Health, aged care, NDIS, defence and interest payments on debt will account for half of Commonwealth spending in 40 years’ time, according to an excerpt from the Intergenerational Report (IGR), set to be released in full by Treasurer Jim Chalmers on Thursday.
Key points:
- The full intergenerational report will be released this Thursday
- The government is set to spend more on health and aged care
- Jim Chalmers says the report shows the pressure on the budget will intensify
Those areas currently account for one third of total spend, but the excerpt revealed that by 2062-63, spend on those five categories was expected to rise by about $140 billion or 5.6 per cent of GDP.
An ageing and growing population is also forecast to contribute to driving up how much the federal government spends on health and aged care, with Australia’s ageing population estimated to account for about 40 per cent of the increase.
“Other factors, such as new technologies, treatments, and other improvements in care quality, are also projected to drive government spending growth,” an extract from the report said.
“The projected growth in spending reflects growing cost pressures and demand for public services as the population ages as well as improvements in the quality of care, including from new health technologies and treatments.”
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The report excerpt revealed that as the population ages, income support payments to individuals and families, and education payments, were forecast to grow in real per capita terms, but decline as a share of GDP, which was consistent with the 2021 report.
Over the next decade, NDIS and interest on government debt are set to be the fastest growing categories, but towards the end of the 40-year projections, the spend on health and aged care will grow quickest.
“While health spending is growing more slowly than NDIS, aged care or interest, it represents a larger share of total spending,” the report said.
“As a result, health spending is expected to increase the most as a share of GDP over the next 40 years.”
In April, the national cabinet unveiled a plan to save $50 billion over the next decade by reducing the growth target for NDIS from 14 per cent to eight by 2026.
Pressure on budget to intensify
In the May budget, the government then confirmed it would seek to significantly reduce the growth of the NDIS, leading to more than $74 billion in savings, including $15.3 billion in the four years from 2023-24.
The updated figures are expected to spark debate about where funding can be reined in and how else the federal government can collect money through tax reform.
The report showed interest payments on debt would rise from 0.7 per cent of GDP to 1.4 per cent.
Mr Chalmers said the report showed the pressure on the budget would intensify.
In a statement, Finance Minister Katy Gallagher said the government was focused on responsibly managing the budget.
“The IGR shows that the hard work must continue to keep the budget on a sustainable footing, while ensuring we deliver the services that Australians rely on every day,” she said.