Evatt report flaws exposed

The States -- how they rate

THE Evatt Foundation's attempt to assess the performance of State Governments, in its The State of Australian Government 1994-95, is an excellent idea, but as a piece of research it is seriously flawed.

The report endeavours, among other things, to assess and compare the performance of the States and Territories on a broad range of policy areas, and to produce an overall ranking of State performance, using published data.

The task is a worthy one, but the exercise is only as good as the methodology and data employed.  The old adages of "garbage in, garbage out", and "lies, damned lies and statistics" both apply.  Unfortunately, the Evatt Foundation's assessment runs foul of both.

Its main conclusion, that governments that spend most -- SA, ACT and NT (Victoria, the pariah of union movements, is the exception) -- perform the best, may be what the report's main sponsors (the Community and Public Sector Union) wanted to hear, but it's a statistical delusion.

The report relies mainly on data from the latest Commonwealth Grants Commission Report.  This data has been used extensively over the last half-decade, in a number of studies including audit commissions in Tasmania, Victoria, WA and SA.  Surprisingly, these studies have, using the same data, reached conclusions opposite to those of the Evatt report.

The trouble with the Evatt Foundation's use of these figures is that above-average levels of spending, as measured by the Commission, may arise from "better" services or greater inefficiency.  Likewise, below-average levels of spending could arise in the converse way.

For analysis to be credible, one must look beyond the Commission's data to assess the relative policy position of the States.  The Evatt Foundation report failed to do this.  Instead, it assumed that above-average spending is good and below-average spending bad.

Numerous studies have looked beyond the Commission's data, and, not surprisingly, found that efficiency and effectiveness are major determinants of the spending differentials identified by the Commission and that much of the above-average spending is wasteful, particularly in the States the Evatt report ranks highly.  They have also found that many areas of under-spending, particularly in Queensland, which is accorded a low rank in the report because of its low spending levels, are justified on efficiency grounds.

Enough research has now been done in areas such as health and education to confirm what common sense always indicated;  that high spending does not mean better or more services.

The report makes a big song and dance about the high level of spending on culture and recreation by the SA Government (66 per cent above the all-State average), and claims that because of this public-sector largesse SA is the cultural capital of Australia.  However, the Grants Commission does not adjust for the differences in private-sector supply.  Victoria and NSW, which have relatively large and profitable private-sector entertainment industries, are justified in spending less public funds than does the relatively isolated SA.

Similarly, the report's assessment of public transport provision is flawed.  It gives the smaller States poor assessments on public transit services, because they spend substantially less than is spent on such services in Sydney and Melbourne.  Of course, it would be absurd for Tasmania to adopt a mass transit system designed for a large city.

The Evatt report does not canvass the full range of available and relevant data, and its failure to do so materially affects its conclusions.  It does not consider public sector capital expenditure, user charges, or a whole range of other revenue-raising measures.

It also fails to consider data, provided by all governments, on forward estimates of spending, taxing and deficits, and important transition factors.  It is therefore judging governments on their inheritance rather than their own policies.  The report weights factors in a manner that is clearly absurd.  It says it applies no system of weights so as to avoid imposing judgements about the importance of categories, but value judgements are necessary, have been made, and lack credibility.

The Evatt Foundation's 1994-95 assessment is not worth the paper it is printed on.  The project is well worth doing but only if done well.  So back to the drawing board they should go -- and next time ideology should not get in the way of methodology.

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