Perverse incentives

The National-ACT spending cap:

The spending cap legislation will “within the next two years provide that core Crown operating spending … will be subject to a spending limit”, which will allow spending growth “no faster than the annual increase in the rate of population growth multiplied by the rate of inflation.”

The new regime will exclude spending on unemployment benefits, asset impairments and natural disasters.

Doesn’t that create an incentive to the public sector to increase inflation? (Only in things that individuals and families need, of course)

Not to mention incentives to:

  • not remove overstayers
  • write off assets to avoid the on-going depreciation
  • import loads of cheap foreign labour
  • increase the birthrate (that’s a longer term strategy :)
  • categorise more things as national disasters (see – I didn’t suggest they should create national disasters :)
  • and so on.

(I expect the incentives to suppress public sector wage growth and casualise the workforce are deliberate)

There may be many criticisms of the Public Sector, but no-one has ever said they can’t read the hidden signals and navigate government policy.