Australian Federal Budget - Budgetary Policy Developments

Budgetary Policy Developments

In comparison with similar economies, Australia's government spending is relatively low. For the twenty year period from 1960 to 1980, the growth in spending roughly matched percentages in Japan and the United States.

In the first half of the 1980s, spending surged by approximately 3% of gross domestic product and the tax rate surpassed that of Ronald Reagan's administration. However, government accountability was a highly contentious issue in the late 1970s, and John Howard maintains that under Fraser "spending went up... at about two per cent per year in real terms... Reagan better than that".

As the debate played out, the free-market politicians turned to attacking the political parties which were in power in the Australian states, and public sector medium enterprises came to be seen as inefficient. The economic term "current account deficit" was in vogue.

Riding on strong economic growth in the latter part of the 1980s, the Hawke government brought forward an agenda for public sector reform that had been pioneered in the US. Declaring a number of debt reduction strategies ranging from tariff rate reductions to privatisation and competitive tendering, Australia's public sector significantly declined in the period.

Spending in the 1990s saw significant shifts in social policy expenditure as part of a broader scheme of "low inflation targeting". Although outlays for services to industry increased, the budget outcome remained the same throughout the early 1990s recession. The Howard government actually reduced expenditure by 1.3% of gross domestic product in its first two years, making large cutbacks to outlays for the hospital system and education. Overall the government continued to run down public debt and promote asset trading in the private sector.