Hey Big Spender
The COVID-19 crisis has forced Australia to finally face an uncomfortable truth: our governments are too cavalier with our money. By Tim James.
As Australia begins to turn its attention to how it should recover from the COVID-19 pandemic, one absolute certainty arises: governments across Australia must cut waste. Dealing with the debt and deficit flowing from fighting this virus will be insurmountable unless leaders take the knife to nonsensical spending at every turn.
First, some big-picture background. Recall the heavy burden John Howard and Peter Costello inherited in 1996 to clear $96 billion in debt. It took ten years, hard decisions and tough budgets to eliminate that debt.
Before COVID-19, and after some good recent progress under this Government, net debt for 2019-20 was budgeted to be $361 billion (according to Budget papers). The forecast in last year’s Budget to have zero net debt by 2029-30 is now surely blown to pieces.
Where to begin in tackling this almighty challenge?
Tony Shepherd signed off his opening statement to the Menzies Research Centre’s 2017 Statement of National Challenges with these poignant words: “Australia remains in control of its destiny, but we cannot postpone the hard decisions indefinitely. The choices we make today will shape our future.”
This is even truer today. Every nation’s destiny is now challenged. The race among all nations to recover will be intense. Those that face the difficult decisions with the greatest resolve will recover quickest. In Australia’s case, those decisions are mostly related to debt. Unless we substantially cut spending, we will saddle generations to come with debilitating debt.
The same report stated that Australia requires “effective, accountable and efficient government”, which is even more essential today, and that “Australians have the right to feel empowered and secure, but not entitled”. The best way to ensure Aussies feel empowered and secure will be by swiftly removing the many newfound “entitlements” with real, sustainable economic activity. The best way to keep enterprise and employment alive long term is for business to be strong and backed by customers, not government.
The path forward is clear. Prudent government spending is vital to national productivity and performance, which in turn strongly shape the growth, now recovery, of our economy.
COVID-19: Read the MRC’s coverage of the debate in Australia and around the world
Too often, as the Shepherd Review noted, government programs and grants are not assessed in terms of real results. Inputs and dollars spent are the measures of success, not outcomes.
Regulation and red tape, environmental green tape, inquiries and reviews, grants and research programs and consultants, to mention just a few, should now be scrutinised. And spending in anything akin to identity politics must be struck out and redirected to what’s required for our country as a whole, not subsets of it nor special interests.
A renewed program to cut spending is among the most critical COVID-19 antidotes. If any form of government expenditure cannot comfortably pass the “effective, accountable and efficient” tests, then it should be abandoned and the money saved.
At the same time, we must make productivity a national priority. The productivity agenda is the single biggest driver needed to kickstart the economy, as the MRC has been saying for a long time. One hope from this present impasse is that the rapid shift in technology-driven tools and processes together with more flexible working arrangements will produce an increase in productivity.
Australia must be ambitious and agile to survive and adapt in the post-COVID-19 global economy. Just as no country or government has been immune from the effects of COVID-19, nor can any government expenditure be immune from more robust scrutiny.