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There is a common perception that the Liberal and National Coalition parties have an ethos of small government. That is, they pursue policies that encompass low levels of government spending and low taxation versus big spending and high tax from the Labor Party.
That is the perception.
Treasurer Scott Morrison has provided facts that prove otherwise. In December, with the release of the Mid-Year Economic and Fiscal Outlook, Morrison confirmed that the Coalition is high taxing and big spending and that, for many decades, Labor has been the side of politics that delivers small government.
The MYEFO documents show that government spending was 25.6 percent of GDP during the first two years of the current Coalition Government and it will remain above 25.3 percent of GDP out to 2018-19. The Rudd/Gillard Government delivered only one budget that saw the government spending to GDP ratio above 25.1 per cent and that was in 2009-10 during the height of the global depression risks – where a raft of temporary stimulus measures saw spending hit 26 percent. In every other year of the Labor administration, government spending was below 25 percent of GDP.
The key to Australia's economic success: locking in low inflation
When Paul Keating “snapped the inflation stick” in the early 1990s, he delivered one of the most valuable, potent and lasting reforms to the Australian economy. Sustained low inflation with a specific target was, in many ways, as important as the decision to float the Australian dollar.
Decades on from this economic fracture, Australia has one of the highest standards of living in the world and has not had a recession in a generation. Last week’s December quarter consumer price index confirmed annual inflation running at just 1.7%, meaning that, over the past 25 years, inflation has averaged 2.5%, which is in stark contrast with the 1970s and 1980s, when annual inflation averaged a destructive 9.2 per cent.
Low inflation is important for many reasons but the boost to living standards for low and middle-income earners is among the strongest. When an economy can lock in low inflation over an extended time frame, as Australia has, it means that those who receive even modest increases in wages and pensions have the purchasing power of their incomes at least maintained, if not improved.