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Interactive Feature
<p>Ella Rubeli/The Global Mail</p>

Ella Rubeli/The Global Mail

Big Spenders

What’s that you’re hiding? Your own version of the Federal Budget? Here we give you the tools to take on Wayne Swan at his own game.


If anyone in Australian public life has cause to ruefully reflect on the old political adage that elections are a democratic means of determining who will get the blame, it is Wayne Swan.

I mean, really, how unlucky can you get, as to inherit the Treasury portfolio in 2007? Even if you don’t like the man, a fair-minded assessment of his circumstances must warrant sympathy.

He comes into the office just as the biggest financial crisis in almost 80 years hits the world economy. Swan — or more correctly perhaps, the econocrats who work for him — do exactly the right thing and respond by pumping money into the system to avert the recession, which hits virtually every other country.

And he gets bagged for it. His political opponents slam him for deficit budgeting. They contrast this with the surpluses they ran when they were in power.

It’s all the more galling because when the Liberal party was running the show all through the boom, which led ultimately to global financial disaster, economic management could not have been easier. Money was coming in faster than they could waste it.

Indeed, they effectively booby-trapped the Treasurer’s office.

Years before it lost power, the Howard government had pretty much exhausted its limited economic-reform agenda. Its last significant economic change, the GST, came in 2000. From that point on, the government entrenched itself by observing the credo of tabloid media and political populists: “fear and greed”.

First, fear: in 2001 Howard was gifted the War on Terror. Then it was asylum seekers; recall the slogan, “We will decide who comes to this country and the circumstances in which they come.”

Second, greed. With money deluging its coffers, the government plumped for electoral bribes such as tax cuts — the benefits of which were quickly absorbed into booming asset prices. The government’s profligacy was contagious.

As a 2011 Reserve Bank analysis of the preceding decade or so records: “In the late 1990s the rate of dwelling price growth accelerated and in the first four years of the 2000s prices increased at an average rate of 14 per cent.

“In 1990 Australia had one of the lowest household debt-to-income ratios in the developed world at 46 per cent. By 2000 it had doubled to 94 per cent and was similar to that in Canada and the United States. By the end of the 2000s, the Australian ratio at around 150 per cent of household disposable income was one of the highest in a group of comparable developed economies.”

And it was not just tax cuts. There were all sorts of targeted bribes, directed at subsets of the electorate. “My favourite [example of Howard wasting the surpluses] was an $800 payment to every apprentice to buy a tool kit,” says Nicholas Gruen, of Lateral Economics.

“Of all the giveaways, that struck me as the most bizarre, although not the most damaging, because it was only a temporary thing.

“The lack of imagination was a sad thing to behold. Every time they looked in the kitty there was another $5 billion of revenue for them, and over years and years they never ... had any idea what they wanted to do with it,” he says.

Granted, the Howard/Costello Government did salt a little away — in the Future Fund, for example. But all except the most anti-government economic thinkers broadly agree that too little was put away for the future, and too much was sprayed up against the wall.

This applies even among the more thoughtful in conservative politics. Malcolm Turnbull, for one, courted controversy earlier this year by suggesting that instead of unsustainable tax cuts, we should have put money into a sovereign wealth fund.

We won’t explore that issue again here; the point is that the Howard Government responded to cyclical good fortune by instituting structural change that would become a big problem when the cycle turned.

Which brings us back to Wayne Swan, who came into the job just as that happened.

No doubt he and the government have in some ways made it harder for themselves. In response to the criticism that it was deficit budgeting, Labor promised to get back in the black, ASAP — by 2012-13.

And so came the 2012 budget, with its projected paper-thin surplus. But things are not going to plan. The world economy has not recovered as hoped. The United States is making a painfully slow recovery, Europe is going backwards, and China is slowing. The resources boom may not be over, as the responsible minister, Martin Ferguson, declared in late August, but it also is slowing, and the prices Australia gets for its resource exports have fallen from their record highs. Some of these may bounce back, but coal in particular may never boom again, for reasons that are worth exploring in a separate story. To make things more difficult, the Australian dollar remains high, which in turn makes our other exports less competitive.

Historically, when Australia’s terms of trade fall, so does the value of our currency. But that hasn’t happened this time, despite the repeated cutting of interest rates.

Bottom line, we’ve got problems. Government revenue forecasts appear to have been optimistic. Budget cuts loom.

As Professor Ross Garnaut, one of the country’s leading economists, warned on ABC TV on Oct. 1, Australians might have to resign themselves to government spending “restraint” (let’s not say “austerity”) for a long time to come.

“Certainly the rhetoric from the Government about restraint in government expenditure is consistent with what’s required, and in fact in the last couple of years we’ve run very tight budgets by long historical standards,” he said.

“But this has to be maintained now for quite a long period of time and I think lots of Australians haven’t assimilated that.”

As to how that restraint should be manifested and what it means for future spending on promised initiatives, such as disability insurance, or dental care, aged services or education reforms, he said simply that it came down to “a matter of priorities”.

Which brings us, in a roundabout way, to the point of this story. What are the country's priorities? What are yours?

With a new interactive-data visualisation tool, The Global Mail is embarking on an experiment to establish what government spending priorities should be, according to you, our readers.

We’re not taking on the entire budget all at once; instead, we’ve selected a handful of the more contentious areas of spending on which you can flex your community-chest muscles. Using the online tool, you can see how many of your tax dollars go to military spending, to aid spending, to private and public schools, to dealing with asylum seekers and to subsidising fossil-fuel use by miners and others.

Then you can adjust government spending as you think appropriate (and, if you like, share it with other readers or your friends online).

This is just the start of a broader experiment in social spending choices. Over time, we hope to put before you, for your judgment, other parts of the Federal Budget. How will we all assess and redress the current balance?

17 comments on this story
by (Dr) Fran de Groen

First and foremost governments must pay worker entitlements.
What about the universities superannuation debacle? To date successive NSW State governments and federal governments have been unable to resolve the question of who should fund the retitement liabilities of university workers. SAS Trustees notified in a 2012 newsletter that 'the actuary for the State Super schemes has estimated that without additional contributions, the separate university employer reserves in the fund are likely to become exhausted over the period from 2015 to 2022'. The newsletter also says that 'both governments are seeking to settle the funding issue as soon as possible' but that as yet 'the negotiations had not been finalised'. With budget constraints being trumpeted by both federal and state government they will seek any excuse to avoid their responsibilities in this regard. After all aren't we academics merely 'latte sipping inner city elitists'! University lecturers have paid compulsory super contributions for their entire employment, many coughing up huge surcharges in their final years of employment - no escape. Now governments want to deny them the income they were forced to save for. No-one from either tier of government seems able to answer questions about this mess.

October 11, 2012 @ 10:53am
by Lee

Thank you for this type of article. I had no idea that private school funding was so grossly disproportionate to public school funding. We do need to redress this.

Looking forward to the next article.

October 11, 2012 @ 12:01pm
by MikeP

Mike and Lee,
The reference to Public versus Private school funding is in error. Your budget analyser relates to Federal Governmnet spending. When you consider that school funding is largely funded by State Governements versus the piddling amount allocated by the Federal Government. State Government contributes very little to the Private school system.
Of course one needs to view the Gonski report for a better view of how to better fund education.

October 11, 2012 @ 12:31pm
by Michelle

You are kidding aren't you, with your ridiculous survey. The average reader (me included), has no idea what we need to spend. Say I think our defence force is adequately funded, how do I know how much is spent now. Further, what is included in defence? How do I know how many children are educated in private vs public schools. I simply want all children to get the same funding and then if parents decide to spend more on a child's education that's a bonus for the child. You are asking people who are not qualified to answer.

October 11, 2012 @ 12:40pm
by Allan

Michelle,
I somehow think that the article was not directed at people like yourself who apparently put some thought into things. Instead I think it was directed more at those who say -- Why are they wasting our money on this ? Why not put more into that ? -- or any one who can run a budget for a house hold could do what Swan does ! Sadly michelle there are not many out there in tax payer land capable of starting their mind before they put their mouth in gear.

October 11, 2012 @ 1:25pm
by Hugh

Michelle and Allan,

If you have a look on the budget page there is actually lots of information - from the Federal Budget and various department documents - about where the money is going.

Each sub-category has a button that says 'Read More', which then expands to give specific detail and numbers for each budget area. For public education, for example, it says:

"As indicated by the name “state schools”, 86 per cent of their recurrent government funding comes from the states, and just 15 per cent from the federal government. (In comparison, Catholic and independent schools get 74 and 73 per cent, respectively, from the feds.)"

Of course it's an inexact science, but it's interesting to see what priorities The Global Mail's readers have. And, personally, I think it's a great way to start a conversation about our priorities as a country - and it is the start of a conversation, not the end of one.

October 11, 2012 @ 1:50pm
by Peter Mills

I reckon it's becoming clear that it is really an 'indication' of our thoughts that is the main game here not the actual dollars going up and down here and there. Guess what..... Defence spending is buggering our budget and it seems we all know it. My personal thoughts are that just maybe we can refocus and think out of left field and develop a defence force less capable of killing people but more capable of keeping peace. Oh sorry slap my hand, did I say that.......... Off this soapbox and moving to another.

October 11, 2012 @ 2:45pm
by Euan Thomas

Oh much better lay-out. Oh and good story as well.

October 11, 2012 @ 3:21pm
by Mark Hanna

Sorry, but this is sadly simplistic.

October 12, 2012 @ 10:26pm
by James Henderson

Imagine the revenue if Tax Exemption for churches was removed!! Forget the mining boom, it'll be time for the Fairy-Tale boom!! "♪ ♫ We're in the Money!!♪ ♫"

October 13, 2012 @ 5:31pm
by Roger Brown

Lucky Michelle is not the treasurer, click on say defence and it shows how much it is this year and then you can adjust up or down to balance the budget . I trimmed defence by a large amount and trimmed Private education by a bit too. If you want Private education , don't expect the PUBLIC to pay for it.

Nice lay out now. Well done .

October 14, 2012 @ 1:45am
by Rob

Hmm, there are a few points to be made here:
1/ In the last couple of years of his tenure, I do recall Costello warning there were story times ahead. If he said that, it means the same people who advised him told Swan the same thing. So the surprise isn't quite as you make it out to be.

2/ The econocrats didn't do exactly the right thing. They clearly over-egged the stimulus response and the government in its panic to spend the money threw a fair bit of caution to the wind. Witness: Pink Batts and BER (which contrary to its description was a construction industry support package dressed up in educational clothes) and $900 cash handout (which was largely a stimulus to the Chinese economy). Having said this, it would have been a bit much to expect them to get it exactly right and under the circumstances, overegging it was preferable to underdoing it.

3/ Since then, Swan's rhetoric about how great we are doing despite the fact that huge numbers of Australians see little to support that thesis does nothing to build confidence. The fiction of a coming surplus is just part of that.

October 18, 2012 @ 3:28pm
by Matt

Re: Rob

The "Pink Batts" controversy was a misunderstanding of basic statistics. The Home Insulation Scheme actually improved the safety of insulation on average. (cf http://blogs.crikey.com.au/pollytics/2011/04/24/the-csiro-gets-hip-to-debunking-media-hysteria/)

I largely agree with you on BER and cash handouts.

January 15, 2013 @ 5:18pm
by Allan

I'd like to see the option to improve government revenue, via an increased mining tax, and the removal of the tax-free status of religious organisations. To say nothing of the elimination of the tax-payer funded chaplaincy program, in whatever expense category that occurs. Surely not education!
Then there'd be additional billions available to spread over the whole community. Even to benefit the non-believers.

January 16, 2013 @ 12:20pm
Show previous 14 comments
by Michael

Where is health and welfare?
What is "industry assistance" exactly? Bailing out Yank companies (Kodak, cars etc) or Howard's relatives?
How can defence be 3 Bil when that is what we are spending on the Afghanistan war now?

January 16, 2013 @ 12:34pm
by Douglas

The test of a government's economic competence is how its economy fares during global adversity. Labor gets a Straight-A report card.

Contrast that to the performance of the economy under the Liberals on the last occasion they were in office during a serious global downturn.

The time period was the late 1970s, early 80s. The treasurer, John Howard.

Under treasurer Howard Australia suffered the 'trifecta of misery':

double-digit unemployment
double-digit interest rates
and double-digit inflation

...all at the same time.

Think about that for a moment.

Treasurer Howard also brought Australia its first and only ever instance of 'Stagflation', an ugly word meaning the combination of Recession and high Inflation.

Debt and deficit that climbed year after year.

And Australia's worst recession since the Great Depression.

January 16, 2013 @ 3:15pm
by James In Footscray

The home page says 'A new IMF study rates John Howard's government as outstandingly wasteful'.

Is it an 'IMF study'?

On the front page we read 'Disclaimer: This Working Paper should not be reported as representing the views of the IMF'.

January 23, 2013 @ 7:42am
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