Business Environment Profiles - Australia
Published: 18 December 2024
Government consumption expenditure
588 $ billion
4.5 %
This report analyses total government consumption expenditure. Government consumption expenditure includes any Federal Government spending on consumable products for defence and non-defence purposes and consumption expenditure by state and local governments. This is defined as net expenditure on goods and services by public authorities, but not public corporations, which does not result in the creation of fixed assets or the acquisition of land or second-hand assets. Consumption expenditure includes employee wages, the purchase of goods and services, the consumption of fixed capital (i.e. depreciation expenses), and the repair and maintenance of roads. The data for this report is sourced from the Australian Bureau of Statistics (ABS) and is measured in billions of seasonally adjusted, constant 2021-22 dollars that have been deflated using chain volume measures.
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IBISWorld expects government consumption expenditure to climb by 3.7% in 2024-25, to reach $588.2 billion. Major budget initiatives include alleviating the cost-of-living crisis through cost-of-living tax cuts, energy bill relief and easier access to affordable medicines, building more homes to address the ongoing housing crisis, investing in Future Made in Australia to boost the economy through strengthening renewable energy capabilities, strengthening social security and welfare and providing support to promote equality. Expenditure is anticipated to spread across several sectors, including fuel and energy, mining, manufacturing, defence, housing and social security and welfare. Inflationary pressures in recent years are also expected to contribute to an upward trend in government consumption expenditure.
Government consumption expenditure expanded significantly from 2018-19 to 2021-22 due to pandemic-related measures. Income support measures, including the JobKeeper and JobSeeker payment schemes, helped eligible Australians remain in jobs and assisted businesses adversely affected by the pandemic. Income support packages are not classified as government consumption expenditure. They are only accounted for in GDP measurements once they are spent by households and are therefore classified under household consumption expenditure.
Both the federal and state governments have contributed to rising government consumption expenditure through the end of 2024-25. The majority of government consumption spending is done at the state level. According to the ABS, the Federal Government accounted for 46.7% of total government expenditure in 2023-24 (latest available data). However, the Federal Government has reported an increased share of total expenditure over the past few years, rising from a 44.4% share in 2019-20. Increased non-defence spending has driven this shift in expenditure share. Defence spending has been broadly stable as a share of total expenditure over the past two decades at over 8%, with some year-on-year variations depending on the commencement and finalisation of defence projects. Although capital expenditure is not included in government consumption expenditure, the consumption of fixed capital is. In turn, there can be delays between increased capital expenditure on defence and rises in defence-related consumption expenditure.
Over the past few years, growth in local, state and federal government spending on education, healthcare and aged care services has bolstered government consumption expenditure. Despite growing in nominal terms, state and local governments have fallen as a share of expenditure over the period. Overall, IBISWorld forecasts government consumption expenditure to rise at a compound annual rate of 4.5% through the end of 2024-25.
IBISWorld forecasts government consumption expenditure to reach $608.2 billion in 2025-26, a 3.4%...
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