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Business Environment Profiles - Australia

Capital expenditure by the public sector

Published: 31 July 2024

Key Metrics

Capital expenditure by the public sector

Total (2025)

128 $ billion

Annualized Growth 2020-25

3.8 %

Definition of Capital expenditure by the public sector

This report analyses the level of public sector expenditure on fixed capital. This includes spending by all government levels (federal, state and local) and any public corporations. The data for this report is sourced from the Australian Bureau of Statistics and is measured in billions of seasonally adjusted, constant 2020-21 dollars.

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Recent Trends – Capital expenditure by the public sector

IBISWorld forecasts public sector capital expenditure to increase by 1.0% in 2024-25 to reach $128.4 billion. Federal and state government capital expenditure growth is anticipated to drive this trend. The Federal Budget has prioritised investments in areas like building more homes, improving public transport and strengthening national defence. These initiatives all require significant capital expenditure for infrastructure projects and equipment acquisition.

The Federal Government committed an additional $1.5 billion to the Local Roads and Community Program, with the total commitment rising to $3 billion in 2022-23. In addition, the government is investing an additional $3.1 billion in the Melbourne Intermodal Terminal Package.

Public capital expenditure dropped in both the September 2021 and December 2021 quarters. However, this decrease is because of inflated public capital expenditure in the June 2021 quarter, intended to offset slow growth in private capital expenditure. Delayed projects in 2020-21 have contributed to an overall rise in public sector capital expenditure over the March 2022 and June 2022 quarters.

Public sector investment rose over the five years through 2021-22 as historically low interest rates spurred public investment in new infrastructure projects. Furthermore, government investment in the National Broadband Network (NBN) rollout has boosted capital expenditure over the past five years. Robust expenditure on road and rail projects has increased capital expenditure among several state governments. In addition, government spending in response to the COVID-19 pandemic has lifted public capital expenditure.

Public expenditure is a key feature of the 2024-25 Federal Budget, with a forecast 6.0% increase in government spending compared to a 1.0% rise in government receipts. Significant allocations include $4.3 billion for social housing, aiming to construct 40,000 homes and an additional $9.5 billion for infrastructure projects over the next five years. The defence sector is set to receive a substantial boost, with $50 billion allocated over the next decade. Despite the increase in public expenditure, business leaders have expressed concerns about productivity levels, emphasising the need for investments to translate into sustainable economic growth. Overall, IBISWorld forecasts total capital expenditure by the public sector to increase at a compound annual rate of 3.8% over the five years through 2024-25.

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5-Year Outlook – Capital expenditure by the public sector

IBISWorld forecasts public sector capital expenditure to decrease by 3.8% in 2025-26 totaling $12...

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