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2 – The role of government

In Australia and around the world, there is a growing tension between what citizens want their governments to do and what governments can or should do.

Governments have a rightful role to play in society but they are a supplement, not a substitute for markets. A market-based society with a meaningful role for government is a proven way of boosting living standards, increasing well being and ensuring equity while ensuring hard work, risk and innovation receive their just reward.

Governments shape the way societies and economies function and meet the needs of our national interest. Regrettably, the community’s expectations have run ahead of what can be afforded. In the face of increasing calls for new spending and new programmes, there has been insufficient focus on the need to revisit spending priorities elsewhere or examine alternatives such as reducing costs or raising taxes.

Governments have the power to tax, spend and regulate although they are subject to limits imposed by law and the democratic process. Governments can also play a significant role in bolstering the economy’s productive capacity and in building human capabilities, by funding education and social services and supporting the community’s creative endeavours.

Governments should aim to improve the incentives and widen the choices available to people and businesses. They also have an essential role in promoting an environment that fosters growth and prosperity.