This article assumes the familiar myth that private enterprise is always more efficient in running an enterprise than is government. All we have to do (so the argument runs) is take government out of the equation and we all become rich and prosperous on the corresponding savings because the savings made by private enterprise administration in some magical way exceeds the distributed profits. This outcome is not substantiated by my personal experience nor by any published figures as far as I know. Indeed it is a well worn mantra much favored by very small business, and right wing apologists. I also take the point put forward by Foyle that the figures mean little or nothing unless the inclusions are known. Private enterprise is always happy to pick up a profitable government enterprise - eg the power industry - but seems less likely to concern itself with, say, the land titles office. Government has the responsibility to operate across the board and unlike private enterprise cannot pick and choose enterprises on the basis of profit alone.
I smell a hidden right-wing agenda here.

ben gershon - Quote "he makes the point big problems need big GOVERNMENT." The trouble from that quote by Menzies is we have THREE Governments
Federal - State - Local that equals over governed.
The ratio of public servants to tax payers is probably a ridiculous 1 public servant to every 100 people (not accurate but probably not far out)

You want to trim that 35% down to 30%? Try trimming back on these taxpayers funded subsidies for starters …

• Annual subsidies to private schools - $9 billion
• Annual private superannuation subsidy - $30 billion (37% of which goes to the top 5% of earners)
• Annual subsidies to car manufacturers - $6 billion
• Annual subsidies for commercial property construction investment - $2 billion
• Free emissions permits to coal-fired electricity generators - $4 billion
• Car dealer finance insurance guarantee - $2 billion
• Subsidies to private health insurers - $6 billion
• Subsidies to Dept of Defence for overseas military operations - $1.5 billion

That’s about $60 billion. Even if those subsidies were only cut back by half, the total saving would be approximately 7% of the gross annual budget.

Simon - you say "Research suggests that 30% of GDP is the maximum efficient size of government". If you hope to be taken seriously when make a statement like this, you really need to cite some actual credible research.

You also give the US as an example we should not want to emulate. I agree with that, but not for the reason you suggest. A large part of America's crisis has resulted not from big government, but from failing to balance the need for government against private sector interests and free market ideology. As a result, we've seen them: fail to properly regulate the private sector (esp. banking); create arguably the world's least efficient health care system, which consumes far more GDP than Australia's for the same health outcomes (talk about vested interests); stuck with a fractured and failing school system; and unable to maintain basic infrastructure, let alone invest in new infrastructure.

So yeah, let's not do that. And yeah, let's keep an eye on government, which can indeed be inefficient (as can the private sector, actually). But let's not set arbitrary targets. Let's instead assess each area or function on its merits and think about who is best placed to fund it, and who is best placed to deliver.

WE need to change the public service with every change of Govt!
We need to understand, that a Govt is only as good as the advice it receives and or adopts.
Someone somewhere, needs to be held accountable for that very advice and or the outcomes it produces!
We need to end the career pathway, that starts straight from university or as a union official, into the ranks of the public service.
We need a class of public servant, experienced and super competent, able to hold the hand of trainee pollies, at least until they can manage alone; and or, free of the training wheels?
We really do need to seriously examine our model of Govt.
Or the adversarial Westminster system, that came to us from feudal England.
Given the diversity of opinion in every party room, do we really need an opposition, or the endless road blocks and the billions in cost, they add to Govt!?
Who is after all, still held completely accountable for outcomes, every three or four years!
We could do much more, if we weren't spending so many billions, simply providing luxury lifestyles for what is little more than obstructionist, debating societies/ham theatre?
The contest of ideas, and the logic that makes some more presentable or more palatable than others, ought to occur during the election contest, not after it, or for 3-4 years after the event.
A free press and genuine public service accountability, might well complete negate the need for an obstructionist opposition.
In any event, a house of review, ensures every bill is thoroughly scrutinised, before it is enacted or becomes law.
Imagine all our corporations, with two boards, one opposing most of the decisions of the other or management. It would be eternal pandemonium and a debacle and endless bankruptcies.
We would never ever accept that model as effective pragmatic management!
Yet we continue to impose it on something far more important, the management of our country and our economy!
Smaller Govt? Why not?
Rhrosty.

Government WILL get smaller. No need to do anything. Just sit & watch.
Energy prices will continue to rise and eat up more GDP as it goes.

Each year there will be less govt funds = (GDP - Energy cost)
and the available private funds will also be less.

All we need to beware of is government borrowing.
If government tries to keep to its promises by borrowing more money
we will end up like Greece or indeed Cyprus.

It really is that simple.