Saturday, August 4, 2012


We expect far more political choice today than we used to in the past.

Parties aren't just expected to balance the budget - there's a whole range of smaller issues that we expect to know about before we vote for them.

This is all having an unforeseen effects, as this column explores . . .


Blame the big department stores, if you like. They were based on two simple, revolutionary, ideas, which caught on in a big way. Firstly, the prices were fixed. There was no haggling. It didn’t matter who you were or how much money could be gouged out of your pockets; everybody paid the same price. Secondly, the stores carried a wide range of merchandise and a shopper could choose between different suppliers of the same article: be it a dress or a shoe. Previously, shops could just keep stocking the same item until it had all been sold, because choice was arbitrarily limited. Suddenly, the balance between the consumer and manufacturer changed dramatically in the purchaser’s favour. The customer could choose. They could buy what they wanted, not just what someone else was offering them.

Eventually, this transformed the economy. It’s taken time but today, everyone’s empowered. The ramifications of this change in influence are still working their way through society, but they’ve arrived politically.

The change began in a small way. Fifty years ago we voted for political parties that would run the country harnessing advice from public servants and government boards. Choice was limited. There were a few attempts to challenge the general, complacent consensus (such as NSW Premier Jack Lang’s attempt, during the depression, to repudiate debt or Labor Prime Minister Ben Chifley’s crack at nationalising banks after World War Two) but basically, voters left it up to the parties to both determine policies and how they should be implemented.

If you want to point to one individual who’s responsible for the increased expectations voters have about economic debate, it would probably be Paul Keating. As Treasurer, he set out to ‘educate’ the electorate about the effect of economic policy. He set up white-boards and graphs in his office and brought-in senior public servants in to brief journalists, to bring them (and hence the public) ‘on-board’. Suddenly, people realised governments could be empowered to make real changes.

That’s when it started to go kaput for the politicians. As the recession of the early ‘90’s gripped the country, economists began to hit the airwaves with their own prescriptions for government. Those who were elected had to explain government spending. Today, for example, failing to balance the books has become a ‘no-no’. Kevin Rudd briefly got away with the stimulating the economy to avoid recession, however the minute the direst threat was avoided the incessant demand to ‘balance the budget’ started up again. The Gonski review into higher education never attempted to justify extra spending on the grounds that knowledge is intrinsically good: instead the argument was put that any extra spending would provide an immediate pay-off. It’s all dollars in and dollars out. Government reduced to simple economic management, because we don’t trust the politicians to do anything else.

And this is the central stumbling block when it comes to reconciling the magnificent aims with the limited resources to be devoted to the National Disability Insurance Scheme. Nobody prominent appears prepared to say we don’t need such a scheme (Campbell Newman, as Premier of Queensland, is self-evidently not prominent in the sense of being a significant contributor to national debate – after all, he personally decided to opt out). Considerable questions remain, however, about how the NDIS will eventually be rolled out and who’s going to fund it.  

The point is that in order to be worthwhile the scheme will need to receive an injection of new money. That’s cash that comes from somewhere else. And this is the problem. You can get some idea of just how insurmountable an issue it is when you go to the bottom line. The first hiccup came with the trial. Two Liberal state premiers were holding out until, following a massive public outcry, they searched in their pockets and, goodness! Suddenly they found they did have the money after all!

That gets us over the first hurdle – funding the pilot. The problem is the track stretches way off into the distance and there’s no simple way to explain where the money to fund the program will come from. In NSW, for example, the trial required the state to put in $585 million, to be matched with another $300 million extra from Canberra. This will allow the average spend on each disabled person to be boosted from (just over) $20,000 to (almost) $35,000. Great. But what happens in 2018, when the scheme’s rolled out nationally?

That’s when the ‘spend’ suddenly zooms to $7.5 billion a year. That’s a big figure. Most of us have only a vague idea of what that sort of money can actually buy, so it’s worth putting it in context. Dealing with asylum seekers, for example, costs just over $1 billion annually. We devote just under $9 billion to the higher education sector whereas the yearly cost of operating the Defence Force is, depending on exactly where it’s fighting, north of $21 billion. The Commonwealth also allocates slightly more than $61 billion to health, which represents about 16 percent of the total budget outlay.

So where will the money come from? Close down universities or sell-off the destroyer fleet? Government services don’t appear have much fat left to trim. On the other hand, the capital gains tax exemption for your primary residence ‘costs’ the government an estimated $20 billion a year. Julia Gillard could easily fund the NDIS (and have money left over) by simply eliminating a concession that’s disproportionately benefiting wealthy people (who live in more expensive houses). Somehow, I think that’s unlikely. The other possibility that’s been floated is increasing the Medicare levy. Increasing this by just 0.5 percent would cost a typical taxpayer $5 a week. A cup of coffee. Unfortunately, people have got used to their beverages and even this would provide less than $3.5 billion. Experience suggests it’s unlikely the cost of the program would remain capped at under $8 billion.

Nobody’s arguing (at the moment) that devoting money to a proper NDIS scheme isn’t worthwhile. The problem is finding the money to sustain it. We’ve become accustomed to seeing price tags on items for sale in department stores and use these to make a quick mental calculation before deciding what we can afford. Unless the government can suddenly find some hollow-log that’s escaped all previous efficiency measures, it appears unlikely that even the most enthusiastic razor gang will be able to find the massive extra sum required to fund this program without raising taxes. And that’s where we begin to have problems.

Everyone feels very positive about helping the disabled until it starts hurting their hip-pocket. At that point, unfortunately, things start to change.


  1. But how far does public funding have to stretch to cover all of life's risks ? Does a NDIS mean Australia becomes even more of a nanny welfare state ? Should not additional public funding be directed to other priorities such as an ageing population which remains underfunded despite a range of initiatives over recent years at both Federal and State levels.

    1. This is absolutely the point! Where does the role of government begin and end?

  2. and the answer is !?