Family tax benefits who?

If you had an unexpected windfall of $10,000, what would you do with it? Give half away to family and friends? Get your teeth fixed? Take a community college course? Put some aside for a rainy day?

What if you had that kind of money to play with every year? The question is worth thinking about, because in round figures the Commonwealth Government spends $220 billion - or $10,000 a year for every man, woman and child in Australia.

Here’s how Mr Costello spent your $10,000 last year:

Table 1. Calculated from Federal Government Budget Outcomes papers 2006-7 and the ABS 2007 Yearbook based on a per-capita spend of $10,000.

See what a good neighbour you are? You did give away nearly half your windfall in the form of social security payments. Now before you spit your chips at all that welfare money, please contain your outrage for a few paragraphs when we take a closer look. Anyway, you’ll be glad to see that those parasites in “The Yarts” only got $114 of your hard-earned, and they had to share that with sportspeople anyway.

How closely does Mr Costello’s ladder of budget opportunity in Table 1 reflect your own personal survival priorities? Overall, it’s interesting to note that this list is a reasonable approximation of Maslow’s hierarchy of needs - welfare/survival first, followed by health and security, education, industry, then helping others and finally the pursuit of happiness and philosophical navel-gazing. Even though you might wish to question the specific amounts involved, if you were a contestant on The Price Is Right and had to guess the order of these items, you’d probably come pretty close to winning the car.

Also, you longhairs at the back waving the health and education placards, just settle down for a minute. Thanks to the GST and stamp duties there was an extra $3,000 per person spent by the state governments, and most of that went to public schools, public hospitals, roads and police, plus about $3.50 and a donut for public transport. So put your banners down and come back to this discussion about Commonwealth expenditure.

One big hitch is the $960 that’s lost in financial munging. That’s partly the impost of running a modern economy and being forced to run complex financial instruments and fiscal risk-management policies, as well as a tangible measure of the “dead hand” of bureaucracy at work. It’s an unwelcome intrusion into our windfall, but it’s hard to eliminate without losing the whole shebang.

OK, so what’s the problem?

The problem is that government spending (i.e. taxation) remains at a stubbornly high level as a percentage of GDP, yet there is also unprecedented cost-shifting to the private sector to pay for health and education.