No. 104

Stone the crows! The great and the good were cutting and coming again this week as people found ever-more original ways to spend public money, on demands for increased spending on aged care accommodation, on pay rises for welfare workers and a national dental scheme, whether or not there is money for any of them. [i]

Which there isn’t. As the estimable Julie Novak points out Australia may not owe as much as the Europeans but the public sector is still borrowing big with total government debt rising by 131 per cent to $253 billion, or 21 per cent of GDP, between 2007 and 2010 – and that does not include government trading enterprises and off budget entities. [ii]

So what is the public sector spending all the borrowed bucks on? Obviously a whack went on temporary GFC stimuli but Ms Novac warns, “the quantum and rate of growth of borrowings by the general public sectors of all governments has exceeded their capital investments”.

And when it comes to magic pudding profligacy, governments, especially in the states, have form. Of the increased state spending made possible by the GST last decade 44 per cent went on public sector pay.[iii]

The problem is that when money is available, especially when it appears, as if by magic, in the form of loans, governments embrace profligacy not probity.

And there are always really good reasons for doing so.

There certainly are for last week’s three proposals for open-ended increases in public sector spending.

As the Grant Thornton report makes clear the existing system of funding aged care accommodation is unsustainable, with an income deficit of $60 a day per bed. [iv]

Not that the industry is demanding a bail out. In fact it calls on Canberra to commit to the Productivity Commission’s plan for more of a market in the industry, supported by old people buying government bonds, the income from which would help pay for aged care accommodation. [v] In most cases the cash to buy the bond would come from the sale of the family home.

Sensible stuff, which is unlikely to occur. Certainly Mark Butler, promoted into cabinet as Minister for Ageing in the December shuffle, has not ruled out calling on his constituents to start coughing up, “funding arrangements for aged care need to be sustainable and fair, both for older Australians and for the broader community”. [vi]

But “fair” does not cut it with the aged care lobby. As Michael O’Neill from, National Seniors said last year, the Productivity Commission Plan did not take account of “the emotional significance of the family home. The reality is many Australians will find mortgaging the family home to pay for their aged care unpalatable.” [vii]

Canberra certainly seems resigned to keeping them happy. MYEFO (mid-year economic forecast outlook) plans extra outlays of $1.9bn over the next four years for aged care accommodation subsidies “as a result of older Australians entering residential aged care facilities with greater care needs than previously anticipated”. [viii]

One in seven or so Australians is 65 or older now. By the middle of the century it will be one in four, making refusal to reform the cost of aged care a giant step down the Athenian road to unsustainable public.[ix]

And then, there was the wages breakout masquerading as a social justice reform. Last week, Fair Work Australia granted 150,000 non-government, (but mainly paid by the states), community welfare workers pay rises of 19 to 41 per cent over eight years on the grounds they were paid less because they are mainly women. [x]

It is difficult to dispute these people are poorly paid and do difficult jobs but easy to argue against the increase for the way it imposes additional costs on the taxpayer without productivity improvements and for the way it will trigger a wages breakout as unions use it as a precedent.

As Graeme Watson, the dissenting FWA member put it, the judgment:

… does not seek equal pay for men and women in a single business, or in an industry. Rather, it seeks to establish a large minimum over-award payment for all men and women in the entire SACS (social community and disability services) industry to a level approaching public sector wage levels. It has more in common with a case based on comparative wage justice than equal pay.[xi]

Which the unions are already invoking for childcare workers and aged care nurses, and will pursue for other groups as they work out ways to extend the precedent. And because the taxpayer is coughing up, capacity to pay is not an issue that apparently occurs to anybody. [xii]

That the Gillard Government could have supported this giant step forward to open-ended public sector spending growth while still talking about expenditure discipline and surpluses confuses the Crows.[xiii]

Tony Abbott also pointed us towards Greece last week, with his idea for a $4bn a year national dental scheme. As with just about every idea for more public sector spending, there is a good argument for the proposal. As the Opposition Leader told the National Press Club;

The big problem with Medicare, as it stands, is that it supports treatment for every part of the body except the mouth. People sometimes spend years on Medicare-funded antibiotics because they can’t get Medicare-funded dentistry. One in three Australians say that they’ve avoided dental treatment because they can’t afford it. [xiv]

Granted Tony Abbott assured us his plan is an aspiration, which he would only implement when the budget was in surplus and the economy could afford it. But does this mean withdrawing it when times are tough?

The Crows don’t think so.

And, once an idea like this is floated, people who will benefit from it soon start acting as if aspiration is necessarily followed by implementation. As the National Oral Health Alliance puts it;

Poor oral health is largely preventable through regular dental care and oral health promotion.  It is quite unnecessary and unacceptable in this affluent nation that so many children and adults have shockingly poor oral health.[xv]

But good ideas, like more pay for welfare workers and publicly funded aged care accommodation, are generally cheap in theory and monstrously expensive in implementation. The Australian Dental Association argues Tony Abbott’s $4bn plan would actually cost three times that. [xvi]

At this rate, Australian governments will soon start spending on enormous ovens – to bake the magic puddings they will need to pay for programs that are as necessary as they are open-ended.


[i] Ben Schneiders and Michelle Grattan, “Historic day as gender pay gap narrows,” The Age February 2, Grant Thornton, “Australian cost of residential aged care research,” January 2012 @ www.grantthornton.com.au/files/cost_of_care_research_120201.pdf recovered on February 4, Matt Johnson, “Tony Abbott calls for Medicare-funded dentistry in Press Club speech,” Herald Sun January 31,

[ii] Julie Novac, “Who will drag us free from our heavy debt burden?,” The Australian February 3

[iii] Julie Novak, “States need to lift their game,” The Australian, October 9 2008

[iv] Grant Thornton, ibid 32

[v] Productivity Commission, Caring for older Australians, August 2011 @ www.pc.gov.au/projects/inquiry/aged-care recovered on February 4

[vi] Mark Butler, “Over 9000 new aged care places allocated but there is more to be done,” December 22 2011, @ www.health.gov.au/internet/ministers/publishing.nsf/Content/mr-yr11-mb-mb228.htm

[vii] Michael O’Neill, “Innovative ideas are required to fund aged care,” The Australian January 24 2011

[viii] Australian Government, “Mid-Year Economic and Fiscal Outlook 2011-2012” @ www.budget.gov.au/2011-12/content/myefo/html/03_part_3-01.html

recovered on February 4

[ix] Productivity Commission, “Trends in aged care accommodation: some implications,” September 2008, xv www.pc.gov.au/__data/assets/pdf_file/0004/83380/aged-care-trends.pdf recovered on February 4

[x] Ewin Hannan, “Unions plan equal pay expansion after landmark Fair Work Australia ruling,” The Australian February 2

[xi] Fair Work Australia, “Equal Remuneration Case,” February 2 @ http://www.fwa.gov.au/decisionssigned/html/2012fwafb1000.htm recovered on February 4

[xii] Ewin Hannan, “Childcare union demands $1.3bn in staff pay rises,” The Australian, February 3, Ewin Hannan, “Unions plan equal pay expansion after landmark Fair Work Australia ruling,” The Australian, February 2

[xiii] Jeremy Thompson, “Government backs social sector pay rise,” ABC News, November 10 2011 @ www.abc.net.au/news/2011-11-10/gillard-in-equal-pay-pledge/3657700 recovered on February 4

[xiv] Tony Abbott, “My plan for a stronger economy, a stronger Australia: address to the National Press Club of Australia,” January 31 @ www.liberal.org.au/Latest-News/2012/01/31/My-Plan-for-a-Stronger-Economy-and-a-Stronger-Australia.aspx recovered on February 4

[xv] “Oral health: planning for next year’s budget must start now,” May 13 2011 @ www.oralhealth.asn.au/media recovered on February 4

[xvi] Emily Parkinson and Fleur Anderson, “Dentists find ‘black hole’ in Abbott plan,” Australian Financial Review, February 2

'2012