The Centre for Independent Studies Research Collection

Leviathan on the Rampage: Government spending growth a threat to Australia’s economic future | Robert Carling

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Australia’s government expenditure has surged to a post-war high (except for the pandemic-era spike) of 38–39% of GDP, up from 34–35% before the 2008 global financial crisis, a new Centre for Independent Studies paper outlines.

 
In Leviathan on the Rampage: Government spending growth a threat to Australia’s economic future, economist Robert Carling warns that federal spending alone has climbed from 24–25% to 27.6% of GDP since 2012–13, fueled by a culture of entitlement and relentless program expansion in social services, defence and debt interest.
 
Key Findings

  • Real per capita federal spending has risen 1.8% on average annually since 2012–13, far exceeding Australia’s 0.5% productivity growth and more than double real GDP growth.
  • A dozen fast-growing programs — including the NDIS, aged care, defence, schools, Medicare and child care — account for 63% of the increase in federal own-purpose spending in that period and now represent around half of such spending.
  • Public debt interest is projected to rise 9.5% a year for the next decade, as higher rates refinance pandemic-era borrowing and ongoing deficits push debt up further.
  • Off-budget ‘investments’ — from student loans to energy transition funds — add a further $104 billion in hidden spending over five years.
    •  
    Drawing on Bastiat’s warning that “the state is that great fiction by which everyone tries to live at the expense of everyone else”, Carling argues Australia has crossed a tipping point.
     
    “More than half of voters now rely on government for most of their income — through wages, benefits or subsidies — creating a formidable bloc against restraint,” he says.
     
    “The honeymoon of debt-funded largesse is over. Without a determined reset of expectations, Australia risks sliding into a European-style welfare state — slower growth, higher taxes and a culture where ‘voting for a living’ replaces ‘working for a living’.”
     
    Carling urges immediate expenditure reform, not just tax tinkering. His reform menu includes: 
    1. Rolling reviews of major programs to cut waste and lift effectiveness.
    2. Fiscal rules to cap per-capita spending growth below GDP growth.
    3. Freeze public-service numbers and shift from consultants to permanent staff.
    4. Shelve new spending ideas — including universal child care and expanded Medicare dental cover.
    5. Return to structural surplus by 2029–30, echoing successful consolidations of the 1980s and 1990s.

      6.  

      Robert Carling is a Senior Fellow at the Centre for Independent Studies and a former World Bank, IMF and federal and state Treasury economist.

      #auspol #economics #australiannews 

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