Opinion & Commentary
None of the Treasurer's budget handouts makes any economic sense
What was the overall rationale driving Peter Costello's 12th budget? What fundamental objectives was he trying to achieve? What key principles informed his decisions? His big idea this year was the $5billion endowment fund for universities. That's a lot of money. Interviewed on Tuesday evening, he boasted: "The endowment I set up tonight doubles everything the university sector has saved in endowments in the last 150 years."
Wow! So for 1 1/2 centuries, public-spirited Australians have been bequeathing universities money in their wills, establishing foundations, making gifts, then along comes the Government and makes all their efforts look puerile with one wave of its magic money wand.
Imagine you are an affluent philanthropist sitting down this morning to make your will. You had been thinking of leaving your alma mater a hundred grand, but what's the point now the Treasurer has weighed in with 50,000 times more than you were going to donate?
Three lessons can be learned from this showpiece budget announcement. First, government spending crowds out voluntary initiatives. If the Government makes huge gifts to universities, other people won't.
Second, there's no such thing as a free lunch. The more "intermediate institutions" such as the universities come to depend on government money, the more they will forfeit their autonomy. Slowly but surely, the Government is smothering civil society by taking on responsibility for more and more areas of life that we used to take care of ourselves.
The third lesson is that the Treasurer is so awash with taxpayers' money that he really does not know what to do with it. A couple of years ago he set up the Future Fund to soak up his surpluses, but this fund is now expected to meet its target ahead of schedule, so he needs to find another mattress to hide our money under. That's why he has come up with his universities' endowment fund.
But why take so much tax from us in the first place? Some economists say we may spend too much of our own money if taxes are reduced, and this can trigger inflation. But if that is why the Treasurer keeps collecting much more tax than he needs, he can achieve the same result by cutting taxes and requiring us to save the difference in our personal super funds. It would be far better for us to save our own money in our own accounts than for the Government to take it off us and put it in its own giant piggy bank. But the Treasurer seems reluctant to relinquish his control over our earnings.
Professor Peter Saunders is The Centre for Independent Studies social research director
