Auditing the auditors: The People’s Commission of Audit

Governments are not like businesses. They provide services because the citizens demand them, not because delivering them is profitable. They collect taxes from citizens, not charge prices from customers. While a business has a legal responsibility to maximise the dividends it pays its shareholders, it makes no sense for a government to generate a surplus from its own citizens.

Tony Shepherd’s National Commission of Audit is a deeply flawed document, but its deepest flaw is its authors’ belief that a government should systematically seek to collect more tax each year than it spends. That is, while the report talks about intergenerational equity, the most inequitable thing a government could do would be to collect surplus tax revenue from one generation in order to leave a subsequent generation lower levels of education and infrastructure and a slightly larger bank balance.

The Commission focusses on the need for the government to sustain public finances but barely discusses the role of government in sustaining the health of Australia’s citizens, its communities and its environment. There is no doubt that governments must make sustainable long-run decisions about tax and expenditure. There is also no doubt that the decisions it makes about how to improve the sustainability of our finances can have significant impacts on the sustainability of the broader systems on which our economy is built.

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