Is this writer really saying that education and hospitals don't produce anything?

Education, healthcare and other publicly-funded functions are consumers of resources, not producers of them. They exist to enable higher outputs in the sectors of the economy that create wealth. If the wealth-creating sectors are growing more slowly than the wealth-consuming ones then there may be a problem coming up.

Part of the expansion in these sectors is undoubtedly down to the increased demands on health and social support services created by an aging population, but that's only part of it. The title of the piece is very good: a great deal of this increase is due to services such as childcare and other social support services for single parent families and for two-income families. A large part of the education expenditure is similarly paying for mature women to become qualified to do those support jobs, such as social work and childcare, which they are very likely to do only part-time, reducing the effectiveness of the public investment in their education. In addition, the vast growth in the pay on offer in those sectors has exacerbated the problem.

The aging population is an unchangeable demographic phenomenon that has been foreseeable for many years and has been the subject of a great deal of planning. The vast growth in people "hanging out each others' washing" is a consequence of ill-considered social engineering designed to increase the size of the labour pool without a concomitant increase in population, partly in response to that change in age profile and partly for other, political reasons.

The article didn't mention it, but over half of Australian GDP is derived from personal consumption expenditure and only a small fraction is from expenditure on business investment of various kinds. Around 25% of that personal consumption is funded from tax redistribution. Over 50% of employed persons pay no net tax, so that small slice of business investment has to do an awful lot of work.

Reading a recent report where there is one "manager" for every 2.5 workers, and about 20% of public servants are classed as "executives" I think that there is a huge scope to purge the huge pool of non productive paper shufflers.

Part of the problem is, I believe, incompetence and endless repetition, to get it right, eventually?
We also are still afflicted by endless duplication, paper work in triplicate, and the endless and entirely unnecessary collection and collation of information.
Just to give some centralizing bean counters, a sense of their own self importance, and or, somehow justify inordinately high salaries/and senior executive job titles.
We know who's incompetent, just by the number of super competent assistants he/she needs?
And the stuff-ups he/she presides over, when they, who always know best, ignore more competent advice?
The Queensland health wages debacle, a case in point!?
These people are your typical corporate psychos, foul-mouthed bullies, claiming all the kudos and shifting all the blame!
If only we could clean out senior public servants with each election!
Private sector CEO's have limited service contracts, which allows the corporate cowboys to be moved on, preferably before they do too much permanent harm.
We really do need to decide who does what and end the duplication and the blame shifting it allows!
If public health/education funds are basically collected and redistributed by the fed, then perhaps a direct from the fed funding model, would reduce some of the unnecessary and costly double dip administration.
State govts, before they provide so much as a single service, already consume some 70 billions PA, as the cost to us, of their existence!
In not too distant memory, much of our public service provision, health, education, utilities, was provided by unpaid voluntary regional boards.
Regional councils took care of water/electricity reticulation, when council members were still unpaid and mayoral salaries were in real terms, just a third of what they are today.
Council sole responsibility reticulation model, provided considerably cheaper in real terms, power! They also sold all the electrical appliances, so it was in their financial interest, to keep a cap on power prices!
Most of Greece's current economic problems can be traced back to tax avoidance, and just too large a public service sector!
Are we following in those hugely incompetent footsteps?
Rhrosty.

We do need to revitalise the private sector!
The only way we can now do that is through quite massive tax reform and simplification, and cheap energy. Both of which, I've dealt with in some detail elsewhere.
Read, Thorium, cheaper than coal!
After that, we really do need to start investing in our own people and their better ideas.
If money, (venture capital) is a problem, then quantitative easing, almost doubled domestic money supply, and a consequent lower AUD beckons?
Rather than continue to insanely rely on debt laden, carpet bagging, foreign investors.
Who seem to specialize in tax avoidance, asset stripping, off-shoring profits and real wage reduction?
Except for the senior executives, whose real comparative incomes have more than tripled, in just two decades; and for no increased productivity or performance, but rather, just the opposite?
If only we could import some Asian administrators under 457 visas?
I bet we could reduce extremely excessive corporate salaries by a full two thirds initially, and likely wind up with far more pragmatic and experienced decision makers?
Who in their turn, would cultivate and mentor the next generation of senior executives, from within their own organisations, as a vastly more sane, and significantly less expensive option!
Rhrosty.

Rhrosty I think you will like this one.

I mentioned recently an old mate, a fitter, & a hard old Scotsman, who became frustrated when handing over the production management at Gilbarco, to a couple of graduate engineers. What they had learnt at uni was proving basically useless in production management & programing.

One of his main bitches was the ideas coming from the board, since the company had gone public, & state & commonwealth government interference.

He pointed out that the company had been started & grown to prominence when a couple of plumbers, disgusted at the quality of the gear they were installing at service stations, decided they could do better. They could & did, & built a large successful company.

The old fitter reckoned the problem was professional management. Rather than finding the best person do the job, they found the person with the most bits of paper saying they could do the job.

This way they were covered if their choice failed. It could not be their fault, the new chum came well credentialed. He reckoned they should remember the company was built by a couple of tradesmen.

The fact that he was a tradesman may have coloured his judgement a little, but he had run production for 20 years very successfully.

What he wanted was government to get the hell out of the way, & let people run things the best way they knew. That was always better he reckoned, than anything dictated by bureaucrats & academics.

After one of his rants, he would look at me, remember I had one of those bits of paper, & say, "well you don't feel like one of them". High praise indeed, coming from him.

Parkinson's Law still applies: as long as your salary and status depends on how many subordinates you have working under you, public servants will be motivated to build up their own empires, regardless of how trivial their contributions is.

My suggestion is that bonuses should be paid proportionate to the decrease in departmental costs between one year and the next. The more unnecessary services and useless staff that get cut, the more that everyone who's left gets paid.

Is this writer really saying that education and hospitals don't produce anything?
Godo,
Well, education produces masses of hangers-on & hospitals produce unmanageable, highly polluting waste.

I think your Scot tradesman would like "The Diagonal Steam Trap"
It is over the size limit for here but this is one link
http://freepages.genealogy.rootsweb.ancestry.com/~rdelzell/general/jimmie_steamtrap.htm
Any shop floor man would get a laugh.

Thanks Belfast. Old Jock is no longer with us, but I'm sure he would have enjoyed it.

He was too serious to ever do something like that, he would have been the one who was first to see what Jimmy Dalzell was up to.

Dr Novak has missed a key point about unemployment figures. The real unemployment figure is 2 million or 20%. No one in their right mind should take any notice of the monthly unemployment figures as they are based on a politicla definition of unemployment not an actuarial one.

In February 2012, the PM said possibly up to 2 million working-age Australians ''stand outside the full-time labour force, above and beyond those registered as unemployed''. These included about 800,000 in part-time jobs who wanted to work more; 800,000 outside the labour market, including discouraged job seekers; and ''many thousands of individuals on the disability support pension who may have some capacity to work''.

All up 2.6 million unemployed.

Imagine if the public service pays & conditions were reduced by 10%. This would have no impact on anything apart greed. These 10% would provide so much work we'd need to import workers to fill the positions. Coalition there's your chance. Also start national service & work towards flat tax.

Jon J, why aren't you running the country, or at least someone just as pragmatic?
We need to revitalise the private sector economy, so that those 2.6 under/unemployed able bodied, are snapped up.
What an incredibly dispiriting waste of real peoples' time and lives!
One remembers a time when even a 1% unemployment rate was considered shameful, and or, those collecting the dole, beach bums and those who wouldn't work in an iron lung, did so by choice rather than compulsion!
That time also saw us as a much more egalitarian society, the third wealthiest nation state on the planet, and a creditor one at that! Before Thatcherism, Reganism and Howardism, and or the hubris and self congratulation, that seems to have so marked it!?
That was the time when some employers would even pay an employee a generous spotters fee, for introducing a new able-bodied, willing worker!
That was also the time when we ran railways, and trained many of our apprentices, in our many railway workshops.
Yes, they were mired in the previous century; but imagine if they could have moved with the times.
I mean, Japan introduced her rapid rail in 1953-4 for just 5 billion!
Suppose we had looked and decided, this was the way we should go?
When we could still afford the land corridors.
And no, I don't hanker for the past, just the practical pragmatism, that was applied to most public decision making, and politicians who came to their positions, very late in life as virtual retirees, with a wealth of practical experience, real world wisdom, a REAL desire to serve others, rather than themselves; and more than just pieces of paper, backing their judgement calls.
Since those days, both major parties have moved very much to the right, and we are a vastly poorer, less well run country for it!?
Rhrosty.

Rhrosty, the proportion of the population that is regarded as being part of the workforce has increased by well over 30% since the 70s because of the mobilisation of women.Since productivity has increased, albeit at a lower rate, then the actual amount of work that needs doing per employed person has decreased or at best remained static, all things being equal. Nearly all the growth in female employment has been Government funded, either directly or indirectly via subsidy and a great deal of that has been part-time.

In other words, the growth in apparent under-employment is an artefact of the growth that has occurred in the labour pool which has been created artificially and has resulted in a large increase in workers with skill sets that do not match demand from industry. A social worker isn't much use to a mine developer, so the 457 worker (invariably male) is imported and works overtime while the social worker is given a part-time job filling out forms for old people and illiterates, paid for by the Government.

She then dutifully notes on whatever surveys are circulated that she is under-employed and idiot politicians regulate higher wages for her sector and give her charitable employer more money to pay her with.

But nobody in government suggests that we actually have more than enough social workers, teachers, nurses, child carers or bureaucrats and that perhaps women might be better serving the country by either staying at home with the kids, supported by a loving husband, or showing willing to do the training that would enable them to do the work that the 457s are doing.

That would be "patriarchal" and anathema.

I agree with following paragraph

'Public sector jobs growth, particularly in the 'new commanding heights' of education, health and welfare, has proceeded on its merry way, irrespective of the economic weather, whilst major productive sectors have struggled to maintain their jobs base in an underperforming post‑GFC Australian economy'.

However, i am curious to what evidence the author cold point me to to show what industry (productive) will be created if following occurs.


'A significant reduction in public sector employment, founded upon critically assessing the economic merits of functions and activities presently undertaken by government, remains a meritorious strategy for reform‑minded governments to promote long term economic growth and productivity'.

Chris Lewis,
If the public service were to be reduced (take note, not cut) & public service pays & condition reduced by 10% no one would experience even the slightest hardship & more monies would be freed up for development & projects.
There simply is too much money going to high ranking bureaucrats whilst services & associated jobs are cut. That last federal bludgers pay rise was higher than thousands of full time wages. Look at how much some utterly pointless & useless uni chancellor or a judge gets paid . It's nothing short of criminal. They could all do with a cut thus freeing up money to build a more functional society. Teachers are asking for a pay rise at this very moment. give us some evidence that they deserve one more dollar. Money makes things go round, 6 digits in some bank statement don't.

individual, i dont disagree with you. i reckon there can be significant cuts to the PS, and probably academia. In my life, i have seen considerable waste in the public sector, academia, and even the provate sector. I have also seen a link of waste between public and private sector.

I am just interested in what industries will prosper. I have asked the author this and am open to all evidence.

My feeling is that it is going to be quite hard to get productive sectors going, even if we cut public spending. I hope i am wrong.

Where i live famers are struggling, and every second ad on the weekend seems to be for a house purchase or Tom waterhouse. Now these latter industries are based on consumption, i am interested in production, preferably production by Australians.

I am just interested in what industries will prosper.
Chris Lewis,
I suppose that depends entirely on the decision makers. Where they say the money shall go that's where it goes to be syphoned in all directions. The most likely to prosper in Government projects are the consultants & in private projects it'll be the principal contractor although private projects do not generate the insane profits as in those made by government appointed private consultants on five year contracts.
The losers are always the tax payers. Of course it is made to look like infrastructure is being graciously provided but once you start delving into things you find out how much our Government bureaucrats waste so criminally & so criminally unaccountable. I hope the new Coalition Governments have a few ounces of integrity to stop the sorts.

Individual.

I concur. We need greater scrutiny and consensus about where all resources go, including academia.

My concern is just how we get the right balance in regard to the private-public mix, whatever the right mix is.

Unfortunately where industry is concerned I think the horse has bolted.

When I came out of the navy, I finished the BSc in engineering I had started, [in one year, I was paying back then], & went into the plastics raw material.

At one time, about 63 or 4, we were supplying raw materials to 6 different TV manufacturers. From memory, Krysler Admiral EMI Echo AWA HMV & at least one more.

I was responsible for developing an ABS plastic formulation suitable for refrigerator door liners. Once perfected we had 6 customers using it in their fridges.

We also supplied 4 companies making telephones. Along with washing machines, vacuum cleaners & kitchen mixers, there were dozens of appliance manufacturers.

Can any one name any company still manufacturing such stuff here today?

Hell we don't even have anyone able to repair the stuff today. God help our grand kids.

Too true Hasbeen, too true !
The other company would have been Philips or Astor.
Remember the AWA factories on Parramatta Rd, the valve factory and TV plant ?
Remember AWA at Nth Ryde ?
Manufactured two way radios for industry, aviation, Marine, broadcast
transmitters, defence & stacks of others. Designed sophisticated
approach software & systems for airports an defense etc etc.

What does AWA do now, Runs Keeno, duh--

There seems to be an army of screen jockeys employed in the finance
industry, making nothing but money.
We would be better off if they were down the mine digging coal.

Unfortunately where industry is concerned I think the horse has bolted.
Hasbeen,
Yeah, but don't forget that horse is now getting old. There's a hybrid in the early stages of evolution & things will start to change in the next five years. I see it in the changing attitudes of the younger with sense. Quite the majority of the smart are in fact querying so much blatant unaccountability & they are in fact agreeing with me re National service & flat tax. Sheer economics & Law & Order will dictate the introduction of these policies. It's merely those who are hanging off the apron now who are getting very defensive when asked to be accountable.

Individual, the problem is that our economy has become one based on retail spending. Over half our GDP is derived from money spent on goods and services going to the household. 1/3 of that is money redistributed from taxes as welfare benefits and a further 1/3 is from income earned working for Government or organisations funded by government either directly or indirectly. The rest is largely derived from money earnt and spent by people who are themselves providing services that are paid for by the other 2/3, such as retail shop assistants, hairdressers, beauticians, etc, etc, etc.

If you've read Douglas Adams's Hitchhiker's Guide to the Galaxy, they're the group who were allocated to the "B" ark...

A few years ago Tony Abbott, when he was Howard's Health Minister, gave an interview on the 7:30 report, where he inadvertently but clearly made a distinction between "the taxpayer" and "the consumer" when talking about some proposed reforms to health funding.

At that stage most median income families still paid some net tax, but the largest consumers of health services were clearly not net tax payers, especially after the cost of providing them access was taken into account. Abbott made the point, which is very strong, that the interests of the "taxpayer" were at odds with the interests of the "consumer" and that his job as Minister was to try to balance those competing demands.

Since 2010 more than 50% of median income families pay no net tax. They have moved from being "taxpayers to "consumers". That makes the job of trying to balance the competing interests much harder, since "consumers" are now the majority of voters and "taxpayers" are mostly just corporate entities with no vote at all.

They do have the option of choosing not to participate by moving offshore though and lots have done so. Where does that leave the "consumers", when there's nothing to consume?

Have you read Animal Farm lately?

Antisceptic,
They're , devoid of sense, taxpaying consumers who pay GST after paying for everything else. Sadly, they're the ones propping up the public service.

From the Grattan Institute yesterday:

http://grattan.edu.au/publications/reports/post/budget-pressures-on-australian-governments/

"Australian government budgets are under pressure. Our analysis of the budget positions of the Commonwealth and the three major states shows that rising costs, a shortfall in tax revenues, declining minerals prices and big political promises could see a combined annual deficit of around 4 per cent of GDP by 2023. The greatest single pressure comes from growing health spending. Balancing budgets is difficult but it can be done – provided governments are prepared to make tougher choices than they have made over the past decade."

I hate to say I told you so, but I did.

However, blaming health spending is actually begging the question. Health is a large consumer of resources, but it is arguably an essential service. The real problem is that the resources that could easily pay for it are being consumed in a circular whirl of "hanging out each other's washing" that doesn't produce anything at all of genuine value. It simply generates heat and noise and an appearance of prosperity that is based not on needful work, but on make-work and government borrowing premised on trying to buy the votes of women.

It cannot last. There is a really large economic collapse coming within the next few terms of Government that will be unprecedented and I really doubt that there is now anything that can be done to stop it, for the reasons given in my last post. There are now so many people who are reliant on Government subsidy to maintain their existence that Government spending reductions would simply accelerate the inevitable crash.

My kids have been badly let down by their forebears in this society. Their generation will suffer mightily as young adults because of the egocentrism of a relatively small group of people who have pursued influence within politics and media and made good, prudent policy effectively impossible, because of their intentional desire to construct a society in which those who generate the wealth are not those who decide how it should be spent.

Poor fellow, my country.

Antiseptic said;
There is a really large economic collapse coming within the next few
terms of Government that will be unprecedented and I really doubt that
there is now anything that can be done to stop it,

This exactly what I have been warning of, although it is not my
original thought. The oil field engineers and geologists have been
warning of this for years and years.
The increase in the cost of fuel and its supply constrictions simply
cut back on GDP and growth.
Unfortunately the politicians don't want to know as they can see no
solution to restore business as usual.
This condition it is believed is permanent.

We do need to return to an economy that once again makes things, our future depends on it.
Not too far ahead in time, we will have depleted our mineral resources.
Oxide reactors consume less than 5% of their total radioactive material!
Whereas, thorium reactors consumes as much as 95% of theirs!
The waste from thorium is vastly less toxic, and is eminently suitable as long life space batteries.
We have more than 10 times the amount of thorium in comparison to uranium, and enough to power the world for 600 years.
There's is no doubt that thorium power is cheaper than coal and has the added advantage of being smoke stack and carbon free.
We also need to get away from the concept of a national electricity grid.
The first effect is prices at least double what they need to be, and an electrical supply system that is far too vulnerable; and far too expensive to adequately maintain.
Future industrial parks ought to also include an onsite publicly owned and operated power supply.
Publicly owned, given no private operator comes anywhere near the much lower price paradigm of the public model.
And a lower profit model that more than recovers all actual costs, is not subsidised, as claimed.
It's just a lower cost model, where the social and economic benefits vastly outweigh anything privatisation can ever produce.
There are other energy provision paradigms, that ought to be included in the mix. Including biogas> electricity and algae> bio-fuel production!
Imagine, what could hold us back if we had the lowest real tax impost in the world!?
Very possible with a single stand alone expenditure tax; and, the lowest energy prices in the world.
Other pluses include, we live on an Island continent, and share no common land border, with any other neighbour.
We are a stable democracy, with a highly educated workforce.
And we punch well above our weight in many areas of R+D.
Every component would then be in place, to encourage the mass migration to these shores, of the world's premier high tech industries.
Rhrosty.