If Norway can offer free universal health, pensions and education, why can’t Australia?

I raised the question of “If Norway can offer free universal health, pensions and education, why can’t Australia? Both countries are stable democracies, both have sizable immigrant populations, both are considered rich. Yet Norway has maintained national control of its natural resources whereas Australia is selling it all to multinationals. Time for a major rethink Australia?” on Google+ and Facebook.

The comments were interesting to say the least. So I decided to look a bit more deeply into how Norway can offer its citizens not only universal free education, health and pensions, but also maintain a budget surplus despite the recent economic crisis.

So, here is a brief overview of both Norway and Australia from an economic point of view.

Corporate Tax: In Australia the corporate tax rate is 30% versus the 28% that applies in Norway.

Individual Tax: In Australia, the maximum tax rate for individuals is 47% which includes the Medicare Levy, versus, Norway’s 46.8%.

VAT/GST/Sales Taxes: Australia has a flat 10% GST tax which is not charged on essential items. Norway on the other hand has either 15% or 25% on food and drinks in shops, or 8% on transportation, cinema and hotel rooms.

So, from a tax collection perspective, individual and corporate tax rates are pretty much on par, whilst VAT/GST/Sales taxes are higher in Norway than Australia.

Is it their demographics which then makes Norway a much more attractive place?

Norway’s population is just under one quarter of that of Australia – 5.1 million versus 23.6 million. Thus Australia with its larger population should more than compensate for the income the government derives from the taxes.

Natural Resources?

Both countries have a high level of resources. Norway for example, is the fifth-largest oil exporter and third-largest gas exporter in the world. Australia on the other hand, is a major exporter of agricultural products [particularly wheat and wool] minerals such as iron-ore and gold, and energy in the forms of liquified natural gas and coal.

So what allows Norway to better provide for it’s citizens than Australia can?

From my perspective, there is one major fundamental difference between the two countries, and that is how Norway has utilised its natural resources.

In Australia, the mining and mineral industries in particular, are privately owned and profits are distributed among the corporation’s shareholders. The majority of corporations are foreign owned so the profits tend to flow out of the country. Norway on the other hand, established what is now called the Government Pension Fund of Norway. The Fund itself is comprised of two funds – The Government Pension Fund Global (formerly The Government Petroleum Fund) and the  Government Pension Fund Norway (formerly The National Insurance Scheme Fund). The former invests globally where as the latter invests in and is a major shareholder in many large Norwegian companies.

Today, that Government Pension Fund Global is estimated to be valued over $700 billion while the Government Pension Fund Norway is valued at around $20 billion.

This, in my opinion, has given the Norwegians a huge advantage over Australia in that its natural wealth is not only taxed appropriately by the government, but rather than incorporating that revenue into the general coffers, it is being used to invest for the future.

Both countries have a diverse population in terms of demographics, and both can be considered social democracies where the governments are seen as being responsible for providing essential services to their citizens. Services like education, health, pensions, welfare etc. Yet Australia’s inability or lack of courage to control its wealth has led to the current situation where the financing of health, education, welfare and pensions et al, are being cut back.

This is a pretty sad indictment on a country with 23 million people that is considered the 12th largest economy in the world and the average wealth of its people is second only to Switzerland. And yet despite all this, Australia’s poverty rate increased in 2013 to 11.4%.

Australia, in my opinion, needs a radical rethinking of how it operates, not from a political perspective but rather on how it utilises its natural wealth and provides for its people. Otherwise under the current regime [from both sides of politics], the gap will get bigger and bigger between those who can afford the basics and those who can’t.

Time for a change Australia and a good example to look at is Norway.

Nor-aust incomenor-aus poverty