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For budgets only smaller is tougher

By Mikayla Novak - posted Tuesday, 10 May 2011


Prime Minister Julia Gillard and senior Ministers such as Treasurer Wayne Swan and Finance Minister Penny Wong have warned Australians of a 'horror' 2011-12 Budget.

To prove their point the federal government has trialled selective spending reduction options in the court of wider public opinion over the past few weeks.

Last month media reports suggested that the government would reduce the level of funding to the National Health and Medical Research Council, which provides research and development grants for cancer prevention, cardiovascular problems and public health, by $400 million.

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The Health Minister Nicola Roxon has not exactly doused such speculation on the basis that 'every single dollar that we put into the health system has to be constantly assessed to see if it's being spent in the most efficient and effective way.'

Next on the announced list of unpleasant budget 'medicine' were reports that the government would impose additional measures to reduce access to the Disability Support Pension, whose number of beneficiaries has exploded from 577,700 people to 757,100 over the last ten years.

In another missive to break the back of welfare dependency, the Gillard government has recently announced that up to 11,000 teenage parents on welfare will be forced to attend education and training as a means of securing future employment.

Unsurprisingly, the interests directly affected by these expenditure rationalisation proposals have fiercely castigated the suggestion that even a single dollar should be removed from their favoured budget allocations.

Medical researchers have already engaged in public protests in capital cities to boost public sympathy for the expenditure status quo, while the welfare lobby has publicly labelled the measures as 'punitive' infringements against the rights of welfare recipients.

When it comes to medical research funding, it is difficult to accept the argument that a dollar of taxpayer funded research expenditure on every occasion yields economic benefits of many multiples in excess of the original investment.

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Within this there are legitimate questions to be asked concerning the relative efficiencies of private and government investment in medical R&D.

It should also be evident that singling out medical research cuts, which constitute only 0.08 per cent of total commonwealth general government spending, is little more than a diversionary exercise when there are much larger sources of expenditure to also prune back.

More promisingly the government is correct to identify the need to reduce welfare rolls that would foster labour force participation and, as a consequence, economic growth in the longer term. There is also growing community recognition that welfare passivity is correlated with a range of economic and social pathologies, and thus needs to be urgently addressed.

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About the Author

Mikayla Novak is a Research Fellow with the Institute of Public Affairs. She has previously worked for Commonwealth and State public sector agencies, including the Commonwealth Treasury and Productivity Commission. Mikayla was also previously advisor to the Queensland Chamber of Commerce and Industry. Her opinion pieces have been published in The Australian, Australian Financial Review, The Age, and The Courier-Mail, on issues ranging from state public finances to social services reform.

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