A king’s ransom to run “small government”

Despite the party of power being avowed champions of “small government” the cost of running the Australian government has ballooned to $100 billion with the percentage increase departmental expenses outstripping both the increase in taxation revenue and GDP

30 November 2021 | Callum Foote, MW Media 

The Liberal party manifesto claims “we work towards a lean government that minimises interference in our daily lives”. “We are the party of small government” is the pitch; “Labor stands for big spending”, “we keep government out of people’s lives”.

That’s the sales spiel. It’s not true.

The eight years of Coalition government have been the most expensive in history. And while they have deregulated for their friends – relaxing insolvency laws and directors’ disclosure duties – they have regulated their perceived foes such as proxy advisers to the super funds and litigation funders who assume, de facto, the duties of the corporate regulator.

One might be surprised to learn that career bureaucrat Scott Morrison is overseeing the most expensive government in recent memory, which is approximately 34% more expensive than Rudd’s 2013 government when adjusting for inflation, according to Federal budget papers.

Departmental expenses on the rise

The cost of running the government, paying for salaries, rent, pens and paper is captured in the Federal Budget as departmental expenses.

Departmental expenses exclude what are known as administered expenses, which are payments made on behalf of the government by government agencies such as social benefits and grants to the States.

Departmental expenses also exclude investments made by departments, to represent the true cost to run these entities.

Total departmental expenses are tipped to hit $100 billion in 2020-21, according to the last budget, which is up a staggering 90% from 2010-11, when the federal government cost just $52.4 billion to run.

Adjusting for inflation, this is a 60% increase.

Since Morrison took office in 2018, the cost of government has grown by over a third or $25 billion. From $74 billion to $100 billion as predicted in the latest budget.

In fact, despite decrying the “the stifling structures of Labor’s corporate state”, the Liberal party’s Federal government exceeds all comparative metrics compared to tax revenue or GDP.

During the 2007 to 2013 Rudd-Gillard-Rudd government the cost of government increased on average just 2.5% annually.

When Rudd entered government in 2007 the total departmental expenses were approximately $50 billion. 6 years later, when Labor lost office in 2013-14 departmental expenses had risen to $58 billion.

The Coalition government, on the other hand, has seen its departmental expenses increase 9% year on year since taking office in 2013, having increased from $58 billion to $100 billion in 8 years.

Cost of government compared to taxation revenue

The growth in the cost of government has almost doubled the growth in Federal government taxation revenue which has increased by just 55% over the past decade, from $288m to $448m.

Both of these metrics outstrip Australian GDP growth, which has grown just 26% over the past decade according to the Australian Bureau of Statistics.

Federal government taxation revenue has almost doubled growth in GDP, while the cost of government has exceeded the grown in GDP by 3.5 times.

While the Liberal party manifesto decries “the punishing disincentives of burdensome taxes”, as a percentage of GDP, federal government taxation has increased from 18% in 2010 to 23% in 2019-20, the latest year for which the ABS has provided Government taxation revenue data.

Editor’s Note: the cost of government has increased due to the Pandemic, although the rise was underway before Covid. The decision to outsource the work of bureaucracy to consultants such as the Big Four consulting firms has seen an explosion in government contract payments. This article was first published at Michael West Media