Cutting spending – there must be a better way

Recent surveys of voters strongly support governments cutting spending rather than increasing taxes as the best way to reduce the federal deficit. The Commonwealth budget has been continuously in deficit since 2008-9.

There has been a massive growth in Commonwealth spending and debt over the last two decades. Total social spending (health, education and social security) increased from $106 billion in 2002-3 to over $354 billion in 2022-23. Net debt has risen from $33 billion to $715 billion during the same period. The pandemic accounts for about half of these increases. The rest were driven by governments responding to electoral demands and political priorities.

The challenge in a democracy is how best to rein in spending without a government committing electoral suicide.

So far, all the new Albanese government has given us is the Treasurer’s dire warnings about the tough times ahead, while public debate has mostly been about defence project overruns and other issues has been dominated by the partisan ritual of blaming the previous regime and condemning its programs with little accompanying independent  analysis.

This is no way to conduct policy on such crucial issues where the government needs to take the public into its confidence and explain what has to be done.

Perhaps, the Albanese Government should have taken a leaf out of the former Whitlam Labor Government which on coming to office quickly appointed an independent task force to identify savings from the previous government’s spending to make room for its own new priorities.

Led by the respected Dr H.C. Coombs, former Governor of the Reserve Bank, the Task Force to Review Continuing Expenditure of the PreviousGovernment,was asked to give “close scrutiny to continuing policies of the previous government so that room may be found for our own higher priority program.”

Within three months the Task Force delivered its 350-page report covering 141 separate expenditure items covering defence, assistance to industry, the rural sector, concessions, social welfare and assistance to the states.

Its critique of each spending area covered origin, ongoing commitments, critical assessment, continuing relevance, legislative requirements and suggestions for reforms.

Released to the public, the Task Force was so much better than what we now have where decisions seemed rushed and made behind closed doors and discussions mired in confusing political doublespeak.

Instead of condemning the previous government’s programs the Task Force acknowledged that many “were established in good faith and for legitimate purposes,” thus making decisions for cuts “unlikely to be easy”.

The Task Force warned that if the new government’s election commitments with their substantial new spending, were to be implemented and to avoid causing excess demand, labour shortages and inflation, then its predecessor’s programs needed to be critically examined and trimmed.