They probably won’t. But they should. Everyone attending the Albanese government’s “productivity summit” should read Leviathan on the Rampage, a report by Robert Carling from the Centre for Independent Studies that was released this week.
“A culture of dependency has taken root” was the headline. And the key finding was: “More than half of voters now rely on government for most of their income, through public-sector wages, welfare benefits or subsidies.” The consequences of this for democracy are enormous. Carling notes wryly: “Government may have grown to the point that there is a large segment of the population – perhaps even a majority – facing incentives to ‘vote for a living’ rather than ‘work for a living’.”
The numbers are stark. More than 30 per cent of the workforce is now employed in the public sector or in activities heavily dependent on government payments.
Over the past 25 years, GDP has increased in real terms by 2.7per cent a year, population has increased by 1.5 per cent a year, and Commonwealth government spending has grown in real terms by 3.4 per cent a year. In other words, “government spending has outstripped the economy’s capacity to pay for it”.
Carling scrupulously avoids political point-scoring.
He emphasises that responsibility for what has occurred rests with both the major parties. In recent years, the spending records Labor and Liberal governments are almost indistinguishable.
An inevitable consequence of a larger public sector is a smaller private sector.
Indeed, the Coalition has been in power federally for most of the past quarter of a century.
For politicians from both sides, “spending more money has become a political device for politicians to signal their concern about a problem or issue that voters expressed to be addressed … whether additional spending actually fixes or diminishes the problem has become secondary”.
It’s only to be expected that the Labor Party makes government bigger. Liberals are meant to be different – but in practice they’re not.
Empty nods to Menzies
At Liberal Party preselections, it’s not unusual for literally every candidate to quote from “The Forgotten People” speech Robert Menzies delivered in 1942. And there’s a better than even chance that at least half the candidates will make some reference to Menzies’ line about the “noble instinct” of creating future generations of “not leaners but lifters”.
(Not many candidates quote the other mention of “lifters” in the speech – “Are you looking forward to a breed of men after the war who will have become boneless wonders? Leaners grow flabby; lifters grow muscles.”)
After the obligatory nod to Menzies, Liberal Party preselection candidates usually then say something about the importance of small business.
Little do those candidates appreciate that if they’re lucky enough to win the preselection, and then win a seat in parliament and be part of a Liberal government – both are increasingly rare occurrences for Liberals these days – they’ll preside over an economy that has an ever-shrinking proportion of the sort of enterprises Liberals profess to care about.
Forthcoming research from the Institute of Public Affairs shows that in 1960 – the heyday of Menzies – the share of national income received by family businesses and the self-employed was 26 per cent. In 2019 that share was 9 per cent, and in 2024 in the wake of COVID-19 it was 7 per cent.
An inevitable consequence of a larger public sector is a smaller private sector. And the part of the private sector that is rapidly shrinking is the one most susceptible to the additional taxation and regulatory burdens that come with a bigger government.
Correlation is not causation – but sometimes it is. In recent years, as the size of government in Australia has grown, the country’s economic productivity has declined. Carling writes: “Above a certain level bigger government tends to be associated with slower productivity growth, slower economic growth, and slower advances in living standards.”
Many of the summit participants represent the dominant players in this country’s economy: big superannuation, big unions, and big business.
The summit and all the publicity surrounding it demonstrate the truth of Carling’s conclusion: “The winners from big government are concentrated and vocal; the losers diffuse and docile.”
