Business Environment Profiles - Australia
Published: 15 October 2024
Capital expenditure by state and local government
74 $ billion
3.9 %
This report analyses the level of expenditure by state and local government on fixed capital. This excludes capital investment by state and local public corporations. The data for this report is sourced from the Australian Bureau of Statistics and is measured in billions of seasonally adjusted 2021-22 dollars.
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Capital expenditure by state and local government is forecast to increase by 1.1% in 2024-25 to reach $74.2 billion. Significant infrastructure, health, education and social housing spending by state governments is expected to support capital expenditure growth in the current year. In particular, strong spending from Victoria, Queensland and New South Wales will drive growth in capital expenditure by state and local government in 2024-25. For instance, as part of the 2024-25 budget, the NSW Government has committed to spending $4.0 billion over four years on social housing. The Victoria State Government has focused on uplifting the healthcare sector through its Hospital lnfrastructure Delivery Fund. Cost of living pressures have encouraged state and local governments to ramp up spending. The Queensland government's capital expenditure budget on health and transport is set to swell as the government focuses on increasing bed capacity and rail works.
Over the past five years, the Federal Government has aimed to support economic growth through new infrastructure projects. This includes providing funding to state and local governments. As part of Victoria's Big Build, Significant investment in large-scale infrastructure developments like the Melbourne Metro project, the Suburban Rail Loop, the West Gate Tunnel and the Victorian Government's Level Crossing Removal Program has contributed to increased state and local government capital expenditure. Under the Level Crossing Removal Program, 110 dangerous and congested level crossings across Melbourne will be removed by 2030. As of October 2024, 84 level crossings have been removed. Continued population growth has also pushed state and local governments to boost investment in existing public infrastructure. IBISWorld forecasts capital expenditure by state and local governments to rise by a compound annual rate of 3.9% over the five years through 2024-25.
Over the long term, state and local government capital expenditures are typically influenced by population and real GDP growth. However, state and local governments also use capital expenditure to stimulate economic growth. In the aftermath of the global financial crisis, the Federal Government and state and local governments injected substantial stimulus through capital expenditure into the national economy in 2008-09 and 2009-10. This was done to combat the adverse effects of the global financial crisis (GFC). Following this spike in spending, capital expenditure trended downwards over the five years through 2014-15. Capital expenditure increased enormously over the three years through 2017-18 thanks to the NSW Government's state infrastructure strategy, titled Rebuilding NSW, which included approximately $20 billion for investment in infrastructure. Major projects under the plan include the Sydney Metro rail line and M4 Smart Motorway. The Victorian Government passed legislation to create Infrastructure Victoria, an independent statutory authority, which delivered a 30-year infrastructure strategy for the state in October 2016. The strategy was updated in 2021, outlining the next stage of Victoria's infrastructure journey under Victoria's Infrastructure Strategy 2021-2051.
IBISWorld forecasts capital expenditure by state and local governments to drop by 3.1% in 2025-26...
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