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Business Environment Profiles - Australia

Government funding for public hospitals

Published: 12 August 2024

Key Metrics

Government funding for public hospitals

Total (2025)

74 $ billion

Annualized Growth 2020-25

3.7 %

Definition of Government funding for public hospitals

This report analyses government funding for public hospitals. This includes funding from federal, state and local governments. The data for this report is sourced from the Australian Institute of Health and Welfare and is measured in billions of dollars per financial year.

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Recent Trends – Government funding for public hospitals

IBISWorld forecasts that government funding for public hospitals will grow by 5.6% during 2024-25 to $74.0 billion. Federal Government expenditure on healthcare is anticipated to strengthen over the year as support staffing capacity is supported and funding allocations for projects are increased. On the other hand, interest rate hikes are expected to affect borrowing costs and public policy priorities for federal and state governments. The improvement follows record years in spending on public health largely catalysed by the COVID-19 pandemic.

Over the beginning of the period, the pandemic placed significant pressure on public hospital services. Although demand for services, such as elective surgeries, has declined in recent years, the growing need for Personal Protective Equipment (PPE), particularly high-rated PPE such as N95 masks and face shields has placed significant pressure on hospital operating expenses. Wage costs have also risen, as overtime has become more frequent due to staff shortages as a result of isolating staff members being unable to work during their quarantine periods. This growth in wage costs has increased wage burdens and forced funding to increase in turn.

Hospital funding arrangements have undergone significant changes over the past decade. The National Health Reform Agreement (NHRA), first introduced in 2011 outlined the responsibilities of the Federal, State and Territorial Governments regarding health funding. Since the introduction of the NHRA, funding for public health services has increasingly become a state and territory responsibility, with State and Territory governments providing over 58.8% of total public hospital funding in 2021-22.

State and local governments provide universal health care in public hospitals, which means care is provided to all prospective patients regardless of their characteristics. Therefore, in conjunction with co-funding from the Federal Government, state and local governments are obligated to fund all additional services resulting from demand growth from older demographics, as well as fund a greater volume of services for Australia's growing overall population. Furthermore, healthcare costs tend to rise at a greater rate than economy-wide inflation. Public hospitals typically use the most up-to-date medical equipment, and the continual upgrading of equipment that initially requires costly research and development means that the per-patient cost involved in public hospitals typically rises at a faster rate than inflation each year. The increased volume of services over the past few years and increased per-patient costs are forecast to result in upward pressure on government expenditure for public hospitals. Consequently, IBISWorld forecasts that government funding for public hospitals will grow at a compound annual rate of 3.7% over the five years through 2024-25.

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5-Year Outlook – Government funding for public hospitals

IBISWorld forecasts government funding for public hospitals to rise by 5.3% to $77.9 billion in 2...

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