The Productivity Commission’s 2012 Indigenous Expenditure Report, on behalf of the steering committee for the review of government service provision representing the Australian and state and territory governments, landed on September 4. As I read it in the emerging evaluation of indigenous Australians’ industry, Richard Bell’s insightful theorem “Aboriginal art — It’s a white thing!” kept recurring in my mind.

Black expenditure too, it seems, is a white thing.

The report, to give it due credit, uses careful language: total direct indigenous expenditure is estimated at $25.4 billion in 2010-2011, 5.6% of total direct government expenditure of $451 billion. This estimate is then divided by the estimate of the indigenous population at June 2011 of 575,000 to give an estimated per capita figure of $44,128. This figure is compared with $19,589 for other Australians with the differential mainly allocated to greater need (66% of difference) and additional cost (34% of the difference, much associated with remoteness).

Of this estimated amount, 45% is estimated to be provided by the Australian government and 55% by state and territory governments. And 78% is estimated to be provided through mainstream services and 22% through targeted, indigenous specific, services.

In the report’s foreword, Gary Banks suggests that the report can contribute to better policy making and thus improved outcomes for indigenous Australians; “the estimates provide the basis for acquiring a better understanding of the adequacy, effectiveness and efficiency of such government expenditure”. I am not so sure.

At face value, it is not surprising that in June 2009 the Council of Australian Governments decided that estimates were needed on what is spent on services that support indigenous Australians. This is mainly because in 2008 COAG endorsed a general framework that constitutes the current dominant policy paradigm, to “Close the Gap” between indigenous and other Australians. This is a proposed technical statistical solution to deeply entrenched indigenous disadvantage that will require the deployment of many dollars to address. The governmental logic is big gaps need (supposed) big dollars to deliver future big outcomes. If only it were that straightforward.

So if the indigenous expenditure report could assist governments to target expenditures at areas of greatest need, or in a manner that ensures greatest efficiency and effectiveness, even at a very general level, or if it could tell us something about the adequacy of the spend it would be a very valuable investment — although no estimate is provided of what this complex statistical exercise cost. But these are precisely the sorts of questions of policy significance that the report tells us, very frankly, it cannot answer:

  • it cannot tell us what money was spent on indigenous people
  • it cannot tell us how effectively a service was delivered
  • it cannot tell us how much was spent on Closing the Gap
  • it cannot tell us the split in expenditure between service provision and cost of administration
  • it cannot tell us how much benefit indigenous Australians garnered from the estimated direct indigenous expenditure.

This raises important questions about what political purposes are being served by this report.

One answer is provided by going to the headlines in the nation’s most influential mass-media outlet The Australian: from September 4 “Aboriginal split: 5.6pc of funds, 2.6pc of population’ (pc in this case refers to percentage not political correctness); and ‘Indigenous spend topping $25bn: The question is has the two-year surge benefited the 575,000 people?’; and from  September 5 “Scullion calls for an audit of $25bn“.

Nowhere is there any mention that this is a crude estimate of indigenous expenditure, not actual expenditure on indigenous people; nor that any comparison with earlier figures for 2008-09 is meaningless owing to different methodology.

Indigenous Affairs Minister Jenny Macklin, in defending this supposed extravagant spend of $44,128 per capita, states it is justified owing to high levels of indigenous disadvantage. Which it is. But she forgets to mention that it is not an actual spend, perhaps seeing political mileage in such high figures.

The call by Senator Nigel Scullion, opposition spokesman for Indigenous Affairs, for an across-the-board audit of indigenous spending by all Commonwealth government departments ignores the report’s explicit statement that it does not provide any breakdown by individual departments and that only 45% of the estimate can be sheeted home to the Commonwealth. A more pertinent audit of all $451 billion spend by all governments on all Australians might be needed; but that might expose the convoluted nature of the task whatever disadvantaged citizen group is concerned.

All the while the Productivity Commission and the steering committee remain silent, no corrections, no letters to the editor, no opinion editorials; and so moral authority is lent to the media nonsense.

The estimates consist of three elements: directly identified indigenous expenditures plus indigenous share of mainstream expenditure estimated on the basis of actual service use plus indigenous share of mainstream expenditure estimated on the basis of share of population. This methodology is self-assessed in the report as conceptually robust. But it is bound to provide a higher estimate of indigenous expenditure owing to identified greater need and the methodology.

A robust conceptual framework, in my view, would encompass three inter-linked and inseparable elements: historical legacy, current need, and future investment.  It is to such a framework that the undeniable capacities of the Productivity Commission should be deployed.Historical legacy encompasses a series of backlogs that need to be quantified and include shortfalls in physical capital, such as housing and infrastructure and human capital, such as endowments of education and health. Current need is referred to in the indigenous expenditure report as “greater need”, while future investment should identify the development assistance that indigenous people might require to ensure their improved well-being acknowledging the diversity of their circumstances.

Because the indigenous expenditure report only estimates indigenous expenditure for one year 2010-2011, it lacks the conceptual capacity to engage with this more complex framing of indigenous disadvantage. Hence, for example, in looking at the past there is no sense of what capital, as distinct from recurrent expenditure, might be needed to address historic shortfalls in the provision of schools, hospitals, roads, housing and essential services.

Similarly there is no distinction made between expenditure invited or desired by indigenous people and that which is imposed. A clear example here is income management imposed on thousands of indigenous Australians, recently estimated by the Parliamentary library to cost $1 billion over five years with no evidence of positive outcomes.

The reliability of estimates is on a steep gradient with directly identified indigenous expenditure being most reliable and mainstream expenditure estimated on the basis of population least reliable and meaningful. For example, the indigenous share of expenditure on national defence is pro-rated on the basis of population and added to the indigenous expenditure account.

What seems clear from this report is that directly identified indigenous expenditure is more effectively audited and targeted than the indigenous share of mainstream expenditure. This raises important questions about the risk of the recent call by influential academic Professor Marcia Langton for the abolition of such expenditure, on the basis that indigenous exceptionalism creates a sense of entitlement .

Most significant is the absence of distinction in the report between positive and negative funding. Estimates of direct indigenous expenditure are divided between five broad areas called “building blocks”. Some building blocks, like early child development or education and training, are positive as future investment; others, such as expenditure on law courts, legal services and incarceration, are negative. Health care should also be distinguished in this way: preventative health expenditure differentiated from acute, chronic and palliative care. No distinction is made between positive and negative funding; both are quantified with a positive sign and so are summed undifferentiated as estimated indigenous spend.

Unlike Banks, I am not confident that the report will contribute to better policy making and improved outcomes for indigenous Australians — as demonstrated already by the political posturing by Macklin and Scullion. Indeed given all the qualifications in the report it appears conflicted and self-serving — especially as estimate reliability is largely based on subjective assessment ranging from good to very poor by the report’s authors. The assessments of indigenous people are nowhere to be found.

All this takes me back to Bell’s theorem — who benefits from the estimate of total direct indigenous expenditure?

One answer comes from early analysis of 2011 census community profiles data for indigenous locations: non-indigenous Australians in these places have median individual income many times higher than for indigenous people, as well as less-crowded housing provided generally and inexplicably at lower reported rent.

In the up-and coming industry evaluating indigenous disadvantage, also principally a non-indigenous thing, the Productivity Commission is emerging as the major player. Evidently, it does not matter if publicly funded research responds to conceptually fraught questions and provides technically competent, but inadequate, answers.

It is unquestionable that the Australian state will always play a critically important role in supporting indigenous Australians, just as it does in supporting all Australians, even the rich. But increasingly indigenous people are represented as recipients of highly abstracted, estimated public expenditures in the hopeful quest to Close the Gap. And as citizens are misled about how their money is being apportioned, new types of gaps in Australian society emerge.

*Jon Altman is a research professor in economics/anthropology at the Centre for Aboriginal Economic Policy Research at the Australian National University. This is an abridged version of an article originally published in Tracker.