10 Jul 2008

Economists wade into debate on Government spending

5:14 pm on 10 July 2008

ANZ bank economists have waded into the debate over Government spending, saying more attention needs to be paid to where money is ending up.

Their report, "Defending the Front Line", notes that departmental expenses have increased an average of 7% a year since 1997, while frontline spending has averaged 5%.

However, it also notes that the spending may be a result of services having been run-down in previous years, and that mix is not necessarily wrong.

In education, it says departmental spending grew by 12% a year over the decade, outstripping the growth in teacher numbers and other school services.

One of the report's authors, Cameron Bagrie, says frontline spending in areas such as law and order, employment initiatives and health services is of greater benefit to the economy.

The report calls on the Government to publish regular statistics on the mix and quality of its spending, and says measurable benchmarks need to be introduced to the likes of the Fiscal Strategy Report.

Associate Finance Minister Trevor Mallard says the report into the public service is lightweight and reflects a poor understanding of the way the Government works.

Mr Mallard says the report does not accept, for example, that when a Ministry of Social Development worker gets an unemployed person a job, that is departmental spending. He says that is in fact frontline, but the report says it does not count.

Mr Mallard says the report also ignores extra staffing needed to implement the likes of Kiwisaver, the policy giving 20 free hours early childhood care and the superannuation fund.

The National Party says the ANZ report echoes its own concerns about the growth of the sector.