Henry Ergas provides an FAQ on the Rudd health policy in the Australian. Read the whole thing – I especially loved this bit.
True, the states may not have the tax base to easily fund rising health costs. But if you believe the recently released Intergenerational Report, neither does the commonwealth.
Henry then provides some analysis of the money being stripped out of the State budgets.
The 2009-10 Intergenerational Report projects that GST revenue will average about 3.5 per cent of gross domestic product during the next 40 years. One-third of GST revenue would therefore be 1.15 per cent of GDP. The report also projects that commonwealth spending on hospitals amounts to 1 per cent of GDP in 2009-10, increasing to 1.1 per cent of GDP in 2019-20.
In other words, the GST revenue the government intends to take back from the states is roughly equal to the entire amount the commonwealth was already projected to spend on hospitals. Since the commonwealth’s share of spending is only set to rise as a result of the plan by about 0.20 per cent of GDP, this looks like a huge windfall for the commonwealth, while stripping the states of more than $140 billion (in present value) during the next 10 years.
Claims that the plan is a way of strengthening the states’ finances seem bizarre. But even if that were the objective, the way to address it would be to fix the states’ tax base, rather than slashing their funding.
Before the election Rudd made out that he was going to sit down with the states and work out how to reform health. Now he unveils a plan of his making and publicly beats them over the head with it. So much for ending the blame game.
TerjeP (say Tay-a)
5 Mar 10 at 8:34 am
Yea Terje.
The moron is trying to cover up the huge fuck up in the insulation business by bringing out an ill-conceived policy that is short of facts and which Roxon has already said is going to cost more though higher taxes.
They’re are behaving like they were in the last period of government trying to get the population’s attention.
My bet is that they’ve polled outer Sydney and Queensland and are panicking with the result.
JC
5 Mar 10 at 11:48 am
Nice skewering by Henry Ergas. I predict the policy will become an embarrassing millstone to rival medicare gold.
Pedro
5 Mar 10 at 2:33 pm
Don’t mention medicare gold, you’ll have homer in here telling us how wonderful it was.
Steve Edney
5 Mar 10 at 2:51 pm