01 October 2015
by John Passant

Australia does not have a spending problem

New Treasurer Scott (who to knife next?) Morrison is arguing that Australia has a spending problem. This is the prelude to further savage cuts to government spending on workers and the poor. The man who successfully demonised and attacked asylum seekers will now use his ‘skills’ on working Australians.

Australia does not have a spending problem. Commonwealth Government spending is 26% of GDP. This is within normal variations on budget expenditure. It is well below the OECD average. In other words Australia is a low spending country. It is also a low taxing country, again well below the OECD average.

What Australia does have is a revenue problem. Revenue collections have dropped in the last few years to 23.5% of GDP.

Here is how The Guardian captured Ken Henry on this falling tax dynamic: Henry said in 2002, when the budget was in balance, spending and revenue were both 25% of gross domestic product.

Today spending is 26% of gross domestic product and revenue is 23.5% of gross domestic product. A bit more than half of it is explained by a deterioration in revenue performance; by the tax system not delivering in the way that the tax system has delivered in the past, Henry said.

The situation we’re in now is that we’re going to need a much bigger tax reform package … and this tax reform package is going to have to be revenue positive, not revenue negative. It’s going to have to boost the budget surplus. We’ve never done this before.

So if the government did want to fix the revenue problem it could tax the rich. Instead its talk is about rewarding the hard workers which is code for tax cuts for the rich and capital, those people who live off our labour.

If the government wanted to cut spending then ending subsidies to business, abolishing business tax exemptions, stopping tax lurks for the rich and slashing defence spending ($24 billion on a fighter jet that doesn’t even work, seriously?), coupled with a taxing program that actually taxed the rich, could wipe out the $35 billion dollar deficit overnight or go to spending on public schools, public health, public transport and renewable energy.

We spend about a billion a year on the concentration camps on Manus Island and Nauru not to mention the other billion on operation border farce and the rest of the rotten operation. There’s some money for schools and hospitals instead.

Tax the rich and slash defence spending? The Liberals – ha ha ha. Labor – ha ha ha.