Australia’s big government, by the numbers

Today the IPA has released a study of mine, drawn from my recently completed PhD thesis, which presents historical measurements of the size of government in Australia. The country’s best economics journalist, Adam Creighton, has profiled some of the key findings of the study here.

Incidentally, the report in The Australian includes a bonus chart, that I chose not to fit into the final paper, comparing defence, law and order against social (education, health, social security, housing, cultural) spending, as a share of GDP, since the mid‑nineteenth century. The chart, used by Adam, nicely summarises the general evolution of the Smithian (protective) and Bismarckian (redistributive) state in Australia.

In this post, I pull out a chart from the paper, which was the product of many months of hard, manual work to compile: the (gross) number of pages of primary legislation passed or assented in a given calendar year by commonwealth and state/territory governments. This flow measure is commonly used as a proxy (albeit an imperfect one) for regulatory burden.

Aust regulatory state

While not denigrating the usefulness of fiscal measures of the size of government in any way (because they are important), it is essential that indicators be presented, and refined if necessary, to account for changes to the regulatory burden (alternative methodologies to estimate regulatory burden can be found here and here). As economic historian Robert Higgs points out:

high levels of governmental taxing, spending, and employment derive from but are not themselves the essence of Big Government; the essence is a wide scope of effective authority over economic decision‑making. Authority comes first: no authority, then no taxing, spending, or employment. Authority arises from executive orders, statutes, court decisions, and the directives of regulatory agencies.

The study refers, in passing, to the broad outlines of the policy underpinnings of the new regulatory state, during the supposed post‑1980s ‘neo‑liberal’ era of permanently reduced government. Environmental and social regulations, including those enacted for the purpose of adhering to international treaties, had become prominent during the 1980s and beyond, whilst during the 1990s economic edicts to, for example, implement national competition policies, effect changes to labour market regulatory arrangements, and to place pricing regulation clamps on privatised utilities, also informed the growth in regulation. During the 2000s, and particularly since late 2007, items of legislation of great length were enacted to enforce policy harmonisation across jurisdictions, in areas such as OH&S standards, health care, child care and education services, and environmental amenity.

Now, to be fair to Higgs, the chart does not incorporate all elements of ‘black’ or ‘grey’ letter edicts imposed and enforced by governments, and nor does the chart reflect the alternative methodologies that could be used to provide for more refined regulatory burden measures.

Nonetheless, the chart (and I hope that many other items in the latest IPA study) does serve to fill some of the gaps in our understanding of the evolution of Australian public sector activity, and provide confirmation that there is a great element of truth in protestations by individuals and businesses that governmental regulatory impositions are increasing over time, at a seemingly escalating rate.

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39 Responses to Australia’s big government, by the numbers

  1. Alex Robson

    Great stuff Julie.

  2. MT Isa Miner

    Not that I have a clue about what I am saying and I have only ripped through what you wrote but does your many months of painstaking manual work cover any of the kerfuffle about Reinhart-Rogoff 2 economists who said “that the debt-growth relationship is causal and were “”strong austerity advocates”" but apparently had fat fingers in the data entry and didn’t nut out the numbers properly?

  3. Robbo

    Talking of numbers I was gobsmacked this morning to read that Wong now says the government is facing a $17 billion shortfall in revenue next FY. Last week Gillard announced the shortfall would be $12 billion and the week before Swan said it would be $7 billion. Does anyone in that Labor circus know what the hell is happening, or does it mean that the shortfall is actually rising by $5 billion a week? If the latter is correct then my calculator says that the shorfall will be close to $100 billion. What a nice round number for the incoming government to face.

  4. Rabz

    Yes, how could mountains of unintelligible, increasingly intrusive and quite frankly, utterly ridiculous legislation not be a bloody good thing?!?

    Case in point, it proves the gillard minority gubberment is a success, I tells ya!

  5. Robbo

    I forgot to add “the shortfall will be close to $100m billion by the time of the election” Sorry.

  6. Alex Robson

    Mt Isa Miner: Debt to GDP is not the same as government spending as a share of GDP.

  7. Driftforge

    In a similar vein, I did a quick cut of the Tasmanian State Legislation; the half way point to current was 1995.

    Comment from a local member was that they thought that maybe 2 pieces of legislation per year were more than administrative in nature.

  8. Love the graph. Some labels to explain the spikes would be interesting.

  9. Julie Novak

    Ooh Honey Honey (that isn’t your real name, is it?!) … the periodic spikes you see prior to the great increase in legislation of the 1980s, and beyond, reflects, in the main, consolidations of the Education Act by Victoria. I could’ve removed those consolidated Acts, but legislative consolidations often incorporate new, as well as old, provisions, so I made a judgment call to include the consolidated Acts, introduced in those selected years, into my series.

  10. Julie Novak

    Thanks, Alex, hope you find the work informative.

    Miner – I didn’t specifically deal with R-R because, at the time of writing my thesis, the R-R kerfuffle didn’t exist! However, I’m sure you know that Sinc, Chris Berg, myself, and others have had our say about this.

  11. Louis Hissink

    The worrying thing is that the long term trend is smooth, suggesting no difference between either side of politics in Australia. If this trend continues we might end up like the Orthodox Jews who, whenever a novelty appears, need guidance from their Rebbe in order to deal with it.

    Imagine it, some elite guidance officer instructing us how to deal with some new development in order to comply with the regulations.

  12. blind freddy

    “Authority arises from executive orders, statutes, court decisions, and the directives of regulatory agencies.”==and where does the “will of the people’ fit IN?

  13. cohenite

    Thanks for your work Julie.

    A government led recovery; the idea that bureacratic jobs are real jobs is an issue with which modern society will have to grapple with more in the future; in that respect it would be interesting to do a comparison between the growth in government legislation and bureacracy.

    I see you post occasionally at OLO; there is a guy over there called Alan Austin who posts regularly about how great an economic job the Gillard/Swan government has done; see:

    http://www.onlineopinion.com.au/view.asp?article=14956

    The comments give him heaps but it would be good to read someone with credibility on the subject take him to task, although having said that he is implacable.

  14. Steve D

    That’s scary. Do we know what the cumulative chart looks like?

    Valid legislation =
    passed legislation
    - repealed legislation
    - 'sunset' legislation

    As bad as a lot of churn is, the prospect that it is mostly adding to what is already there is worse!

  15. It’s my nom de blogue. But I am definitely one of the people behind the link.

  16. Julie Novak

    Hi SteveD – my professional colleagues are looking into cumulative, and other, measures. Their findings will come out in due course.

  17. Billy the Kidder

    Is it possible to measure the cost on business and the potential flow on to household budgets?

  18. Hugh

    Julie, you’ll get a big govt grant if you research how global warming causes more government legislation. At a superficial glance, the evidence seems compelling. Congrats.

  19. Rohan

    Now if that were a graph of global temperatures, you could say that there has been no change in temperatures for the past 16 years or so.

    I wonder if the ALP will use that to introduce a new tax next week. Ie. to prevent AGR – Anthroprogenic Government Regulation. After all, all options are now on the table.

  20. Ripper

    Well done Julie, where can I buy a T shirt with that graph

  21. Eyrie

    Cohenite, geez that guy is a complete whackjob or somebody has written a clever computer program simulating a paid Labor hack.

  22. Borisgodunov

    People have been denigrating the Great Soshalist Money Managers, Commisar Wong is a great financier ,shes a Lesbian aint she,the Greatast Treasurer Woine used to be Treasurer of Qld, Tech Teachers Soviet ,and was used to handling hundreds of dollars,so whats your problem?

  23. Chris M

    Good job! Figure I might be breaking 100′s of these regulations each year knowingly or otherwise.

    If only someone would introduce a “reg shredder stimulus scheme”.

  24. stackja

    If the people are educated to expect less from government then repeal the unnecessary legislation. An ill-informed electorate has believed the MSM that the environment needs laws to cool the planet. That workers need laws to stop bosses ruling them. But will the ‘elite’ like losing their power?

  25. [reads graphs] Arrrrggh. I CAN’T BREATHE. I CAN’T BREATHE!!!!

    [slowly crushed under weight of evidence]

    [even more slowly crushed under weight of legislation]

  26. amcoz

    As KP famously said, to those morons in that senate enquiry, ‘Since I grew up, I would imagine that 10,000 new laws must have been passed through the parliaments of Australia. I do not think it is a much better place…’

    What more can be said? Nothing’s changed since.

  27. Louis Hissink

    The increase in regulation is simply the abrogation of individual responsibility – the predictable path that collectivism takes. Hence the comparison with Judaism above – the collectivist society requires a morass of regulations to pre and proscribe behaviour.

    Jesus seen in that light then appears as one of the first to reject the corruption of the collective and proposed individual responsibility informed by 10 commandments. So too Islam which is also dominated by a morass of regulations.

    Judith’s graph simply plots the extent to which we have been Fabianised, and the Abbott government will but slow it down a little until the next flush when they are booted out of office for being too boring.

  28. TerjeP

    Some years ago I found a ABS document that showed a breakdown of raw per capita tax revenue extracted in the previous year by federal government, state governments and for each state the average local government. It was great because per capita is a key way to normalise such info. I spoke to the ABS to see if there was any time series of this per capita break down going back in time. They had one that spanned the last decade but nothing longer. They did however point out that the initial report I looked at had been published for every year back to 1901 and one could in theory collate the numbers to create a time series that covered more than a century. It would need to be calibrated for the change from pounds to dollars and for inflation but it seemed like a great resource. Alas I lacked the time to gather the reports and collate the data. It would be a great service if any budding intellectuals either have or could pull this together and put it into the public domain for discussion, analysis and relection. What I did gleam is that the cost of government in real per capita terms has risen enormously in the last century (ie way beyond inflation). Not that this should surprise anybody here but it would be good to have the data readily on hand to debate others with.

  29. TerjeP

    p.s. normalising to percent of GDP is another measure but I think the actual cost is sometimes more topical and telling.

  30. Julie Novak

    Well, Terje, my paper does show you don’t need to solely rely upon the ABS to derive a series of taxation or revenue (or even expenditure) per capita. My paper does include those figures, in nominal terms, but it’s possible to adjust for inflation, if you so wish. References and data sources in the paper.

  31. Samuel J

    Excellent Julie. So it is health, safety and environmental regulation + welfare spending that are the principal drivers of the growth in the size of government. That gives a clear target for getting the monster back in control. Unfortunately the NDIS is yet another example of further expansion of welfare spending / redistribution.

  32. Rabz

    The increase in regulation is simply the abrogation of individual responsibility – the predictable path that collectivism takes.

    Freedom from bureaucratic statist numpties versus creeping enslavement.

    Remember people, if we are bound by mountains of unintelligible legislation (laws, if you will) there is no such thing as “a law abiding citizen”.

    The frogs swim languidly around the pot, seemingly oblivious to their fate…

  33. amcoz

    SJ, your succinct summary goes to the heart of ‘our’ problem, and I would chuck in a burgeoning legal system for all the new arrivals, welfare claims (and disputes, etc), which clearly imputes that it wont be too long before there’s no money at all for defence, roads, rail and ports.

  34. TerjeP

    Thanks Julie. I’ll take a look. I assume the paper you refer to is the one released by the IPA which you reference above.

  35. TerjeP

    Julie – I was struck by the green line in figure 2. It shows tax revenue per percent of GDP. State government spending as a percent of GDP is basically the same now as it was in 1900. The growth has all been a function of the new government tier that got created in 1901. Federation is bollocks.

  36. Ronaldo

    there is no such thing as “a law abiding citizen”.

    Rabz points to a fundamental contradiction in our legal systems – ignorance of the law is never an excuse for an infraction, but it is impossible for any human being, even one with a perfect memory, to know all the laws that might affect him or her.

  37. Jim Rose

    gary becker also wrote about how social regulation continued to grow unabated afster 1980. there was some deregulation that removed barriers to entry.

    the tax reforms since the 1980s reduced taxpayer resistence to taxes because the excess burden was less while raising much that same revenue

  38. sfw

    I only recently discovered that in Texas, the parliament meets only once every two years and the legislators receive only $7000 per year. Perhaps that’s something that could be looked at here in Oz. It certainly limits the damage they can do.

  39. Julie Novak

    Terje – A major part of the growth in Australian government since the twentieth century has been at the commonwealth level. This should not surprise anybody who is aware of various theories of federalism, such as Popitz’s law, Brennan-Buchanan cartel thesis, and Migue’s common policy pool problem framework.

    sfw – yes, I am a big fan of Texas’ part-time legislature (which is, in fact, a feature of many other US states). However, Australian state parliaments are effectively part-time now, if not in terms of sitting periods but the effective powers at their disposal, as well. While we can agree with Twain’s sentiment that liberty is at mortal danger when legislatures are in session, there are many other factors driving the (over) supply of public sector outputs.

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