It may come as a bit of a surprise that there really isn’t any readily available database that shows the fiscal record of any particular administration. We will have to construct this for this topic, and there will be some complications involved in doing so.
For today, however, I just want to use some currently available information to present a bit of the ‘big picture’. I’m going to use Core Crown Expenses, which is the standard measure, and look at the period from 1998/99 to 2008/09. I think that timeframe is the best one for a simple analysis, but no year-to-year analysis is perfect. The budget for 1999/2000 was actually set by Bill Birch in the Shipley government, but the incoming Clark-Anderton government committed significant additional spending during 1999/2000 ahead of their own first Budget in June 2000. Similarly, the current government made significant changes to the 2008/09 appropriations but the budget for this was originally set by Michael Cullen.
Plus, of course, the Core Crown Expenses are a mix of deliberate initiatives, responses to cost and salary pressures, and automatic adjustments (benefit CPI increases, additional superannuitants etc). With these caveats in mind, then, let’s look at the figures.
The graph above shows the growth in Core Crown Expenses from the 1999 fiscal year (1998/99) to the 2009 fiscal year (2008/09). The yellow line is the CPI index for this period, so the area above that line represents a real increase in government spending. Anything below that can be argued to be simply reflecting general price inflation.
We can see that expenses increased from $34 billion to $62 billion during the period. That’s an increase of $28 billion, or almost a doubling of Core Crown Expenses. Probably about a quarter of that, or $7 billion, can be accounted for by general CPI inflation, so the real increase would be about $21 billion.
Where did all that additional money go to? We have data breaking the money down into Core Crown Expense Classes, a slightly odd grouping of spending areas that don’t seem to be used anywhere except the Crown accounts.
The graph above presents the composition of the $28 billion increase by Core Crown Expense Class. It shows that the two largest areas of additional spending were ‘Social Security and Welfare’ and ‘Health’, followed by ‘Education’. Between them, these three classes accounted for almost two-thirds of the total $28 billion increase.
Such broad categories, however, raise as many questions as they answer. For instance, what drove that extra ‘Social Security and Welfare’ spending? It might be thought that it went on additional benefit expenditure, but actually it was more likely to have been a combination of an ageing population increasing the cost of Superannuation, and Working for Families tax credits.
Also, since some Expense Classes are much bigger than others, those large slices of pie above may simply reflect the fact that those areas made up a large proportion of spending to begin with.
To test that, let’s use an index approach to show the growth pattern in each Expense Class over time irrespective of the overall size of spending in each.
This shows that, when viewed in relative rather than absolute terms, growth in ‘Health’ and ‘Education’ was actually only mid-range amongst the Expense Classes, and ‘Social Security and Welfare’ was one of the lowest-growth areas.
By far the fastest growing Expense Class was ‘Economic and Industrial Services’ followed by ‘Transport and Communications’. ‘Defence’ by contrast has grown quite slowly — however Core Crown Expenses do not include capital expenditure such as military equipment.
All this is just the first layer of the onion. Over the course of this topic I intend to peel further and look at the particular initiatives and expenditure lines that have driven costs in each of these Expense Classes, and also look at other areas like capital expenditure that are left out of this initial analysis. Let me know of any insights you have about how to proceed, or requests about particular areas of expenditure that you feel are important.
Update: I should also reference my data sources. Most of the data comes from the very useful Treasury file Fiscal Time Series – Historical Fiscal Indicators 1972-2008. The data for 2008/09 is from Core Crown Expense Tables in BEFU 2009.