Blue Model Death Watch
Australia’s Conservatives Eye Privatization

Australia’s conservative government is looking to privatize parts of a number of costly agencies, the Wall Street Journal reports:

In a move that would be risky in a charged election year, due to the popularity among voters of the country’s generous health and welfare system, Prime Minister Malcolm Turnbull said on Tuesday the conservatives were looking at outsourcing a range of government payments worth up to 50 billion Australian dollars (US$35.43 billion).

“The government is as always totally committed to Medicare,” Mr. Turnbull told Parliament. “What we are looking at…is improving the delivery of government services, looking at ways to take the health and aged care payment systems into the 21st century.”

Treasurer Scott Morrison may test market appetite for a deal soon after the next national budget statement in May, which could clarify the future of several privatization offers being looked at by the conservatives.

Australia is struggling to adjust to a fading resources boom that is shrinking government coffers. A sharp slowdown in mining investment has forced the government to look harder for ways to trim a budget deficit that grew markedly under the previous Labor administration.

While some things that governments do can or should really only be done by government workers, a very large proportion of government activities could actually be carried out by private contractors—administering government benefit programs like Social Security, disability payments and so on. This is routine clerical work, and governments have been unable to get the efficiencies that private companies can—through automation, for instance. Civil service-protected government employees for many (not all) tasks are more expensive and less efficient.

American politicians should watch what happens in Australia closely. Will the reforms set off a huge reaction that sinks the party that suggested the idea at the next election? Will the idea actually be tried, and if so, does it succeed (presumably after a bit of a shakedown cruise) in actually saving money while maintaining or even improving the level of service? This is a work in progress and shifting functions out of government into the private sector where appropriate is something that all governments are going to have to do sooner or later.

We’re lucky in the U.S. in that we can experiment with different approaches at the state level and see what works. And we already contract out more government services than many Americans realize (parts of the food stamp program, notably). But there’s probably much more that can be done.

One idea for the next administration: set up rules at the federal level that allow and encourage states to experiment with innovative methods of delivering services to see if there are ways of reducing costs.

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