The roadmap for federal fiscal consolidation

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(click on figure for larger, and readable, version).

The roadmap for fiscal consolidation at the commonwealth government level should rest, initially, upon consideration as to whether the expenditure function or activity being undertaken conforms with the heads of power in Section 51 of the Constitution.

With the constitutionally allowable constitutional activities of the commonwealth being strictly limited, and being more restrictive in scope and scale than the actual activities presently being undertaken, there is substantial scope for ceasing ‘unconsitutional’ spending altogether, or transferring the relevant roles to the state governments subject to their agreement.

The next step for a reform-minded, fiscally prudent commonwealth is to carefully consider if the considered expenditure function or activity conforms with the economic conception of a public good (recalling Alex Robson’s timeless economic advice, elucidated here).

It needs to be recognised that numerous spending activities undertaken by the commonwealth are not, in fact, compatible with the public good definition. In the cases of private goods (and so-called ‘merit goods’), the commonwealth should end its involvement in their financing and/or provision. This should ideally, by way of examples, include a substantial reduction in redistributive transfers to individuals and corporations, the privatisation of state-owned broadcasting networks, and so on.

In the cases of genuine public goods, such as defence, foreign affairs and basic public administration, there is invariably scope for a reform-inclined government to enhance cost efficiency in numerous ways, which should, in turn, deliver longer term benefits to taxpayers.

Of course, a similar roadmap of fiscal consolidation could be suitably applied at the state level. There remain substantial opportunities for state governments to reduce their relative size and scope through privatisation and similar initiatives.

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11 Responses to The roadmap for federal fiscal consolidation

  1. rafiki

    Much constitutionally allowable spending is not based on careful (or indeed any) consideration of the economic conception of a public good. Moreover, the High Court has expanded the scope of the s 51 powers (especially the corporations and external affairs powers), and sanctioned s 81 spending, to the point where it would be a bit fatuous to start at your first step.

  2. Julie Novak

    I recognise the role of the High Court in aggressively expanding the scope of central governmental powers. This, however, does not invalidate my general point, I don’t think.

  3. Driftforge

    Just because the heads of powers have been expanded by the high court does not require that the government of the day fill the expanded space.

    You could trim the federal budget down to about $100B by limiting it to the original constitutional bounds.

    You could trim it down to well under $300B just by limiting it to a stricter reading of the current document.

  4. .

    Rafiki is right and the monarchists are wrong.

    The constitution is broken and needs a restoration, or a new model.

  5. Token

    If the problem is the people appointed to the High Court choosing to ignore its role and to use its powers in an activist manner to eternally expand the role of the federal government beyond its intial scope, is that the part of the constitution that needs notes the functions of the HC the part that needs to be amended?

  6. Driftforge

    Dot, what if the new model is a (new)variant on Monarchy, rather than this useless sot of an idea of a republic?

    Where does that take us?

  7. .

    The US Presidency and French and Irish models mimic monarchy.

    Forget about the ARM and ACM.

    The monarchists are wrong, philosophically. The constitution is broken.

    We would need, as a bare minimum fix:

    1. Grandfather rights to civil & political rights granted to all from current common law to now, and common law and constitutional rights as at Dec 31 1900 and extend s 116 to have an equal protection clause (working up a chain of superiority).
    2. Alter the external affairs & corporations power so that they cannot be abused.
    3. Force the States to be subject to the same restrictions on s 116, and rights and liberties as the Commonwealth, including property acquisition (true but not explicit or tested as of yet, Peter Spencer’s high court case is still progressing).

    That might be a little messy but the gist of it would be correct. Before any smarty pants says “unworkable”, there is a lot of unresolved stuff in the constitution as it stands.

  8. Empire Strikes Back

    I like your model Julie. This is a simple flowchart for organising an orderly retreat, by the Commonwealth, from the Australian economy. The CIS Target30 stuff is all well and good, but talking % of GDP targets misses the point. There must be a ruthless test and this does the trick.

    The constitution is not broken. Federalism is broken and it’s broken because of fiscal imbalance and HFE. The man with the gold makes the rules, in spite of adequate existing rules.

    Take an axe to Commonwealth receipts and spending, return income taxing powers to the states and watch the moochers run for their lives.

  9. Driftforge

    2. Alter the external affairs & corporations power so that they cannot be abused.

    This is probably most significant. Alternatively, you invert the system and give states pre-eminence.

  10. Scotty

    Oh Julie, if only, if only….

  11. Oh come on

    That roadmap looked good until 1920. Then along came the Engineers’ Case…

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