EACH spring, more than a million annuals and bulbs bloom in the nation's capital as part of the Floriade festival.Tens of thousands of out-of-territory visitors attend the month-long event that gives the city a mellower dimension than the throbbing horsepower of January's Summernats or the frenetic oomph of parliamentary sitting weeks.
Yet if there is one thing that defines the bush capital of Canberra, it is government, and lots of it.
Commonwealth spending is always in bloom, especially now as the Rudd government's response to the global financial crisis washes through the economy.
According to the federal government's Mid-Year Economic and Fiscal Outlook, general government payments are estimated to reach $338 billion or 27.8 per cent of gross domestic product in 2009-10. That's Whitlamesque spending growth of 7.3 per cent during an emergency.
If Gough Whitlam, prime minister from 1972 to 1975, and his Laborites introduced the leviathan of big government to Canberra, then all subsequent administrations have been fellow travellers in the escapade.
He may have started out as the doyen of the free-market, libertarian, small government set, but John Howard (1996-2007) too, brought his populist, wicked spending ways to the federal quadrant.
Kevin Rudd, at least for now, is Howard's chequebook baby brother: a neo-John.
But spending is not the only measure of Canberra's influence or control under this Labor government. The capital's reach and primacy, the tight grip of the commonwealth executive and its hyperactivity, are sucking lobbyists, consultants and bureaucratic "fat cats" into the Hill's vortex.
As well, as former Australian competition tsar and dean of the Australia and New Zealand School of Government Allan Fels argues, spending is one thing, but the growth of regulation is a more salient feature these days of government in the major capitalist countries.
"Contrary to the myth of deregulation, the amount of regulation has been rising and will continue to do so," Fels told The Weekend Australian, citing banking guarantees, climate change policies and homeland security. "It's a paradox. As governments privatise and try to deregulate, more regulation is required. After the GFC and the response of governments to the crisis, it has become even more pronounced. The government is a steerer rather than rower these days," he says.
Big, bigger or nosy government is here to stay.
"There's now a broad consensus in the mainstream political world about the overall size of government," Finance and Deregulation Minister Lindsay Tanner claimed in a speech in March, in the midst of preparing the Rudd government's second budget, echoing an address he gave two years earlier.
"The great battles between the extremes of individualism and collectivism are now consigned to history," Tanner argued about the "remarkably durable hybrid" called social democracy.
"No mainstream Australian political force now seeks to either massively expand or radically shrink government."
While Canberra "the government" spends, Canberra "the city" is not far behind. "Canberra is usually a good place to ride out a national downturn," says Chris Richardson, a director of consultancy Access Economics. "It's no different this time."
Unemployment in the ACT in November was 3.7 per cent, compared with the national rate of 5.7 per cent.
The commercial construction game may be at "ground zero" according to Richardson, but it has been an "impressive few years". New office space flooded the market, so vacancy rates are creeping up to 10-year highs. Still, the federal government is increasing its footprint in the city.
Departments, such as Defence, moved into new digs and the National Portrait Gallery was recently completed. Medium density housing has begun to appear in established areas close to the civic centre and is likely to continue in this vein as the capital's population grows in coming years.
The surge of people into "affordable" Canberra over the past decade has produced a doubling in established house prices since 2002. That's "capital growth" in household wealth ahead of Sydney, Melbourne and the weighted average of the country's eight capital cities.
Although construction has slowed down in the past year, there's still more commercial and engineering work in the pipeline. Canberra Airport is being upgraded, the Cotter Dam is being expanded to meet the thirsty city's water needs, ASIO is getting a new headquarters, the National Gallery of Australia is being refurbished and the Belconnen shopping centre is likely to undergo a major redevelopment.
If you build it, people will come. After taking the cleaver to the Australian Public Service in his first term, Howard eased off on his headline-grabbing public-sector austerity and, funnily enough, it did not hurt his popularity. Employment in the public service during the coalition's final three terms grew by more than employment in the rest of the economy. According to a study published in early 2008 by Treasury officials Kirsty Laurie and Jason McDonald, in the nine years from 1998-99, the average staffing level (full-time equivalent) in the APS grew by 29 per cent. Their measure of public servant numbers comes from federal budget statistics, rather than the Australian Bureau of Statistics or Australian Public Service Commission, to better gauge the growth in the size of the "bureaucracy" serving the federal government.
"This equates to average annual compound growth of 2.9 per cent a year compared to average annual compound growth in full-time equivalent employment of 2.1 per cent," they wrote, before citing a reality check on what this actually means for the economy. "This growth is noteworthy given that the proportion of public servants with at least a bachelor's degree is almost twice that in the private sector (40 per cent compared with 23 per cent). Therefore growth in the public sector is likely to be reducing the supply of highly educated labour for the rest of the economy."
Not all federal employees are based in Canberra, of course. On the narrowest measure, employed by the Australian Public Service Commission (which counts only those working under the Public Service Act), about 40 per cent of public servants are based in the capital.
This is not the case for the 2845 people in the Senior Executive Service, three-quarters of whom are in Canberra. It is this "fat cat" element in the APS, staple of the tabloids for their salaries, cars and super-duper super, that has been growing at the fastest rate. Since 1998, the SES has grown by 81 per cent, compared with 38 per cent for the entire public service.
Under Labor, the public service headcount has continued to grow, despite candidate Rudd's vow on the eve of the 2007 poll to savagely trim the APS.
"It just strikes me as passing strange that [the Howard] government that supposedly belongs to the conservative side of politics has not systematically applied the meat axe to its own administrative bloating for the better part of a decade," Rudd told the National Press Club.
The SES has grown by 12 per cent since mid-2007 and the recruitment drive for outside talent by Terry Moran, the secretary of the Department of the Prime Minister and Cabinet, is likely to push up the numbers of high-salaried public servants.
Another feature of the Rudd era has been the rise in the use of outside experts for policy advice. Rather than cutting spending in an area that Labor in opposition regarded as wasteful, the new government has turned to management consultants, academics and market researchers to fill in the gaps of its policy agenda that the bureaucracy is not equipped, in its opinion, to handle -- during a period of supposed fiscal restraint.
Labor has awarded $972 million in consultancy work, spanning 8000 contracts, including $11m to Boston Consulting Group for its work in implementing information technology efficiencies and $25m to McKinsey and KPMG as lead advisers to the $43 billion National Broadband Network.
As well, the lobbying fraternity has been in overdrive in the corridors of Parliament House since November 2007 as a new administration has tried to find its feet and corporate Australia has sought to identify Labor's soft spots, from industry assistance to climate change.
Fels, a Canberra veteran, has noticed an intense race among the business lobby groups to expand their research and policy expertise as the influence game has changed in Canberra. It's been a fat time for "rent-seekers" as the editorial and op-ed writers would say, and they also boost business in the hospitality, accommodation and taxi sectors in the city.
Four decades ago, Canberra -- and its ACT environs -- was home to 150,000 people. Then in 1972 a social engineering and reform program kick-started by Whitlam hit the scene; in a four-budget burst, federal spending jumped by 56 per cent in real terms. Commonwealth government spending went from 18.9 per cent to 24.8 per cent of gross domestic product. By the end of the 70s, the ACT had grown by 50 per cent. Today, the population has pushed past 350,000.
The size of Canberra is the physical embodiment of the commonwealth's prevalence in the national economy. According to Treasury secretary Ken Henry, since Whitlam's day, in spite of significant annual fluctuations, the average level of Australian government spending has been 25.25 per cent of GDP. "The Whitlam government came to power with a broad-ranging policy agenda, the implementation of which had the effect of increasing both the scope and size of Australian government," Henry told a Whitlam Institute symposium recently.
"The agenda included real increases in social welfare payments, free university education, universal medical coverage, new departments of Aboriginal Affairs, Environment and Urban and Regional Development, and significant public sector real wage rises.
"The Whitlam government was, therefore, responsible for an enduring increase in the size of government. That is, the close to 6 percentage points of GDP expansion in government expenditure during the Whitlam government has never been reversed. And I think I can safely say that it never will be."
Henry argued at the forum that the once-passionate debates about the economic consequences of larger government and the appropriate role of fiscal policy have lost their intensity and ideological content. Whatever the size of government, it is fiscal sustainability that keeps the economy stable, reduces economic vulnerabilities and thereby improves economic performance. For overall community wellbeing, Henry argued that the impact of "size of government" was less clear. "Based on the numerous efforts to estimate, for developed countries, an empirical relationship between size of government and aggregate measures of things relevant to wellbeing, including rates of economic growth, it would be sensible to conclude that the optimal size of government is not a question that can be answered by a technical economic analysis."
Julie Novak, a research fellow at the Institute for Public Affairs, a Melbourne free-market research outfit, remains unconvinced by Henry's or Tanner's arguments about the size of government. "This is a live issue. Free-market think tanks have not lost the war," she says of the ideological struggle. "Circumstances do change and the Australian people will look back at this time and ask: was all this government spending really worth it?"
Novak claims there is plenty of evidence to support her view that big government has serious and deleterious effects on the country's long-term capacity for growth in output and productivity. She says Liberal politicians such as shadow treasurer Joe Hockey and former opposition leader Malcolm Turnbull, who were warning about spending excesses and the size of the Rudd government stimulus packages, reflect that thinking.
It must be said, however, that the conservatives, such as they are, do not have a great track record on this front. Indeed, the supposed champions of smaller government actually provided the impetus for the rise of the welfare state. They call them "big government conservatives", successful at the ballot box, less appealing as demi-gods or Nobel laureates. Like Ronald Reagan and George W. Bush in the US, Howard was ultimately a disappointment to the libertarians, as he embedded family payments to the middle class and the great tax-transfer churn.
In their paper, Treasury economists Laurie and McDonald note that since mid-decade, the Howard government's spending had become focused on its own consumption and that it had occurred while Australia had experienced 17 consecutive years of real GDP growth.
"The economy is currently operating at close to its limits of capacity," they wrote when Labor was preparing its first budget. "In the current environment, the costs of the government drawing on the economy's resources are clearly higher."
New Liberal leader Tony Abbott also remains a disappointment to the proponents of small government.
In his recent book Battlelines, Abbott's policy tendencies are clearly on display: a centralist, a populist, a moralist, a big spender and a fiddler.
For Labor's political attack dogs, the high-spending era of Howard and his spiritual successor thrice removed, Abbott, is one they are unlikely to let go of easily.
When Abbott says "wasteful", Rudd says "Who's your daddy?"
Canberra's new reform game involves getting more value from government, measuring outcomes, reforming processes, making sure the commonwealth remains fiscally sustainable.
This public finance othodoxy, and the urgency of the task, will become even more apparent when the details of the Henry tax review and third Inter-generational Report are released in the coming months.
"The natural electoral advantage once enjoyed by the conservatives has evaporated," Tanner said in his March speech to the National Press Club.
"Unwilling or unable to make government work better, they've largely defaulted to handing out money to win electoral support."
Not just the Tories. Tanner should be wary of the fiscal laxity he has inherited and the latent tendency of his boss. A slow drive down Northbourne or Commonwealth Avenue shows the Canberra long-bloom project has had many unlikely fathers, over many seasons and cycles.
