Gary Banks: reshaping government, the way forward

So where to now? In framing this week’s ANZSOG conference, the school’s dean and former Productivity Commission chair outlines the challenges for the public service.

The global financial crisis, its origins in deficient market regulation and housing subsidisation, and its aftermath of fiscal deficits and sluggish growth, have led many governments not only to consolidate their finances, but also to consider whether their own roles need to be pared back or refocussed.

Australia’s new national government has signalled an end to a perceived “age of entitlement”, with recent budgetary measures not just lowering the trajectory of spending on social programs and industry support, but also altering its nature and coverage in an attempt to motivate greater self-reliance and work effort. Similar developments are occurring in New Zealand, where the public sector’s share of GDP has exceeded that of Australia.

The issues around the reshaping of government’s role and how that role is best discharged are not uncontested, with opposition parties in both countries taking a contrary stance in key areas. How this plays out politically could be expected to have significant implications not only for future living standards in the two countries, but also for public administrations and public servants.

The expansion in government spending and regulation over past decades, which is also evident in other OECD countries, did not come out of thin air. Every regulation or spending measure responded to a call for government to “do something” to remedy a perceived problem or need within our society and economy. Many such demands are entirely legitimate and governments have responded to them appropriately, in ways that yield net benefits to the community. But some do not pass these tests. And of those that do, some may exceed the capacity of society to “pay”. In the end, democracy is about making choices and trade-offs. And as economists like to put it, there are no “free lunches”.

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