I do not want to downplay the efforts of those committed to policies to improve the prosperity for many pensioners and unemployed who are struggling to meet their living costs, a reality evident even after a long economic boom where Australia’s average economic growth rate increased by about 3.5 per cent between 1985 and 2007.
Nor do I want to deny the strong possibility that severe social problems may lie ahead, as suggested already by Australia’s household debt to disposable income ratio increasing from 42 to 160 per cent of GDP between 1985 and 2007 (although declining to 153 per cent by the end of 2008).
But I will argue that Australian government policies over the past 25 years have not been as mean-spirited as many critics would have us believe, despite Australia experiencing greater debt, lower tax rates for the rich and companies, and greater labour market flexibility in line with the demands of the international economy.
OECD data reveals that Australia governments have done very well even in regards to many aspects of social welfare in comparative terms against other nations, an aspect which may or may not be a surprise to social democrats who I suspect selectively use evidence to support their call for greater public resources to help the vulnerable.
It is all too easy to pick and choose OECD data that highlights Australia’s high level of income inequality. For instance, in terms of social expenditure to help the vulnerable or disadvantaged, Australian government spending at 17 per cent of GDP in 2005 was just 21st highest in OECD (average 20.5) behind Sweden with 29.4. (Australia’s level of social spending had been 13.6 per cent in 1990 compared to an OECD average of 18.1 and Sweden 30.2). Similarly, social democrats will note that Australia ranks just 15th in the OECD in terms of income equality given that the income ratio between Australia’s richest and poorest 10 per cent was 3.95 compared to 2.72 for Denmark.
But other data indicates considerable social welfare success by Australian governments at a time when all OECD nations faced the same competitive pressures, as illustrated by most governments also adopting extensive economic reform. For instance, after transfers are added and taxes deducted, Australia’s level of income inequality remained similar from the mid-1980s to mid-2000s whereas it worsened in 19 of the 24 OECD countries measured. Further, of the 22 OECD nations measured by the mid-2000s in terms of targeted measures to reduce inequality, Australia ranked 6th best in terms of public cash transfers and 2nd in terms of household taxes.
In terms of poverty levels between the mid-1980s and mid-2000s, as measured against 50 per cent of the median income level in 26 OECD countries, Australia’s level remained at about 12 per cent of the population whereas it worsened in 16 other nations with just eight countries improving their rates. Poverty levels increased by three to five percentage points in Austria, Germany, Ireland, Japan, Netherlands and New Zealand.
And there are other measures which suggest that Australia has hardly become the ruthless and individualistic society often claimed by critics of recent policy trends. Far from Australia being an individualistic society which leaves its vulnerable behind, there are many measures which indicate that Australia is a leader in terms of social achievements. For instance, in terms of the gap between the richest and poorest regions in regards to per capita GDP, 2005 OECD data noted that Australia has the least difference and was just one of four nations (along with the Netherlands, Sweden and New Zealand) where the gap was less than double. The greatest difference was in the UK and US.
Other evidence indicates why Australian government efforts are often well targeted. For example, though Australian public education spending was 4.3 per cent of GDP in 2005, the 6th lowest in the OECD (average 5.0) behind Iceland 7.2 (8.0), Australia’s 15-year-olds in 2006 ranked 5th best in science, 6th in reading, and 7th in mathematics.
In equity terms regarding education, Australia was actually ranked number one for the least difference in terms of scores for science between different ethnic backgrounds, with native, first generation and second generation scores being almost identical, whereas differentiation was greatest in Germany, Sweden, Denmark, Austria and Switzerland. In addition, Australia was ranked 5th best for the least difference in reading scores between the top and bottom deciles of scores.
And there are other societal measures that should make us proud. For instance, Australia still had the highest level of household expenditure on recreation and culture in 2006 (6.6 per cent of GDP), ranked 1st for helping a stranger (66 per cent of persons compared to the OECD average of 46.5), 5th for donating money (70 per cent of persons compared to 72-75 for Netherlands, Ireland and the UK with the OECD average at 46.6), and 3rd in terms of volunteering time (38 per cent of persons compared to 39-42 for the US, New Zealand and Norway with the OECD average at 24).
As the above evidence indicates, Australia has much to be proud of in social welfare terms, despite 25 years of economic reform. Though we will always need extensive debate to ensure that our most vulnerable are helped and ample resources are provided to enhance opportunities for social mobility, Australia’s left should recognise some of the achievements made by Australian governments in recent decades within an increasingly competitive economic environment.