Tax dream is turning into public-service nightmare

October 20, 2000

Australians pay less tax than those in comparable nations, but successive governments have spent less on public services. The result, said the National Tertiary Education Union, has been a dangerous fall in public spending on higher education and research.

In a preliminary "audit" of the higher education system, the union said the drop in public spending had been accompanied by, and may have influenced, a decline in private expenditure on research.

An audit report says comparable nations to Australia have consistently collected up to 10 per cent more in taxation as a proportion of GDP.

According to estimates, Australia is more than 7 per cent below the Organisation for Economic Cooperation and Development average and, when levels of government are aggregated, Australia collects some 20 per cent less tax - a potential revenue shortfall of A$44 billion (£16 billion).

"If this remains far below the average, it will inhibit the ability of government to invest in public and social infrastructure," the NTEU said. Just five countries - Mexico, Korea, Turkey, Japan and America - tax their citizens less relative to their total national wealth, placing Australia 24th out of the 29 OECD nations.

"It is an indictment of Australian education policy that, at a time when other nations are recognising the value of increased investment, Australia has substantially reduced investment. Between 1991 and 1997, Australia experienced the second largest drop in funding tertiary education relative to GDP (with) only Canada experiencing a larger drop," the report says.

Until the mid-1990s, government spending on universities was 1.15-1.2 per cent of GDP but, with the election of a conservative government in 1996, funding has fallen more sharply than at any other time since the Commonwealth assumed financial responsibility for higher education in 1975.

"There are few times in our history when we could have less afforded to enter such a sharp period of decline," the report says. It notes that had funding in 1998-99 been maintained, an additional A$2 billion would have been allocated to the university sector.

Gross expenditure on research and development increased on average by 5.4 per cent a year between 1991 and 1997 - a healthy rate by OECD standards. But spending over the past two years has fallen from 1.65 per cent of GDP to 1.49 per cent so that Australia is now well below comparable OECD countries.

The report concludes that the decline in public funding of tertiary education and R&D defies a global trend. Australia's status as a low-taxing nation has clearly hindered governments' ability to adequately fund public education and innovation systems.

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