The NZ Spending Binge

March 15th, 2007 at 7:29 am by David Farrar

Phil Rennie from The Centre for Independent Studies has today published a paper called “New Zealand’s Spending Binge“.

It’s a relatively short paper at 16 pages, so I encourage people to read the whole thing. Some key points are:

* Core government spending has increased by $20 billion since 2000, or 32% in real (inflation adjusted) terms

* If one had not increased spending by this amount, one could have almost abolished income tax and funded the 2000 level expenditure from GST and a low corporate tax rate

* The government has little information on how effective this extra spending has been and the available social indicators we have show negligible improvements since 2000 in life expectancy, infant mortality, hospital outputs, literacy, violent crime, suicide and poverty.

* Much of the spending is middle class welfare churned back to those who pay it. Therefore much public spending today is not ‘new’ spending; it is displacing spending that would have happened anyway, by individuals themselves. It follows that more public spending will not necessarily increase public welfare, and may even reduce it.

* Many people could afford to purchase their own social services if taxes were lower. This would allow for more competition, innovation and personal responsibility, and would reduce unnecessary bureaucracy.

* Australia provides an interesting comparison to New Zealand, because they have a smaller government with more reliance upon private health, education and superannuation. They also outperform New Zealand on most social indicators.

Looking just at health spending up 49% in real term, we have since 2000:

* a slow down in the rate of life expectancy increase
* a slow down in the rate of infant mortality decrease
* a reduction in elective surgery operations from 107,366 in 2000 to 105,437 in 2006
* no change in hospital readmission rates (a key indicator of quality of care)
* no change in hospital mortality rates
* a decline in patient satisfaction with DHB services

A comparison is made with Australia.

Australia has a smaller government than New Zealand; their government spends 34% of GDP compared to New Zealand’s 40%.54 It is also a much richer country with better social outcomes.

Incomes are a third higher across the Tasman, and the Australians also outperform us on a range of social indicators, including life expectancy, infant mortality, income inequality and suicide rates.

Australia doesn’t necessarily have less social spending; the difference is that private provision is more prevalent, and actively encouraged by the Federal Government. In health for example, 33% of Australian spending comes from the private sector compared to 23% in New Zealand. In education, the corresponding figures are 26% for Australia and 17% for New Zealand.

Rennie concludes by saying:

Too often politicians take the view that all government spending is inherently ‘good’. There is not enough scrutiny of public spending, of its benefits and of the alternatives available to policymakers. Too often this reflects an ideological commitment to the role of the state, rather than a dispassionate look at what the state can realistically achieve.
There needs to be a wider debate on what the proper role of government is and what services should be realistically provided by people themselves. We need to consider what governments can do as well as what they should do.

Hear hear,

No tag for this post.

Comments are closed.