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From Labourism to Social Democracy: Labor Governments and Fiscal Policy in the Australian States, 1911–40
Geoffrey Robinson*
To what extent did the early political success of the Australian Labor Party (ALP) impact on public policy? This article presents an analysis of patterns of social expenditure and taxation in the Australian states from 1911 to 1940. Although the 1910 Surplus Revenue Act initiated a major shift in financial power to the Commonwealth the states continued to levy income tax, operate social services, in particular health and education and provided direct social welfare payments in this period. The focus of scholars on the institutions of tariff protection and industrial arbitration has obscured the importance of state social services expenditure. The article reviews general theories of public expenditure as well as relevant Australian scholarship. It then examines patterns of taxation and social expenditure and considers the extent to which state divergences were influenced by the partisan composition of state governments and divergent labour movement strategies. It concludes that Labor made a difference but this difference varied from state to state.
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| Australia was the first country in the world where a workers' party, the Australian Labor Party (ALP), was elected to executive office at both the national at state government level. By 1915 Labor had formed majority governments at the federal level and in every state apart from Victoria. When Labor split over conscription in 1916 the party was condemned to political marginality at the federal level where it won only one election in the interwar period. Nevertheless, Labor soon recovered at the state level. Labor claimed to represent lower-income earners, but were Labor governments distinctive in their record of public expenditure and taxation or did Labor's rhetoric merely serve to incorporate workers into the capitalist system? Rudolf Goldscheid argued in 1925 that 'the budget is the skeleton of the state stripped of all misleading ideologies'.1 The experience of Labor governments in the six Australian states provides a unique opportunity to consider what labourism meant in practice. However, previous scholarship on Australian political economy in the interwar period has focused largely on economic regulations and the role of the federal government rather than on fiscal policy. The result has been that key aspects of what labourism meant in practice been neglected. |
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Public Expenditure, Taxation and Labourism | |
| The growth of public expenditure and taxation has been the object of substantial academic enquiry. We can identify at least three divergent patterns of explanation. Some have argued that the growth of public expenditure is an inevitable result of modernisation and economic development, whether due to the social stresses that result from an urbanised and individualised society or the simple fact that higher living standards enable governments to impose higher levels of taxation. Public choice analysts argue that governments may adjust public expenditure to match the preferences of the median voter or to buy voter support during election campaigns. Another approach would point to the continued divergences between nation-states, as evidence that politics and culture do have an independent influence on levels of public expenditure and taxation. This approach might highlight the impact of democracy, which potentially empowered the poor and insecure majority, or the influence of political traditions potentially hostile to laissez faire such as social democracy or political Catholicism.2 |
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In 1901 Federation established a national commodity market but there remained major divergences in the political economy of the Australian states apparent in varying wage levels, per capita incomes and taxation. Over the course of the twentieth century, however, the states converged. Landmarks in this process included the increasing dominance of Commonwealth government and its agencies in tax collection, wage fixation and social policy. Compared to the United States or the European Union, Australia became a uniquely centralised federation.3 However significant divergences persisted in the interwar period and these were linked in part to the partisan composition of state governments. |
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