Editorial – Malcolm, We Have a Spending Problem

While Turnbull and Bishop try to chophold hands with the Saudis on human rights, let’s go back to what Turnbull’s biggest focus should be – the budget. You know, that thing which currently has a $400 billion dollar debt sitting on the books, with annual deficits adding around $35 billion to the pile each year – and to which our future prosperity is tied.

When it comes to the budget, there has been plenty of debate about whether we have a revenue or spending problem. That is, should the government be cutting its spending or dipping into our pockets for more revenue?

The thought of handing more money to the Feds should make us all aggressively vomit. But before we do that, let’s start with some simple numbers taken straight from the government’s 2015 budget papers.

Government Revenue (billions)

  • 2015-16: $397 (e)
  • 2014-15: $377 (e)
  • 2013-14: $360
  • 2012-13: $351
  • 2011-12: $330
  • 2010-11: $302
  • 2009-10: $285
  • 2008-09: $293
  • 2007-08: $295
  • 2006-07: $273

But for a brief plateau/small dip in 2008-09 and 2009-10, government revenue has comfortably increased every year. Even with these two years factored in, government revenue has increased by an average of about 4.25% per year since 2006-07.

Government Spending (billions)

  • 2015-16: $430 (e)
  • 2014-15: $415 (e)
  • 2013-14: $406
  • 2012-13: $367
  • 2011-12: $371
  • 2010-11: $346
  • 2009-10: $337
  • 2008-09: $316
  • 2007-08: $272
  • 2006-07: $253

The average annual increase here is a little short of 6.1%. Sounds ominous.

Combining the two

To make things easier on the eye, The Marcus Review has put the above into a graph (for some reason, you can’t find one of these on any government or mainstream media websites).

Budget3

Now we can easily see where Rudd, Gillard and Swan:

  • panicked at the onset of the GFC in 2008;
  • kept spending as if the GFC were still happening all the way into 2012;
  • had an epiphany in 2012 and said to themselves ‘What the hell have we done? Maybe we should cut back on spending?’; and
  • decided in 2013 that sensible spending epiphanies are for losers and resumed spending at GFC rates – plus a bit more to make up for lost time. For good measure, they also entrenched extra future spending for the next 5-10 years which the next government would never be able to get out of or find very costly to get out of (e.g. NDIS, Gonski).

The GDP argument

Some people like to scream out that government revenue since the Howard years is ‘only’ 22%-23% of GDP, whereas under Howard, the figure was routinely 25%. They then use this as justification for the budget crimes committed by Rudd, Gillard and Swan.

While the GDP numbers are true, a quick look further back in time shows that 22%-23% figures are far from unheard of. In fact, since 1970, there were seven times where we had revenue less than 24% of GDP and still managed to turn a surplus for the year.

Having government revenue at 25% of GDP is not normal for Australia and the government’s spending decisions over the years certainly do not justify making it the new normal.

If the Left wants to cry that Rudd and Gillard had their ice cream knocked out of their hands and were left with only two scoops instead of three, they can go for it. However, it doesn’t excuse the entrenched unsustainable spending and overall budget catastrophe that was left: when revenue goes down, the answer isn’t to increase spending in a profligate manner and then cry foul.

No end in sight

For the last seven years, the government has been spending far beyond its means. The problem is that there is no end in sight. Over the next four years, the government is projecting about $80 billion of more deficits.

By 2018-19, government revenue is expected to be at $488 billion (25.2% of GDP). And even then, a budget deficit of $6.9 billion is expected. If you want to know just how diabolical the budget situation is, look no further than this. Even with the magical ‘Howard years’ revenue figure (25.2% of GDP), we still do not expect to turn a surplus because of all the entrenched spending created by Rudd and Gillard.

When you have plenty of revenue and still don’t think you can balance the books, then you have a serious spending problem.

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