Australian Governments put their hands in our pockets because they are not under the discipline of the market

Australian Governments put their hands in our pockets because they are not under the discipline of the market, by David Uren.

Here’s a startling contrast: the cost of goods and services with prices set by the private sector has increased by just 5 per cent during the past five years.

But where prices are set or substantially influenced by the government, costs have escalated by 27 per cent, more than five times that pace.

In the private sector, competition has never been more intense under the onslaught of cheap Asian-manufactured goods, the entry of new global retailers and the ever-greater ability of technology to put goods and services from around the world at a consumer’s fingertips.

The price of items that are subject to international competition has risen by only a little more than 2 per cent in five years, with no change at all since 2014. A 15 per cent fall in the Australian dollar may have been expected to push up the cost of imports, but it hasn’t happened. Clothes are about 4 per cent cheaper than they were five years ago, cars are down 6 per cent, and the price of computers and televisions has plunged by more than one-third. …

But once government gets into the mix, different rules apply. Governments are happy to push their own funding pressures back on to consumers, while the failure of policies attempting to subsidise costs or to direct market outcomes have opened the path to private sector rent-seekers.

Graph from the IPA.

Rising fees and charges on essential services are a tax, forcing households to cut back elsewhere. As research by Coles into shopping patterns in its own stores has shown, people on lower incomes are not just cutting back on discretionary items but on meat and vegetables, with an impact on family health. …

The federal government has become focused this year on the impact of electricity prices, which are rocketing a further 15 per cent to 20 per cent this quarter, adding to the momentum of government prices.

The left likes to downplay the role of competition. Indeed, avoiding competition seems to be the motivating theme behind many areas of leftism. Government has no competition — bliss.