Budget Review 2020–21 Index
Phillip Hawkins
Australian Government expenditure increased significantly in
2019–20 and is expected to increase further in 2020–21 largely due to the
Government’s economic response to the COVID-19 pandemic.
This brief uses functional expenditure data, published in Budget
Strategy and Outlook: Budget Paper No. 1: 2020–21, Statement
6: Expenses and Net Capital Investment to illustrate
the extent to which expenditure has increased in 2019–20 and 2020–21 and across
the forward estimates and highlights the areas of expenditure which have been
most affected by the pandemic.
Expenditure by function
Figure 1 below shows Australian government expenditure by
function since 2018–19.
Figure 1: Australian government
expenditure by function

Australian
Government, Budget Strategy and Outlook: Budget Paper No. 1:
2020–21,
Statement 6: Expenses and
Net Capital Investment, p. 6-49 and
Australian Government, Final Budget Outcome 2019-20, p. 12.
Social security and welfare is the largest functional
expenditure of the Australian Government accounting for just over a third of
all Government expenditure. This function includes age pension expenditure, family
tax benefits, child care subsidies, JobSeeker payments and the National
Disability Insurance Scheme. The social
security and welfare expenditure budget brief provides more detail on this
expenditure.
Health expenditure, which includes Medicare
expenditure and Australian government expenditure on hospitals and aged care,
accounted for around 15.0 per cent of all Australian Government expenditure in
2019–20. The COVID-19 pandemic has led to an increase in expenditure on health,
as discussed in the public
health response to COVID-19 budget brief.
General revenue assistance is money paid by the
Australian Government to the States and Territories and local government to
spend on any purpose (also called ‘untied’ funding). This is distinct from
funding provided by the Australian government to other levels of government for
agreed specific purposes such as building hospitals, infrastructure or funding
schools. This expenditure is largely payments of the goods and services tax,
which is collected by the Commonwealth but transferred to the states and
territories. General revenue assistance accounted for around 11.1 per cent of
Government expenditure in 2019–20.
Education which includes Australian Government
funding for primary and secondary education and tertiary education accounted
for around 6.9 per cent of Government expenditure in 2019–20.
The economic
response to COVID-19 includes the JobKeeper program and JobMaker Hiring
credit and is expected to account for 9.5 per cent of Government expenditure in
2019–20, growing to 12.3 per cent of expenditure in 2020–21. Table 1 shows the
total amount of expenditure included in the Government’s economic response to
the COVID-19 pandemic over each year of the forward estimates period. This
expenditure is expected to peak at $82.5 billion in 2020-21, or around 12.3 per
cent of Government expenditure in 2020-21 before declining substantially in
subsequent years. This reflects that the economic response to COVID-19 is
anticipated to be temporary.
Table 1: economic response to
COVID-19
|
2019-20 |
2020-21 |
2021-22 |
2022-23 |
2023-24 |
Economic response to COVID-19 ($ billion) |
55.2 |
82.5 |
2.9 |
0.25 |
- |
Proportion of GDP (%) |
2.8 |
4.2 |
0.14 |
0.0 |
- |
Proportion of total Australian
Government expenditure (%) |
9.5 |
12.3 |
0.51 |
0.04 |
- |
Australian
Government, Budget Strategy and Outlook: Budget Paper No. 1:
2020–21,
Statement 6: Expenses and
Net Capital Investment, pp. 6-10.
Trends in expenditure
Figure 2 shows Government
expenditure as a proportion of GDP over the last 20 years. Prior to 2019–20
expenditure ranged from around 24 per cent to just over 26 per cent of GDP
averaging 25.1 per cent of GDP and peaking over this period at 26.2 per cent of
GDP in 2009–10. However, as a result of COVID-19, in 2019–20 expenditure grew
to 29.2 per cent in GDP and it is expected to peak at 34.4 per cent of GDP in
2020–21 which is 9.3 per cent of GDP higher than the average level over the
prior 20 years
Figure 2: total expenditure and the
size of the economic response to COVID-19

Australian
Government, Budget strategy and outlook: budget paper no. 1:
2020–21, Statement 11:
Historical Australian Government data,
p. 11-6.
The economic response to COVID-19
is a significant component of the additional expenditure expected in 2020–21,
accounting for an estimated 4.1 per cent of GDP in that year.
Other significant contributors to
the increase in expenditure are:
- social welfare and expenditure, which is expected to grow from
8.7 per cent of GDP in 2008–09 to 11.7 per cent in 2021–22 (3.0 per cent
of GDP higher). This is largely being driven by significant increases in
expenditure on the JobSeeker payment and through the Coronavirus Supplement and
Economic Support Payments.
- health expenditure which is expected to grow from 4.1 per cent of
GDP in 2018–19 to 4.8 per cent of GDP in 2020–21 (0.7 per cent of GDP higher).
This includes substantial expenditure on health responses to COVID-19.
- education expenditure which is expected to grow from 1.7 per cent
of GDP of 2018–19 to 2.1 per cent of GDP in 2020–21 (0.4 per cent of GDP
higher). This largely reflects increased expenditure for tertiary education for
that year, including temporary additional research funding.
- transport expenditure is expected to grow from 0.4 per cent of
GDP to 0.7 per cent of GDP (0.3 per cent of GDP higher). This partly
reflects a substantial increase in expenditure on air transport due to
expenditure measures to support the airline industry. Government expenditure on
air transport was $299 million in 2018–19 but is expected to be six times
higher in 2020–21 at $1,836 million. Expenditure on rail and roads is also
anticipated to be higher.
Much of the increase in
expenditure in 2019–20 and 2020–21 is anticipated to be temporary with
expenditure estimated to fall to 27.1 per cent of GDP in 2023–24 (albeit still
around 2 per cent of GDP higher than the average level over the last 20 years).
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