When it comes to paying for government services, Australia has a bad case of cognitive dissonance. We want more and better services, but we are less happy to foot the bill for them. The budget challenge is big and getting bigger. Official projections suggest a structural budget deficit of about $50bn a year over the next decade. We estimate the true number could be closer to $70bn.
Over the next decade, the government will spend significantly more on the NDIS, defence, health and aged care. Federal government spending is estimated to average more than 27% of GDP in that period, compared with less than 25% over the three decades before Covid. Many state governments have also increased their spending as a share of the economy. And these spending pressures will grow as our population ages and the climate changes.
