28
Apr
2016

Why the idea that smaller government could help fix Australia’s budget is a myth

by John Daley


Published at The Conversation, Thursday 28 April

See full article: Five budget myths that refuse to die

Many believe that Australia has relatively large government, and that the key to budget repair is smaller government that will lead to faster economic growth and a stabilised budget.

While there are many reasons to prefer smaller government, particularly promoting the scope for individuals to make choices that shape their own lives, smaller government is unlikely to solve Australia’s budgetary problems. Across the OECD, there is no obvious relationship between size of government and size of government deficits.

In any case, Australia has relatively small government. Although government expenditure is currently towards the upper limit of historic expenditure, Australian government expenditure is low relative to the OECD. This is so, even if compulsory superannuation contributions are taken into account. Australian governments spend less in most categories. In particular, welfare spending is relatively low due to Australia’s highly targeted welfare system.

The Conversation