Leviathan on the Rampage: Government spending growth a threat to Australia’s economic future | Robert Carling

Australia’s government expenditure has surged to a post-war high (except for the pandemic-era spike) of 38–39% of GDP, up from 34–35% before the 2008 global financial crisis, a new Centre for Independent Studies paper outlines.
 
In Leviathan on the Rampage: Government spending growth a threat to Australia’s economic future, economist Robert Carling warns that federal spending alone has climbed from 24–25% to 27.6% of GDP since 2012–13, fueled by a culture of entitlement and relentless program expansion in social services, defence and debt interest.
 
Key Findings

• Real per capita federal spending has risen 1.8% on average annually since 2012–13, far exceeding Australia’s 0.5% productivity growth and more than double real GDP growth.
• A dozen fast-growing programs — including the NDIS, aged care, defence, schools, Medicare and child care — account for 63% of the increase in federal own-purpose spending in that period and now represent around half of such spending.
• Public debt interest is projected to rise 9.5% a year for the next decade, as higher rates refinance pandemic-era borrowing and ongoing deficits push debt up further.
• Off-budget ‘investments’ — from student loans to energy transition funds — add a further $104 billion in hidden spending over five years.

 
Drawing on Bastiat’s warning that “the state is that great fiction by which everyone tries to live at the expense of everyone else”, Carling argues Australia has crossed a tipping point.
 
“More than half of voters now rely on government for most of their income — through wages, benefits or subsidies — creating a formidable bloc against restraint,” he says.
 
“The honeymoon of debt-funded largesse is over. Without a determined reset of expectations, Australia risks sliding into a European-style welfare state — slower growth, higher taxes and a culture where ‘voting for a living’ replaces ‘working for a living’.”
 
Carling urges immediate expenditure reform, not just tax tinkering. His reform menu includes: 

1. Rolling reviews of major programs to cut waste and lift effectiveness.
2. Fiscal rules to cap per-capita spending growth below GDP growth.
3. Freeze public-service numbers and shift from consultants to permanent staff.
4. Shelve new spending ideas — including universal child care and expanded Medicare dental cover.
5. Return to structural surplus by 2029–30, echoing successful consolidations of the 1980s and 1990s.

 
Robert Carling is a Senior Fellow at the Centre for Independent Studies and a former World Bank, IMF and federal and state Treasury economist.

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