New Zealand’s Spending Binge Delivering Disappointing Results

Government spending is now $20 billion higher than it was in 2000 yet has delivered disappointing results, says a new report by The Centre for Independent Studies.

In a report to be released on Thursday 15 March 2007, New Zealand’s Spending Binge, Policy Analyst Phil Rennie attempts to quantify the social benefits this extra spending has delivered.

‘Government spending has increased by 32% in real terms since 2000, yet the available social indicators we have show negligible improvements. Life expectancy, infant mortality, hospital outputs, literacy, violent crime, suicide, poverty and income inequality have barely changed.’

‘Remarkably, if this extra $20 billion of expenditure was allocated to tax cuts, nearly all income tax could be abolished. All the remaining public services could be solely funded by GST and a low corporate tax rate.’

The paper theorises that government spending in New Zealand has reached such a high level that it is now delivering diminishing returns. This is because so much spending is simply recycled (or ‘churned’) straight back to those who paid the tax in the first place.

‘Much public spending today is not “new” spending; it is displacing spending that would have happened anyway, by individuals themselves.’

The report also compares the social outcomes across the Tasman. Australia has a much smaller government with more reliance upon private health, education and superannuation, and at the same time they outperform New Zealand on most social indicators.

‘Government spending is now higher than it was under the Muldoon government of 1984, and yet there is not enough scrutiny of how effective it actually is. We need to consider what governments can do as well as what they should do,’ says Mr Rennie.

Phil Rennie is a Policy Analyst with The Centre for Independent Studies.

READ ONLINE HERE: http://www.cis.org.nz/IssueAnalysis/ia83/ia83.pdf

ENDS

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