Whitlam's Legacy. Taken From The Australian Financial Review

by David Schuh

Whitlam's Legacy (article from the Australian Financial Review)

"The Whitlam government reforms started an age of entitlement, with huge spending increases on the big ticket social policy items such as education and health. Mr Whitlam's social reforms were radically different from earlier thinking on welfare.

He engineered a sharp expansion in the size of government but did not count on basic aspects of human behaviour. First, any good or service provided free or way below its cost of production will tend to be overused and even wasted. 

Second, nothing is free; it's just a question of who picks up the bill. And paying for the age of entitlement through higher taxation has dulled the incentives to work, save and invest – and so reduced the economy's capacity to pay. 

And third, once entitlements are handed out, they are much harder to take back if times change. The effect of this has been to ratchet up entitlements over time. And regrettably, it has helped entrench the welfare culture, or what indigenous leader Noel Pearson has called a culture of sit-down money. 

The Whitlam reforms are not monuments which can survive unaltered. More efficiencies, price signals and patient-centred incentives need to be built into the health system. To improve standards, universities need the freedom to define their own courses and set their own prices. The Rudd and Gillard governments' disability scheme needs to be closely managed to keep a lid on costs. And Labour's huge projected rise in school spending needs to be reined in because, in this, as in many other cases, the problem is not a lack of money, but how it is spent."