How big is the government?

So there is this argument going around that the Rudd-Gillard government is still smaller than the Howard government. Very popular in some quarters on Twitter. Okay – so how do you measure the size of government? Milton Friedman argued that it was the tax burden. That is a good place to start. I like to think of it as being either taxation or spending which ever is the larger. After all if the government has a deficit that is simply deferred taxation. So I pulled the expenditure data as a percentage of GDP of of the latest MYEFO. Graphed the Howard era spending and the Rudd- Gillard era spending. Now the first thing to check is the number of budgets Peter Costello brought down. I had thought it was 11, but it was 12. So the average for the Howard era is 24.15 per cent (shown in the broken blue line below). Then the question is, how much benefit should we give Wayne Swan for this financial year? Yesterday he trashed his own budget. We really have no idea how much spending there will be this financial year. Nonetheless lets give him the full benefit and include this year in a calculation of spending. The average for the Rudd-Gillard government (so far) is 25 per cent (shown in the broken red line).

All up looks to me that the current government is spending more than the Howard government did. Yes, I understand there was a GFC – yet that excuse only goes so far.

It is true that if you look at the revenue side of things the current government does look better than the Howard government. Yet the government here is trying to make a virtue of weakness. Revenue is not down because this government has cut taxes; indeed this government has introduced new taxes and increased existing taxes while cutting tax expenditures. Revenue is down because the economy has been weak.

I should add the expenditure figures do not include off-budget items like the NBN.

This entry was posted in Uncategorized. Bookmark the permalink.

21 Responses to How big is the government?

  1. Robert C

    Don’t forget the billions in off-budget spending on the NBN!

  2. Louis Hissink

    Which one? Local, state or federal?

  3. Andrew

    I recently tweeted Sinclair about this issue. Comparing the taxation and spending as a % of gdp of the Howard and Rudd/Gillard Governments is not really a fair measure. The first budget handed down by the Labor Government was the 2008-09 budget. This was when the accounting system was changed. Let me quote was Treasury says on their website.

    The 2008-09 Annual National Accounts show a substantial increase in the level of GDP over history due to the ABS adopting the new System of National Accounts 2008. Given the degree of increase in the level of nominal GDP…

    One must also consider the billions of dollars that Labor has borrowed before one states that the Rudd/Gillard government taxed less than the Howard Government considering the above point.

    Some estimates state that this change of accounting may have increase the gdp measured by the ABS and treasury by 4.5%.

    Again, don’t be conned by Labor luvvies that they tax lower and spend less. Pure BS.

  4. .

    The true burden of Government is all spending plus any surpluses, the costs of regulation plus inflation.

  5. .

    I’d amend that.

    The spending plus surpluses is also factored to the deadweight loss of collecting such revenue now or in the future.

  6. adrian

    the 12/13 figure is a forecast, so let’s see how that turns out.

  7. jupes

    Don’t forget the billions in off-budget spending on the NBN

    What is off-budget spending and how does it get that status?

  8. Leigh Lowe

    How big is this government?

    Well, if the cottontails of the Dear Leader are any indication ………

  9. Jannie

    Now that’s a loaded question!

  10. Ubique of Perth

    Now that Gillard’s pretense of a budget surplus has been jettisoned and with an Abbott-led Coalition government in 2013 a certainty, Labor’s scorched earth program will swing into overdrive. The fact that the economy is not a smoking ruin already is testimony to the good government we enjoyed from 2 March 1996 until 24 November 2007.

  11. ugh

    “What is off-budget spending and how does it get that status?”

    @jupes – essentially the government is claiming that the NBN is a profitable business, so it is a commercial investment for the government (while we all know the NBN is as commercial as igloo to igloo ice sales…).

    They pulled the same trick with the Clean Energy Finance Corp, another $10b off the books.

  12. jupes

    Thanks ugh.

    And we will never know at what point they admit that it’s costing money. That will be up to the Coalition.

  13. Pizzaskase

    The downward cliff at the end is 2012-13 ESTIMATES. So far Swanny has managed to get everything wrong so I would expect cliff will instead finish up a mountain, or least a plateau.

  14. Anne

    Ubique of Perth, I couldn’t agree more and thanks for those dates. Handy to be able to drop those in conversation! Small detail, ‘testament’ to, not ‘testimony’. 😉

  15. Louis Hissink

    Feels just like 1975

  16. Ubique of Perth

    Thanks Anne, including for the detail. Merry Christmas to you and all other Cat contributors.

  17. Pedro

    The other mistake people make is to assume that the howard period was all boom, but in fact some years were a bit soft.

  18. Leigh Lowe

    Feels just like 1975

    Let’s not repeat the mistake of electing a Malcolm to fix it.

  19. Are there any yearly cost estimates as to the regulatory burden? Because I would argue that a better way of measuring cost of government is expenditure + regulation. And I would guess that on that scale the current government would do considerably worse compared to howard…

  20. .


    I said that before, so your idea is excellent. It coincides almost exactly with mine.

    I’d also add in inflation.

  21. Dot,
    Oh, so you did! Sorry, missed that!
    ATR’s The Cost of Gvoernment Centre, btw, does this in the US:

Comments are closed.