Government outlays and taxation

The tables on this page show one method of measuring the size of government: government outlays and taxation compared with the size of the economy (GDP). By this measure the size of the selected countries' governments varies considerably, with the largest roughly twice the smallest. The single factor likely to do most to explain differences in size is the comprehensiveness and generosity of countries' social welfare systems. So Sweden is at the top and Japan at the bottom. Despite the widespread belief to the contrary, Australians are not heavily taxed.

The tables reveal the quite dramatic growth in the size of government throughout the developed world over the last 30 years of the 20th century. Note that for government outlays or revenue to rise as proportion of GDP they must grow at a faster real rate than the economy overall.

It can be seen from Table 5.1 that government outlays (spending) grew particularly strongly in the 1970s in virtually all the selected countries and continued growing in the 1980s, though at a somewhat slower rate. In the 1990s, however, the rise in the overall mean was minor and, within this, outlays declined as a share of GDP in five countries and rose at a significantly slower rate in the remainder. It is notable that most of the countries where outlays failed to keep pace with the economy were countries where outlays were already particularly high.