-term issues for many years, yet to date neither side of politics has introduced the structural fiscal reforms needed so Australia can afford a safety net for vulnerable citizens in the years ahead.
Australia must prepare for those future challenges now, while our economy is still strong. Implementing the reforms necessary to deal with the looming crisis is a crucial task for the new Treasurer and it will not be an easy one. We can’t afford to put it off for three more years.
Simon Cowan is a research fellow at The Centre for Independent Studies. Treasurer Joe Hockey will speak for the CIS at a business lunch in Sydney on 8 November 2013. A limited number of tickets are available at www.cis.org.au/events.
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