Government Expenditures and Taxation Levels

Some older data on government expenditures and taxation as a percentage of GDP. Australia spends less from government, and taxes less than the European countries. Yet of our direct competitors in the Pacific Rim, such as Japan, South Korea, America, Indonesia and others; we tax more, and spend more. We are a Pacific nation, not a European one. We also practice American style capitalism. Consequently we will have to reduce the size of the state to at least American levels, if not Japanese levels, so that the state doesn't over-burden us in relation to our regional competitors.

Pacific Rim - Government Expenditure to GDP Ratio

The data this comes from is old. If anyone has sources of more up to date data I would love to see it. Australia saw a growth in the ratio of government expenditure to GDP from 1991 to 1997, from 24.3% to 25.3%. Other Pacific Rim nations in 1997 had ratios of;

From that small list it is obvious our regional competitors spend less from the state than we do. Europe spends much more than any Asian country; France 53%, Germany 29%, Netherlands 48%, Sweden 44% and the UK 41%.

Total Tax Revenue as Percent GDP

The same page contains the ratio of total government tax revenue as a percentage of GDP for Australia between the years 1990 and 2000. This appears to include Federal, State and Local taxes.

By comparison, in 2000 the US was 29%, the UK 38%, France 46%, Sweden 50%. To compare central government tax revenue, which I assume in Australia's case means the Federal government, between 1990 and 2000 shows;

The American Federal government took 19%, the UK 36%, New Zealand 30%, Japan in 1993 took 17% and France 42%. These figures suggest that the Federal Government is doing the majority of the taxation in Australia. If all taxation is 33.6% of GDP in 2001, and the Federal government is taking 26.1% of the GDP, then it suggest the states only take a small slice of it. The GST, while going to the states, is a Federal tax; and as has been shown recently comes with Federal strings attached.

Australian Capitalism

Australia practices American style capitalism now. It has done so since the Keating reforms of the mid 1980s. A central principle of American capitalism is that the individual knows best where their money should go. If government is too big and too regulatory, it inhibits this flow of money from an individual and adds overhead to any enterprise.

The secure, static and stable state of the Menzies era is gone. So is the solve everything state of the Whitlam era. By the style of capitalism we have chosen to base our economy on, we will require a shrinking of the state to at least US levels; if not Japanese levels. This will be one way to ensure fluidity of money, and hence innovative services, products and enterprise.

This is not to say that Australian principles of fair-go and the reduction of inequity have no place in government policy and programmes. It does mean, that we will have to selectively choose the areas that government is currently involved in, where it is no longer the most efficient means of providing services or outcomes.

Australia is going to need political leaders that can reduce government and taxes pragmatically, and in a manner that eases those changes on Australian society, rather than Whitlam style "crash or crash through". In the last one hundred years, the Hawke government has been the only to embark on this style of programme.

cam
siento: Figures from Australia compares: How Australia Compares has figures for total taxation in 2000 of 32.5% and government outlays as 36.6% of GDP.

A countries \'style of capitalism\' is also about how companies are financed. Germans talk about Anglo-Saxon capitalism, meaning capitalism based on company funding coming through the stock exchange. This is how Australia has funded things. Wheras in Germany the banks have given loans to the \'Mittelstand\' small to medium sized enterprises at low rates and with high security. The Japanese fund things through Zaibatsus and collaboration, and also by having the world\'s largest financial institution, the Japanese Postal Service.

Each of these systems has their advantages. Anglo-Saxon style capitalism allows rapid exploitation of new technologies as shown by America\'s dominance in computers. The German and Japanese systems provide more stability that enables manufacturers to plan more for the longterm as shown by the superiority of the German and Japanese auto industries. While the Germans have invented electronic fuel injection and ABS braking over the past 20 years, the US auto industry has \'invented\' the SUV and the cupholder.

A better way of looking at government expenditure is by looking at what the government provides and if the government provides them well. One of the big things that should be taken into account with US figures is that the US, unlike Europe and Australia, does not have government health care. Another factor to take into account is the cost of University education. The scandalously rapid rise of University education in Australia means that for about one third of Australians the government has ceased helping them for a major expense.

It is also curious to view Asian levels of government expenditure as definitely a good thing. Japan has not done well over the last 10 years. Many Asian countries may be growing rapidly, but that is surely because they start from a fairly low base.

Australia\'s level of government spending is reasonable. Australia\'s government provides a good suite of effective services at a good price.
cam: Mo\' Money:
the US auto industry has \'invented\' the SUV and the cupholder.

When the Mini (BMW) was introduced to the US it didnt have a cup holder big enough. This was the largest complaint from customers. America is definitely consumer driven, and American companies are consumer focused, and extremely sensitive to their customers.

btw, the biggest innovation for me lately (last few years) has been ipod+itunes, it has totally changed how I listen, use and interact with music.

that the US .... does not have government health care.

According to this retarded applet , the Department of Health and Human Services had an outlay of 643 billion USD. More than the military gets (~400 billion).

That also does not take into account the money that the US States, Counties and Towns spend on health as well. I think the US has social health, just that it is the most inefficient one on the planet.

The scandalously rapid rise of University education in Australia means that for about one third of Australians the government has ceased helping them for a major expense.

I think education is one area that is rife for deregulation. Between expense and relevance to private industry, the University is losing its status. There needs to be innovative and more efficient means for people to obtain a specialist education.

It is also curious to view Asian levels of government expenditure as definitely a good thing.

We have chosen to be a consumerist economy, that means it is most efficient when individuals are choosing where their money goes. Giving more money to the state inhibits the efficiency of a consumerist economy as the government is an imperfect consumer of goods and investor of capital.

Government also skews the flow of money. Negative Gearing in Australia is a good example. It locks money up in brick and mortar, rather than making it available for entrepreneurs. In the US a good example of inefficient use of capital (ie squandering) is the use of government money to create stadiums. The Washington DC Nationals are one big taxpayer rort. In Australia, investment in infrastructure has been deferred for political reasons. Or has been used in attempts at electoral bribes (WA pipeline).

The Federal government should look to bringing down its receipts and outlays to the 20% of GDP mark IMO.

cam
siento: Innovation: The iPod and mp3s and the stuff to support it are innovative and they are also electronics and computer industry examples. Perhaps the best way to describe it is that US innovates better in ares where no one has any idea what to do, while Japan and Europe are better at improving things that have been done a million times. The walkman and the Playstation are high quality and involve some innovation, but are really examples of making everything work well together.

Those are interesting figures about the US health budget. The US spends about 13% of GDP on health, Australia 9%. The US government spends 56% of US money while in Australia our government spends 70%. I had thought the US government share would be lower.

It\'s funny how people like to target negative gearing as causing the housing bubble. The other factor is the lack of tax on people\'s primary residence. If capital gains tax were to apply even partially to family homes this would also cause a shift in housing funding.

There are some positives about home ownership for developing things. A large percentage of small business loans are made with housing as security.

As for choice, well, we have chosen political parties that like to tax and spend. Although the Liberal Party appears to be serious about tax reform.

Taxation always skews economic activity. It\'s inevitable. The government creates stable conditions and a branch of it sets interest rates.  Government always intervenes in the market. It\'s just a question of doing it well or badly.  
cam: America: The iPod/iTunes was just a comment on my part. I didnt mean it meant US capitalism was superior. It has changed how I listen to music. It also made our big stereo obsolete.

The Japanese also innovated what we call quality. The globalisation of manufacturing would not have been possible without the Japanese experience in Statistical Process Control. Australia and America didnt catch up with the Japanese in that area until the 1990s.

Japan had been doing it since the 1950s. I recall in the 1980s having a Datsun 180B that refused to die. More recently I have had a Suburu that didnt want to go either.

Interestingly though, it was an American W. Deming that did all the intellectual legwork for SPC to work. It essentially commoditizes the labor and location of the manufacturing line. Which enabled factories to be moved quickly from Alabama, to Mexico to China in the space of a decade.

Health in the US is super-messed up. There is also the requirement for many employers to provide health as an employment benefit too. There is so much money being spent on health. The recent Medicare bill looks like it was design to balloon out of control too. It is in a more fiscally precarious position than social security. American legislators are quite poor.

cam

Health Expenditure as % GDP

The Economist has some figures of health spending as a percent of GDP.

Health spending as % GDP in 2002. I think the figures are taken from this WHO report ;

America's figures are before the Medicare Bill of a couple of years ago which 600 billion plus 12 trillion in unfunded liabilities. Ouch.

Australia's spending on health has been constantly increasing as well;

Government percent of this expenditure is;

From these figures it seems that the Treasury will run the Health system, and raises the question; Is a healthy nation possible, or affordable, without social health care?

To the polls ->

cam

Constantly Increasing Tax as Percent of GDP

In 1993 the government tax total as a percentage of GDP was 27.4%, in 2004 it is 36.6%. That is an increase of 9.2% in the space of eleven years. A difficult figure to swallow or justify.

A comment on Nicholas Gruen's post on the NZ economy led to me poking around in the NZ government stats site. I found this interesting little PDF which compares New Zealand to the OECD in several areas. A table from the PDF;

It shows Australia in 2004 extracting 36.6% of the GDP's wealth as tax. From this post on SSR which looked at government expenditures , a list of the change in total tax as a percent of GDP;

As can be seen from that list, the tax burden has been increasing consistently, to the point where it is 36.6% in 2004. Since the federal government is the dominant taxing entity in this country, taxing for the states, as well as themselves, blame must be apportioned there first. This also suggests that it is affordable for income taxes to be dropped for low income earners, as well as tax breaks for middle income earners.

Australian GDP Density

Econbrowser has a map which shows GDP density .

This is Australian section of the map. No surprises, Australian wealth is highly urbanised.

US State GDP as Countries

Via Big Picture , another amazing map . This one shows the states of the US as broken up by GDP and then mapped to the nearest country GDP.

Note Australia has the same GDP as Ohio and Indonesia is the same as New Mexico. Singapore and South Carolina line up, as does New Zealand and Maryland. Fascinating map, must do the same for Australia.

Australian State GSP as Country GDP

Australian Gross State Product compared to the GDP of countries .

Not perfect as the GSP data is from 2004-2005 and was in AUD. I multiplied it by 0.8 to get the approximate USD amount. The map is for fun rather than any academic study anyway.

Most Popular on South Sea Republic

The articles that have been viewed the most:

Most Popular Restaurants in Phoenix

Phoenix Eats Out is the restaurant review site for Phoenix, Scottsdale and Old Town Scottsdale which lists the modernist and contemporary restaurants, taverns and bars in the greater Phoenix area. This is the list of the most popular restaurants pages from phoenixeatsout.com that have been viewed the most; My personal favourite restaurants in Phoenix are AZ88, Postinos, Bomberos with Grazie, Humble Pie, Orange Table, The Vig, Fez and others coming close behind. View the complete list with the photo-journalistic style images on phoenixeatsout.com

Most Popular Hikes in Arizona

Arizona is an outdoor state and has lots of hiking in the city and around the state. Phoenix is unusual for most cities in having several large mountains in the center of the city with great hiking. Anyone who comes to Phoenix has to do the Echo Canyon trail on Camelback and the Summit Hike on Squaw Peak or Piesta Peak. The views of the city, suburbs and surrounding mountains are wonderful from Camelback and Piesta Peak. For more experienced hikers there is the McDowell Mountains in North Scottsdale that has several difficult and strenuous hikes in Tom's Thumb and Bell Pass. Alternatively, you can hike the highest mountain in Arizona. At 12,600 feet Humphrey's Peak is a long and difficult hike.

Alternate Australian Constitutions

Between 2004 and 2009 this site, southsearepublic.org, was a constitutional blog based on scoop which focused on Australian and global constitutional issues. One of the strongest aspects of it was the development of constitutions by those involved in the blog. These constitutions are the outcome: The constitutions were built using principles from Montesquieu's separation of powers, the enlightnment's universal political rights and the ancient Athenian technology of sortition and choice by lot.

Archives For South Sea Republic

South Sea Republic started in 2004 as an Australian constitutional blog in 2004 based on scoop software. It was an immigrative outgrowth of Kuro5hin. The archives for each year since then; The articles are ordered by views.

Who Is Cam Riley

Cam Riley I am an Australian living in the United States as a permanent resident. I am a software developer by trade and mostly work in Java and jump between middleware and front end. I originally worked in the New York area of the United States in telecommunications before moving to Washington DC and working in a mix of telecommunications, energy and ITS. I started my own software company before heading out to Arizona and working with Shutterfly. Since then I have joined a startup in the Phoenix area and am thoroughly enjoying myself.

I do a lot of photography which I post on this website, but also on flickr. I have a photo-journalistic website which lists the modernist and contemporary restaurants in phoenix. I have a site on the Australian Flying Corps [AFC] which has been around since the 1990s and which I unfortunately lost the .org URL to during a life event; however, it is under the www.australianflyingcorps.com URL now. The AFC website has gone through several iterations since the 90s and the two most recent are Australian Flying Corps Archives(2004-2002) and Australian Flying Corps Archives(2002-1999) which are good places to start.

Websites Worth Reading

Websites of friends, colleagues and of interest;