In establishing the Commission of Audit, the Commonwealth government has emphasised rooting out inefficiency, waste and duplication. This is a commendable goal, but a substantial reduction in the growth rate of Commonwealth spending over ten years – which is what is needed after the splurge of the last decade or so – cannot be achieved solely by these means. There will also need to be a moratorium on new program initiatives and cuts to the scope of existing programs. Health, education and social security cannot be quarantined from the search for savings.
This financial year the Commonwealth will spend almost $400 billion. If we exclude defence from further net cuts (on the grounds that it has already been emasculated by the previous government) and account for the fact that public debt interest and transfers of GST revenue to the states cannot be reduced, about $300 billion remains in the domain of potential savings. Of this, almost 80% is spent on health, education, social security and welfare, either directly or as grants to the states for those purposes.
No doubt money can be saved on the administration of programs, and by eliminating unproductive Commonwealth oversight of state health and education activities. But the great bulk of the money goes not to administration (the pinhead) but to the programs themselves (the elephants that sit on the pinheads). For example, administration of social security and welfare costs $3.7 billion while the cash benefits to people cost $134.4 billion.
Curbing the growth of spending on health, education, social security and welfare is the key to a lower tax burden and a balanced budget. It means overturning the habit of spending more public money as the solution to every perceived problem and instead looking for ways to spend existing allocations more effectively. (This applies to education as much as it does to anything else, Gonski notwithstanding.) It means re-engineering the health system to reduce subsidisation of private costs and give the private sector a larger role in service delivery. It also means that some people will have to make do with less income support from social security. And it means the Commonwealth withdrawing from state areas of responsibility.
Unless government is willing to face up to these hard choices, the results of the Commission of Audit, while tangible, will be modest in the overall scheme of a $400 billion Commonwealth budget.
Robert Carling is a Senior Fellow at The Centre for Independent Studies.
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Budget realities
This financial year the Commonwealth will spend almost $400 billion. If we exclude defence from further net cuts (on the grounds that it has already been emasculated by the previous government) and account for the fact that public debt interest and transfers of GST revenue to the states cannot be reduced, about $300 billion remains in the domain of potential savings. Of this, almost 80% is spent on health, education, social security and welfare, either directly or as grants to the states for those purposes.
No doubt money can be saved on the administration of programs, and by eliminating unproductive Commonwealth oversight of state health and education activities. But the great bulk of the money goes not to administration (the pinhead) but to the programs themselves (the elephants that sit on the pinheads). For example, administration of social security and welfare costs $3.7 billion while the cash benefits to people cost $134.4 billion.
Curbing the growth of spending on health, education, social security and welfare is the key to a lower tax burden and a balanced budget. It means overturning the habit of spending more public money as the solution to every perceived problem and instead looking for ways to spend existing allocations more effectively. (This applies to education as much as it does to anything else, Gonski notwithstanding.) It means re-engineering the health system to reduce subsidisation of private costs and give the private sector a larger role in service delivery. It also means that some people will have to make do with less income support from social security. And it means the Commonwealth withdrawing from state areas of responsibility.
Unless government is willing to face up to these hard choices, the results of the Commission of Audit, while tangible, will be modest in the overall scheme of a $400 billion Commonwealth budget.
Robert Carling is a Senior Fellow at The Centre for Independent Studies.
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