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When it comes to spending cuts, start from the top

By Sukrit Sabhlok - posted Thursday, 14 July 2016

The big spending promises made by the Liberal-National Coalition and the Labor Party during the recent Australian election campaign shows once again that neither party is serious about reining in government spending.

Australia has a public debt of $400 billion. Cutting back on spending is essential if we want to avoid the need to increase taxes on future generations. However, the lack of political will has paralysed any serious effort to take charge of the situation.

Both major parties have wasted political capital going after recipients of Newstart unemployment allowance or grandmothers on aged care payments. For example, the Turnbull government supported a bill to crack down on jobseekers who unreasonably refuse offers of employment. This is not exactly a winning strategy since these welfare constituencies are firmly entrenched and – rightly or wrongly – have strong emotional appeal to voters.


Witness, for instance, the massive public support for Duncan Storrar, an Ausstudy payment recipient, who rightly complained on ABC's Q & A television show that politicians aren't raising the tax-free threshold on the lower end of the earnings scale. Storrar received $60,000 in donations after a crowdfunding campaign was launched to help him with living expenses.

The Aussie battler has always had a special place in Australian culture. As a result, it makes little sense to argue for spending cuts that target dole recipients or the disabled. An austerity program premised on making the lower and middle-class give up benefits will face huge resistance.

Instead, slashing politicians' salaries is likely to have broad populist appeal. So, too, is attacking the privileges enjoyed by lobbyists and special interests. A campaign against wealthy elites who siphon millions of taxpayer dollars under the radar is likely to be more successful.

Both parties have spent lavishly on politicians and bureaucrats and have handed out millions in subsidies to favoured lobby groups. In effect, Labor and the Coalition have worked the system to their advantage at the expense of taxpayers. The Australian Parliament has authorised generous perks for politicians who are among the highest paid in the world. Federal legislators have received subsidies to buy personal investment properties and attend weddings.

Here's an idea for a campaign: pay politicians no more than the average Australian full-time wage - about $75,000 per year. It is simply disingenuous to argue that politicians must be paid high salaries in order to attract the best and the brightest or that their workload is so intense that they deserve to be paid more. If the state of New Hampshire in America can get by with paying legislators $100 a year, why can't we?

Another potential campaign: stop shelling out taxpayer dollars for useless things. To name a few examples, the Victorian company Palm Products received $360,000 of taxpayer money to develop a coffee travel cup. The old Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education spent $14,000 to buy a coffee table. Finally, the Australian Institute of Sport spent $500,000 on a new logo?


And why not scrap grants to companies that contribute directly or indirectly to climate change? Aren't we supposed to be in the midst of a global warming crisis?

All these examples show that cutting spending doesn't have to be hard. It just requires identifying the areas on which Australians agree. Is there any doubt that voters would respond more favourably to reducing public servant salaries and eliminating corporate welfare than they would to tightening payment eligibility for perceived needy recipients like Storrar?

Anyone concerned with government spending and its potential to lead Australia off a fiscal cliff should realise that cracking down on welfare payments means setting aside taxpayer funds to chase a never-ending stream of fraud. Ensuring compliance with rules isn't cheap. It also sets dangerous precedents for privacy invasion; like, for example, when a private company such as eBay is asked to hand over customer data to Centrelink for cross-referencing. This is yet another reason why it makes more sense to go after the elites first.

In the short-term, it may be better to stop wasting time and money chasing after dole recipients and let them keep their benefits. In the long-term, putting in place policies that create attractive jobs will encourage them to shift into the workforce without having to chase them with draconian bureaucracy that invades privacy.

To stimulate job growth, however, taxes must be lowered and unnecessary regulations abolished. Since these free-market policies aren't easy to get widespread agreement on, why not start small? By picking fights with elites, and obvious rip-offs like a $14,000 coffee table, there is actually a chance of winning. After all, politicians, bureaucrats and politically connected lobby groups are vastly outnumbered by ordinary voters.

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About the Author

Sukrit Sabhlok is a PhD Candidate at Macquarie University Law School.

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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