Labor should stop lying: the Liberals did not cut health spending

It’s a core part of Labor’s election campaign, repeated ad nauseum: the government has cut health funding over the course of its two terms in office. “Liberal health cuts”, or “Liberal hospital cuts” are a routine feature of media releases from the opposition, along with a commitment to reverse them.

And while the government certainly froze indexation of the Medicare rebate — and has been progressively unfreezing it, though Labor promises to accelerate that — the full story on health funding is very, very different from what Labor wants voters to believe.

In 2013-14, Commonwealth health spending totalled $64 billion. In 2017-18, the last year for which actual figures are available (all subsequent figures are estimates or forecasts) it totalled $76 billion. That’s just under 19% growth, or more than 12% higher than inflation. The updated figure in the 2019 budget papers for the current financial year is $80.6 billion, which is a further 6% growth. The only “cut” in sight is that spending is only forecast to rise to $81.8 billion next year — or growth of 1.4%, around the current inflation rate.

You can argue that the Coalition hasn’t lifted spending significantly in GDP terms: in 2012-13, the last full year of Labor, and in 2013-14, Commonwealth health spending was almost exactly 4% of GDP. This year, if the budget forecasts for spending and GDP hold true, it will be 4.1%, and just below 4.08% next year, before falling just below 4% later in the forward estimates. If that happens under a Coalition government, it will be the first time health spending has fallen under the levels inherited from Labor as a proportion of GDP.

If you consider Commonwealth spending as a proportion of all Commonwealth expenses, it’s a similar story: health was around 16% of expenses in the last years of Labor and has remained around or above 16% in the years since, rising to 16.5% of expenses in 2017-18, the same figure as forecast for this current year.

So no matter how you measure it, the Coalition hasn’t cut health spending. What about the specific area of hospital spending? When it was elected, the government renamed that category of spending but it continued to grow strongly — from $13.8 billion in payments to the states in 2013-14 to $19.9 billion in 2017-18, or 44%, with further growth to $26.2 billion forecast across the forward estimates.

It is possible for Labor to argue that the Coalition hasn’t increased spending as quickly as the Gillard/Rudd government intended to, but that isn’t a “cut”, not in any universe where words are supposed to have meaning, especially not when spending is growing far more quickly than inflation.

The 2013 budget forecast spending in 2016-17 to be $75.5 billion. The first Abbott budget pared that back to $71.8 billion and that figure stayed in subsequent budgets. So here, at last, is a cut — except, that was just a forecast: actual spending ended up being $74.4 billion that year. It’s true that in 2014-15 and 2015-16, actual spending came in below the levels forecast in Labor’s last budget as well — but that’s a regular feature of health budgeting given the demand-driven nature of the two biggest Commonwealth items, the MBS and PBS systems. MBS and PBS require bureaucrats to estimate demand and ensure the government isn’t left trying to find an extra billion because someone forgot to factor in a demand for a new medicine. These “underspends” happened as much under Labor as under the Coalition. 

The Coalition has had a series of confused messages about its fiscal policies in government. It claimed to be the fiscal fire brigade, only to dramatically escalate the budget deficit from what Labor left behind. It insisted that the age of entitlement was over and a new era of fiscal discipline would be imposed, while ramping up spending to levels not seen since the Rudd stimulus. Since the departure of Tony Abbott, proper fiscal discipline has been restored to spending, but higher taxes have fuelled the return to surplus.

But throughout it all, no matter what rhetoric, the reality of health spending has been a steady and real increase. If facts mattered to Labor instead of scare campaigns, they’d acknowledge that.