Viewpoint - 11 June 2003

 

The Secret Life of the Gross Domestic Product

 

                            See text for explanation

 

Leo shambled into my cubicle a couple of mornings ago trying to manage a pile of papers which kept eluding him, various ones falling to the floor as he homed in on the chair the dormouse had been occupying. The dormouse has learned to recognise Leo's step and dives for the wastebasket whenever he's awake and hears Leo coming.

 

"Little rodent not in residence today?"

 

"He dove for the wastebasket when he heard you coming, at 180 grams vs 90 kilos he's not to keen to punch above his weight."

 

"Dived, Fred, it's a weak verb these days."

 

"Whatever; is there a reason for this visitation, Leo, or are you tired of the decor in your cubicle and the tearoom has temporarily lost its charm?"

 

"As a matter of fact I'm here to enlist your assistance as an exemplary  intelligent layman; I have here," he says bending down to collect the scattered papers from the floor, "matters arithmetical of interest, at least to me."

 

"Leo, stop being mysterious and get on with it."

 

"Very well. Tell me, Fred, what if the Howard government had maintained the Commonwealth universities grant at the percentage of GDP it was when it came to power while all other sources behaved as they have done since 1996; how much additional funding would the universities have had over the seven years?"

 

"I take it that's a rhetorical question?"

 

 Look at this!" and he spreads a chart out on the now cleared floor.

"That's from last years budget papers and gives Australia's GDP estimated through 2005-06. for 2002-03. I reckon GDP would be just on $754 billion. And working from this year's budget papers, the Federal Treasurer calculates that the total tax receipts for 2002-03 are $159.8 billion with an additional $12 billion from non-tax revenue. A tidy sum even for Kerry Packer.

Note: According to the budget papers, 'Total taxation revenue as a share of GDP is expected to decline in the Budget and forward years, falling from 21.2 per cent of GDP in 2002-03 to 20.6 per cent of GDP in 2006-07. Total revenue over the same period is expected to fall from 22.8 per cent of GDP to 21.9 per cent of GDP. Historical total revenue and total taxation revenue outcomes (and their cash equivalents) are provided in Statement 13.'


"Mind you, Fred, just using the figures in the table, they project GDP to be $934.7 billion by 2006-7, about $180 billion more than now."

 

"Leo!"

 

"Yes, Fred?"

 

 "Having now blinded me with wealth beyond comprehension to say nothing of grade school arithmetic, I ask you, just what's all this in aid of?"

 

"Well, now, I'm pleased you've asked," and he's got that smug look about him. "Check out this table from the Australian Vice-Chancellors response to the Nelsonian Reformation.


"So this year 0.7% of the $754 billion GDP
is $5.3 billion. In 1996 when Mr. Howard assumed the Prime Ministership, the Commonwealth grant to universities was 0.9% of GDP. If they had held to that proportion the grant would have been $6.8 billion and by 2006-07 it would have been $8.4 billion."

 

And before I can get a word in Leo bores on, "You didn't happen to notice that Dr. Nelson between now and 2006-07 is allotting an additional $1.5 billion above 2002-03 funding -- spread over four years? His bounteousness shows no bounds."

 

"Leo, you're not implying that the Coalition government is screwing Australian higher education?"

 

"Nope, I'm saying they're screwing Australia and the opposition parties are letting them get away with it by staying all but mute except for the occasional mumble; there's nothing even resembling the promulgation of policies on higher education, scientific research or innovative development from any of them. But just imagine if the government had kept its grants to the universities at a constant percentage of GDP at the 1996 level while 'other sources' moved from 0.7% of GDP to 0.9% from 1999 to 2004. Then when Dr. Nelson titled his May 2003 policy paper Our Universities: Backing Australia's Future, it might have meant something."

 

"Ok, Leo, would you now like to answer your rhetorical question, i.e. 'what if the Howard government had maintained the Commonwealth universities grant at the percentage of GDP it was when it came to power while all other sources behaved as they have done since 1996; how much additional funding would the universities have had over the seven years?"'

 

"Right, I'll do you a table. Let us estimate the GDP from the chart and use the table of rounded figures provided by the AV-CC. Working from 1996-97 through 2003-4, I reckon it'd look something like this."

 

The Secret Life of the GDP:  (1),(2) and (3) = funding for universities
Calculations are based on the AV-CC table above and are subject to rounding errors.
Year 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04
GDP ($b) 525 550 580 615 665 695 755 790
(1) Non Gov ($b) 3.68 3.85 4.08 4.92 5.32 6.30 6.04 7.11
(2) Gov actual ($b) 4.73 4.40 4.64 4.31 4.66 4.87 5.29 5.53
(3) if Gov = 0.9% GDP ($b) 4.73 4.95 5.22 5.53 5.99 6.30 6.80 7.11
Non Gov + Gov actual ($b)
1+2
8.41 8.25 8.72 9.23 9.98 11.17 11.33 12.64
if Gov = 0.9% GDP + Non Gov ($b)
1+3
8.41 8.80 9.30 10.45 11.31 12.60 12.84 14.22
Difference($b)
3 - 2
0 0.55 0.58 1.22 1.33 1.43 1.51 1.58


Total difference for 7 yrs = $8.2 billion and exceeds the whole  2003-04 Government Grant

 

Well, that's one aspect of the Secret Life of the Gross Domestic Product --

According to Leo.

 


Alex Reisner

The Funneled Web