Government Expenditure

April 17th, 2012 at 9:00 am by David Farrar

The left have been trying to push a meme that this Government has not been spending enough money. That if only we did not have the tax cuts, we would be able to have extra spending. Putting aside the fact that National’s tax packages have had less of a fiscal impact than Labour’s proposed tax cuts, I thought it would be useful to look at actual spending by term. Has National really been slashing spending? If only. First let us look at total expenditure.

The dark blue line is total government expenditure for each term of Government (from 1 July after each election). So total government expenditure increased 21% under National, from Labour’s last term. If you compare to the last term of National’s 4th Government it is a whopping 131% higher. It is also 92% higher than Labour’s first term.

Now next let us look at it in terms of real or inflation adjusted expenditure, which the red line. Ideally inflation should be 1% or so, so the impact is minimal, but that has not always been the case. Real expenditure is 11% higher than from the previous term, and 69% up from the 4th National Government.  It is 50% higher than in Labour’s first term.

Now total expenditure includes SOEs and the like. A more common measure is the core crown expenditure, which excludes this. In nominal terms this increased 19% from Labour’s last term, 83% from Labour’s first term and 105% from the last National Government. This is the green line

To take account of inflation we also have the purple line of core real expenditure.  Well this term National’s core real expenditure was 9.6% higher than the last term of Labour. It is 43% higher than Labour’s first term and 51% higher than the 4th National Government.

Finally we have also had population growth. I don’t accept that all government expenses should increase per capita, but to take account of this we have the light blue line which goes on the second axis. It shows National is spending in real terms per capita 6.2% more than the last term of Labour. It is 28% more than Labour’s first term, and 32% more than the last National Government.

It is interesting to look at the real increase per capita for the last four Governments. The 1st term of Labour saw this increase a modest 2.5%. The second term of Labour saw it increase 6.2% – the exact same increase as under National. The outlier is Labour’s third term is when it increased 13.8% as Labour was so embarrassed by the size of its surpluses it invented all sorts of new spending schemes.

So Labour trying to portray National as mean and stingy, and cutting spending to fund tax cuts is just bonkers. If anyone should be complaining, it is fiscal conservatives who think shouldn’t increase in real per capita terms (something the Government has now agreed to in principle, thanks to ACT).

People may be interested in the real increases from Labour’s last term to National’s first term. They are:

  • Health +11.4%
  • Education +8.3%
  • Law & Order +7.9%
  • Defence 5.0%
  • Welfare +9.2%

Remember those when someone claims National has slashed education or health funding.

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22 Responses to “Government Expenditure”

  1. BlairM (2,320 comments) says:

    I don’t think any National politician should be proud of this record. If they are, they should join Labour.

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  2. peteremcc (342 comments) says:

    Shame on National.

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  3. Other_Andy (2,610 comments) says:

    So after all these so called savings they are still spending more?
    And what is their excuse?

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  4. john.bt (170 comments) says:

    This just shows why we no longer need a Labour party when we have the National socialist party. This is one of the reasons I could not bring myself to give National my party vote at the last election. Other reasons include the ETS and the gifting of our beaches and forests to the Professional Horis.

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  5. grumpyoldhori (2,362 comments) says:

    Yes Key and co are a bit of a bugger, they should have sold off the hospitals by now and moved to the yank type health care system of making insurance companies wealthy.

    The question I have of the extreme right wingers is this, why the fuck are you still in NZ ? because we will never have the extreme right wing types in power again.

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  6. fooman (39 comments) says:

    http://www.treasury.govt.nz/government/financialstatements/yearend/jun11/16.htm

    The 2011 actuals vs. the 2010 actuals make interesting reading.

    You’ll all be happy to know that the education budget was slashed by 0.3% between 2010 and 2011.

    The spending on economic and industrial services only increased by 60%, or 11.2 billion dollars. I suspect the earthquake and the SCF pay-outs are most of that increase.

    Holding the public service in check is going well, only an increase in core government services of 49%, or 2.7 billion dollars.

    Overall only an extra 19 billion spent between 2010 and 2011, or maybe 8 billion above the costs of the earthquakes and institutional investors taking advantage of government guarantees on reckless lenders. I am sure that 8 billion is well spent on infrastructure projects with incontrovertible business cases to support them.

    Lucky those fiscally neutral tax cuts (and a 22.8% increase in the cost of borrowing) balance out on the financially responsible behaviour of the current coalition government.

    FM

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  7. Other_Andy (2,610 comments) says:

    “…..extreme right wing…….”
    Is that anybody who opposes spending more than we can afford or are you so far on the left you can’t see ‘the middle’ anymore?

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  8. Spam (588 comments) says:

    ~$55,000 per capita? Give me the $165,000 for my family, and let me have user-pays, please.

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  9. LabourDoesntWork (287 comments) says:

    “making insurance companies wealthy”

    Well, people are happy to pay to go private on top of the taxes they pay to keep afloat the less preferable state system. The system along the lines of “extreme right wing” (i.e. free market competition) must be doing something right.

    Maybe you can buy your food, your clothing, your electricity from Cuba – can they ship that stuff in? Otherwise you’re only making someone wealthier. Geesh, God forbid that happens.

    No; let’s be at the mercy of what government provides, instead. Far better. Maybe for cheapskates who are also too gullible to realise (believing that government is providing Free Health Care) that they’re actually getting less for what they pay rather than more.

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  10. JeffW (326 comments) says:

    Disgrace.

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  11. virtualmark (1,513 comments) says:

    What this says is that there must be yawning gap to the right of National for a political party that advocates fiscal discipline. I’m sure a reasonable and rational right-wing party would at least get past the 5% threshold.

    The reason ACT polled just 1.07% of the votes in the last election is not because there’s no need for a party to the right of National. It’s because of the bumpkins, idiots and gimps they put up as candidates, and the pathetic ill-disciplined and shambolic way they conducted themselves between 2008 and 2011.

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  12. swan (665 comments) says:

    Its good to finally see some serious criticism of the National Government by DPF. All those who say he is a National Party mouth-piece should refer to this post.

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  13. Alan Johnstone (1,087 comments) says:

    You are missing a key variable in your stats.

    It’s percentage of population above 65. I’d be pretty sure the large increases in health and welfare are being driven by age related costs of illness and a unaffordable non means tested NZ super.

    Graph the aging population over recent years and I’ll bet it tracks very closely to expenditure increases, project it out further as more of the baby boomers retire and you’ll see the numbers go to a very dark place.

    Problem is we have a PM that has made not touching NZ super an article of faith. Still I guess old people vote in higher percentages than any other grouping.

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  14. Other_Andy (2,610 comments) says:

    @AJ

    Agree with most of your post.
    That is, apart from the “…means tested…”.

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  15. emmess (1,427 comments) says:

    I am not sure that graph is accurate though.
    I thought total GDP is just under $200 billion but the graph says that total spending is between $200 and $275 billion.
    That can’t be right.

    [DPF: It is spending per three year term]

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  16. Daigotsu (454 comments) says:

    “Its good to finally see some serious criticism of the National Government by DPF. All those who say he is a National Party mouth-piece should refer to this post”

    You say that but I have a weird impression that DPF intends this as a rebuke to those who say National has cut spending… so he actually intended it as a pro-Nats piece. Odd I know.

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  17. krazykiwi (9,186 comments) says:

    If anyone should be complaining, it is fiscal conservatives who think government spending shouldn’t increase in real per capita terms

    Quite so. It should not. Government spending (of my money) should be constrained to a declining percentage of GDP, with a floor of ~25%.

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  18. lastmanstanding (1,281 comments) says:

    Sigh. As with most things in life its not the QUANTITY its the QUALITY that counts. IMHO governments of what ever colour are bad spenders. They waste most of it on hair brained fruit loop schemes that are doomed to failure.

    Thats why I want the Gumint to let me and the other tax payers spend what we earn ourselves. Sure Happy to give 20% of my gross as income tax to the Gumint and have done for the past several decades no matter what my income has been using legit avenues to ensure it is no more than 20%.

    If everyone else did this then the bastards would be forced to live within their means like most of the rest of us. Gumints should set the example and stop borrowing to pay the grocery bill each bill which is what they all have done.

    Fiscal prudence and pollies area n oxymoron and most of the pollies fit the latter aprt of that word.

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  19. Alan Johnstone (1,087 comments) says:

    I was bothered enough to go back and look at the numbers on this; the recent rises in spending track very closely with the “dependency ratio” which is the ratio of retired people to workers.

    The next ten years are going to truly awful if we maintain the fiction of the universal super, the ten years after that as this glut of people hit 75 – 85 which is the peak cost years for health care even worse.

    The present administrations refusal to change retirement ages or means test NZ super is on the verge of treasonous.

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  20. Luc Hansen (4,573 comments) says:

    It must have taken DPF an awfully long time to come up with these figures, and so well presented!

    Kudos, David.

    Oh, hang on, I seem to remember something about a hotline to Double Dipton’s office…oh well.

    But one thing David, are you telling us that the education spend per student increased 8.3% under National?

    That would be a comprehensive rebuttal to accusations of a cost-cutting exercise in the Ministry of Education.

    Could you kindly confirm this?

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  21. Luc Hansen (4,573 comments) says:

    Oh dear, do I have to do a retraction here? Do the figures come from Scoopit, whoever they may be? If so, I retract the first three lines. But just the first three lines.

    Cheers.

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  22. Liberal Minded Kiwi (1,570 comments) says:

    Grumpyoldhori belies his name – if he was old he’d have a little commonsense in relation to what pertains as extreme right wing.

    This truly is a graph of great shame to the Nats and also those in NZ who STILL have their hands out for more. What will it take for this to change? We have not had a revolutionary Government in since 1984 and even then it was held back by those who were gutless to give NZ a better future. ACT most certainly could have been great, but thanks to the short termism by those in the party now, their idiot board and those who thought it was a good idea to replace a leader with a Tory I wouldn’t want to join that party either.

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