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Dr Bryce Wilkinson
Treasury’s pre-election forecasts confirmed that Government spending exceeds revenue by more than what was forecast in the May 2023 Budget. Far too many commentators are concluding the increase is not too bad. Do not be fooled. The forecasts are not realistic. They are too optimistic.
The government faces a tough year because it is locked into promoting major changes whose public interest justification is thin and whose nature is polarising. For opposition parties, this is an opportunity. For those who care about public policy, it is a train wreck.
The only way for the community to generate greater income is through job creation and productivity growth. This has to come overwhelmingly from the private sector.
During the last hundred years central government taxes per capita rose 20 times faster than consumer prices (from around $660 in 1910 to $13,198 in 2010 in year ended March 2011 dollars, as in the chart below). Meanwhile real GDP per capita only rose roughly 4-fold. The fact that taxes rose roughly 5 times faster than incomes as measured by GDP is reflected in the rise in taxes as a percentage of GDP from 6.3 percent of GDP in 1910 to around 30.8 percent in 2010.
