Wednesday, October 22, 2014

Whitlam spending went where?

While it seems that everyone from Ken Henry to the IPA says that the Whitlam increased Federal government spending to levels to which it has roughly stayed the same since, I was interested to see where the increased spending went.  This series of graphs from a 2007 paper is perhaps the best summary I can find:





It's curious how the second chart shows the Whitlam "real spending" was far from exceptional when you look at the long term trend.   The first chart indicates how closely government spending since then has bounced around 24% - 25% of GDP.   (And no, Rudd/Gillard spending did not significantly deviate from the range, either.)

And the last two charts show Whitlam spikes on spending as a proportion of total spend did show up mainly in education, health and social security.   However, the country did get Medicare and much broader access to higher education, money which many would say was deservedly spent compared to the pre-1972 situation.

International comparisons indicate that the 25% range for spending is well within mid range of what other countries have been doing for a while now, with some economically successful countries spending far higher (see Germany, Scandinavia.)    In fact, it's probably true to say that with very few exceptions, spending below 20% of GDP indicates the sort of poorer country most Australians would not care to emulate in terms of services.  

Of the exceptions, I think we can pretty much ignore Singapore, as a case of a city state which only has to deal with providing services to a dense population on a tiny area.  

Canada seems truly exceptional, though, as a country of similar size to ours that has been spending considerably under our rate.  I wonder what's going on there...

Update:  Stephen Koukoulas made much the same point today, but without the graphs.   I think my post was up first!

1 comment:

nottrampis said...

I think you could criticise the government for the sudden rise in spending although you have to realise this occurred after Treasury had been derelict in their duty of not telling the government of what was occurring to the monetary base.
But to describe it as big government is absurd.
No wonder Davidson never wanders outside of Catallaxy and never allows criticism there.

This reminds me of the time Joshus Gans told him net government didn't rise under Whitlam and when Davidson asked him how he could say that Gans said merely he read the budget papers!