Over the past 20 years the size of government spending has grown, both absolutely and as a percentage of GDP. Public sector debt has also increased substantially. The cautionary tale of Greece indicates the dangers of this path.
In Australia, either taxes have to rise, which will lower the standard of living, or spending has to be cut. The National Commission of Audit report focuses entirely on the latter.
The report broadly does two things. First, as in the terms of reference, it provides “a thorough review of the scope, efficiency and functions of the Commonwealth government”. Second, it sets out a series of 86 recommendations covering the full range of commonwealth spending.
The government is not bound to follow these recommendations, but they provide a useful menu of options.
There seem to be two main findings. The first is directed at what is called “vertical fiscal imbalance” but really is a boost for genuine federalism: state spending needs to be balanced by the power to raise revenue. This reversal of the increasing tendency toward centralisation is a very welcome development (provided that it is matched by a reduction in federal income tax).
The second is recognition that the biggest components of Commonwealth spending (aged pensions, defence, health) are also those that are growing the fastest, and therefore that nothing is solved unless these “third rails of politics” (a euphemism for controversial and/or untouchable issues) are firmly grasped.
Across many recommendations, the overarching approach is to increase the criteria for eligibility, or simply abolish the source of funding. This signals recognition of the manifest unsustainability of decades of vote-buying growth in corporate and middle-class welfare.
Arts and culture doesn’t feature prominently in the report. This is simply because even the most swingeing of cuts to arts or cultural funding – say, cutting everything completely – would barely touch the levels of savings required to restore Australia’s public finances. When you need to feed an entire village, hunting a few mice isn’t going to do it.
Nevertheless, not missing an opportunity, two clear warning shots have been fired into the haystack, possibly injuring a mouse or two. The largest is recommendation 45 (see below), which focuses on the role of public broadcasting – specifically, the ABC and the SBS.
They make a familiar argument “that both organisations have the ability to improve their efficiency and better target expenditure than may currently be the case.” They suggest that this case is “underpinned by advances in technology, societal changes and an expectation of achieving efficiencies and value for money”. Furthermore, these developments “increasingly eliminate the traditional arguments for public broadcasting”.
But the commission doesn’t then go where this argument is seemingly headed. They do not then recommend a noble retreat from public funding of national broadcasting.
Instead, they ask why these benefits from new technologies and increased competition have not translated into lower prices or reduced demand on the public purse. They charge instead that the public broadcasters have captured these benefits for themselves, rather than handing them back to the public.
This is the language of the efficiency dividend. The commission has put them on notice by proposing a benchmarking exercise that would attempt to estimate the size of this captured resource, which will then enter into future funding equations.
The other named arts and cultural funding consideration comes in relation to industry assistance – also known as corporate welfare – a most egregious form of public spending and always and everywhere well ripe for cutting.
Screen Australia is targeted here for “reduced levels of Commonwealth funding”, specifically recommending that it “be halved and focused on areas of Australian content, including those with an historical perspective that might not otherwise be funded”.
And that’s it. All things considered, it is utterly remarkable how soft the Commission has been on proposing cuts to arts and cultural funding. And remember, these are just recommendations, which if history is our guide have only a small chance of becoming reality. Things really could have been a lot worse.