I pity Bill English come Budget time. However, in times of adversity comes opportunity. Richard Prebble has written an excellent piece on the numbers and how serious it is. And a little number crunching by my spies shows the following.
Government spending per person in 1983/84, 2009 dollars, was $11,527.35. Government spending per person in 1995/96, 2009 dollars, was $11,292.22. Government spending reduced over this time saving each of us about $230.00 per year.
Yet government spending per person in 2008/09, 2009 dollars, was about $19,000.00. So between 1983 and 2009, the increase cost you about $7,500.00 per year. But which Government stole more?
National: $2,662.22 (4 years)
Labour: $4,905.41 (9 years)
This increased cost of Government for families is as follows:
Family of Three
Family of Four
Family of Five
Family of Six
Productivity, not government spending, is the driver of our wealth and wages. High productivity growth will deliver high wage growth. But unfortunately, high taxes and poor quality spending decrease productivity. We are paying for government twice – once through taxes, and once through lower wages.
Productivity growth from 1984 – 1990 was 2.8%. In 1990 – 2000 it was 2.5%, yet in 2000 - 2008 it was a mere 1.1%. This cost in lost wages adds up over time. The difference between 1% productivity growth and 3%, over ten years, is almost 25%. That is, policies which lowered our productivity growth have resulted in wages 25% lower than they would otherwise be. For the average wage earner, that’s over $10,000 per year.
So what's the future?
Let's take a "two futures" look for the year 2021. If we do the same as we have done over the last 12 years from now till then government spending will be $31,500.00 for every man woman and child: the average income will be $54,600.00.
But with quality policies, which involve reduced government spending at just $19,000.00 for every man woman and child in New Zealand, plus inflation adjustments, the average income will be about $69,000.0.
Do you want a big government in 2021 or a small government? The burden of Government per person could be $31,500.00 or $19,000.00 and therefore an average wage of either $54,600.00 or $69,000.00.