Commission of Audit Report

I think that the Commission of Audit have been knobbled. I have not read all of their 1000 page report yet but what I have seen is clearly based on poor logic and terms of reference that presupposed the answer. I have never seen a sloppier piece of work from a government commission.

The Commission suggest privatising major parts of government, letting States run services rather than to complicated Federal/State mix that exists at present and duplicates in part and capping the Paid Parental Leave scheme. All three suggestions seem quite sensible.

However they also suggest reducing pension entitlement, cutting back on the National Disability Insurance Scheme, Co-payments on many medicare services and medications on PBS, reducing education spending as a proportion of GDP and reducing assistance for agriculture. There are other measures too. All of these seem to be a drastic attempt to cut spending.

The problem is that they base their arguments of a false premise and their own figures show that if nothing was done there isn't actually a problem.

Twice in the first pages the Commission asserts that 'Households cannot live beyond their means. Government's shouldn't either.' This was an argument much loved by Margaret Thatcher, but she knew it was based on a false analogy.

Governments, which persist forever, never retire and have credit ratings that allow persistent borrowing, are not households. You cannot make rules for the crowd based on what works for an individual. It's like saying, 'If I stand on tip toe I will see the parade better.' Except if everyone does that nobody sees better and everyone gets sore feet.

If a household borrows too much they will be overwhelmed by debt, but governments can borrow persistently and as long as economic growth is as high as the the level of borrowing (as a percentage of GDP) then the debt burden as a share of GDP won't rise. The interest burden remains manageable.

The Commission reports that it looked at a 'Business as usual' scenario and reports that the deficit by 2023/24 would be just 1.5% of GDP. That's half what it is now.

To make matters worse the Commission assume that tax receipts will flatten out. This is because they assume that the government in the future won't allow taxes to rise. This alone completely changes the expected budget outcome and is used to justify cuts. Clearly the Commission is manipulating the results to suit the Government's agenda.

The Commission, by its own admission, can't count (they claim $6,000 to $15,000 is a trebling of the figure) so we might have to treat their figures carefully. However they also show that the tax burden has hardly changed from forty years ago while real government spending has trebled (see above). They seem to prove the point that what is needed is economic growth.

The Guardian has a summary here