Less is more when it comes to election vows

With a State election pending, political parties will offer new spending promises and regulatory benefits to selected voter categories.

But any baubles governments might provide to targeted voters can only come from commandeering funds and imposing regulatory costs on others.

The electoral game involves politicians punting that the losers won't notice their pockets have been picked and that the costs imposed by new funding and regulatory measures won't damage private production too much.

If, instead of this approach, the political auction was conducted on the basis of reduced spending and less regulation, we would see lower taxes and greater prosperity.

The available gains can be observed by comparing the performance of different US states.

In California, Arnie campaigned on cutting spending and regulations but failed to follow through and, in spite of its premier role in high-tech industries, the state has experienced a dismal economic performance.

Texas adopted spending restraint and low regulation and has been a success story.

Over the past decade, income levels in Texas grew 65 per cent while California saw its income levels grow only 40 per cent.  In per capita terms that barely out-paced inflation.

In California the State Government comprises 28 per cent of the state's income levels whereas Texans make do with 18 per cent.

California has Australian-style regulatory policies on land that create high land prices and consequent high house prices.  Texas has few planning restraints on land use and, as a result, Houston's house prices are half those in Los Angeles.

Where are the lessons for Australia?

In terms of their own budgets, the Labor governments in power throughout the country have shown themselves to be spendthrifts.

In Victoria, government spending has doubled over the past 10 years.  Even the much ridiculed New South Wales Government has done better with spending having risen by ''only'' 77 per cent.

The Victorian Labor Government was fortunate since prior to being voted into office the state's spending base had been pruned by the previous Kennett government.

The Kennett government also improved the state's efficiency with a privatisation program that was vigorously opposed by Labor.

Australia is over-regulated, a symptom of which is that all state governments have planning measures that raise the costs of land for housing.

The cost of a new greenfield block should be around $60,000.  In Victoria, planning regulations raise this to $150,000.  In NSW regulations lift the cost of a block to $330,000 but it is small comfort for an aspiring house buyer to learn Victoria's government is not as bad as its NSW counterpart.

We are well past the point where government spending and regulations offer any net benefit and it is time political parties started to compete with each other by offering lower spending, reduced taxes and a bonfire of regulations.

As the Texas example shows, this would lay the foundations for higher living standards.

The popularity of deregulation and cost-cutting is greatest following an economic crisis.

Gross mismanagement by Victorian ALP Governments in the 1990s caused such a crisis but the benefits of reform should be pursued without such a trigger.

ADVERTISEMENT