The Australian: Greens want government to increase spending but abandon growth

WHAT would it mean if the Australian government abandoned economic growth as a public policy objective?

This is what the Australian Greens party wants. Its updated policy platform, adopted last November, says "pursuit of continuous material-based economic growth is incompatible with the planet's finite resources". It calls for growth in production and consumption to be deprioritised as a goal of economic policy.

Ending economic growth is one of the core beliefs of green activists around the world. Canadian David Suzuki said on the ABC's Lateline program a couple of years ago: "Growth has become a driving part of the destruction of the life support systems of the planet. It just can't continue."

Greens leader Christine Milne sought to blur her party's position in a speech to the National Press Club in September last year, saying it was wrong to call her party anti-growth. Rather, she said, it sought "growth in quality of life, growth in equality of society, and growth for the long term".

These are good things, but they are different things to economic growth. Over the 20 years to 2011-12, Australia's gross domestic product almost doubled to $1.37 trillion. In 2011-12, the federal government collected tax and other revenues of $330 billion and spent almost two-thirds of it on social security, health and education.

If the Greens had been managing Australia's economy over this period, presumably none of this growth in GDP would have occurred, leaving the Australian government with a lot less money collected and a lot less money to spend.

Confusingly, while its policies would leave governments with much less to spend, the Greens party has a long list of areas where it wants governments to spend more.

Last year, Milne called for more government spending on public housing; bigger tax breaks for filmmakers; publicly funded dental care; and more government spending on education and on research and development through "tax measures" and "better funding research institutions".

How do the Greens intend to fund all this extra government spending?

According to Adam Bandt, speaking as acting party leader last Christmas, the solution is to "stand up to big business and raise the revenue the government needs".

Bandt should look at the numbers: the federal government expects to raise $367bn in 2012-13, with company tax contributing a bit under 20 per cent. Even a massive increase in the company tax rate would not fund the kind of spending the Greens want.

Of course, the Greens also want to add a big new tax on the resources sector. In February, Milne and Bandt said they were introducing a bill to increase revenue from the mining tax to $26bn. Yet at the same time as raising lots more tax from the resources industry, the Greens want to get rid of that industry. Milne said the Greens sought "a future that doesn't rely on digging up, cutting down and shipping overseas".

They're not too troubled if they cannot raise enough tax to cover higher government spending. According to Milne, seeking to balance the budget is a "surplus fetish". Unfortunately for Milne, running deficit budgets requires borrowing and a government that says it aims to end economic growth will not find much appetite for its bonds in the financial markets.

According to Bandt, the Greens' recently updated policy platform "reaffirms the party's core beliefs".

That may very well be true, but beliefs are not the same as a credible, internally consistent plan to achieve an objective.

If the Greens could show us how the Australian economy will generate the wealth required to pay for all the things they want government to spend money on, at the same time as abandoning economic growth as a policy objective, exiting the resources sector, imposing heavy new taxes on business and squandering taxpayers' money in ventures such as the Greens-championed $10bn Clean Energy Finance Corporation, that would truly be an impressive achievement.

But just as the medieval alchemists could not overturn basic scientific principles to turn lead into gold, unless you believe the Greens can overturn fundamental economic principles, you cannot believe their inconsistent promises.

Paul Fletcher is a federal  Liberal MP