Government Spending Hits Highest Level Since WWII

A sharp rise in government support for disability, aged care and childcare is intended to improve social outcomes, but it is also pushing national spending to its highest level since World War II. This trend raises concerns about the long-term stability of public finances. With programs such as the $52 billion National Disability Insurance Scheme now representing a major portion of the budget, calls for reform are growing.

Currently, combined spending by federal and state governments has reached 39% of GDP, a level not seen in the post-war period. This increase is largely driven by the expansion of care-related programs, which have grown faster than most other budget areas over the past decade. Fiscal analysts say the trend reflects a broader move toward greater public reliance on government support.

Since 2012–13, spending on a group of twelve federal programs covering care, social support and defence, along with rising interest on government debt, has grown by nearly 10% each year on average. These programs have expanded from around 35% of the federal budget to nearly half. The NDIS alone accounts for a significant share of the increase, putting Australia among the world’s top spenders on disability services. However, this rise in spending also means higher borrowing costs as interest rates climb.

This shift has the potential to reshape both political and economic dynamics. Greater reliance on government funding may make budget cuts politically difficult, while long-term pressures on public finances could limit the country’s ability to handle future crises. A reform summit is scheduled for August and will examine strategies to reduce spending and consider potential changes to the tax system. Still, any progress could be slow due to the scope and popularity of the programs involved.

Source: Australian Financial Review, Trading Economics, Maple Community

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