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Govts spend faster than economy grows:PBO

Governments have been spending faster than economic growth over the past decade, the Parliament Budget Office has found.

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Source: AAP


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The pace of federal government spending has outstripped economic growth over the past decade, particularly under the former Labor government.

The independent Parliamentary Budget Office (PBO) found that between 2002/03 and 2012/13 government spending grew by 27 per cent faster than the economy, after accounting for inflation.

Spending averaged 3.8 per cent a year during the period, when the economy was growing at three per cent on average.

During the first half of the decade - 2002/03 to 2007/08 - and during the latter years of the Howard government, spending grew by 13 per cent faster than the economy.

Spending also averaged four per cent annually, when growth averaged 3.6 per cent.

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However, while economic growth slowed to 2.4 per cent over the second half of the decade under Labor - 2007/08 to 2012/13 - spending was 47 per cent faster.

The PBO said the rate of spending growth under Labor initially accelerated due to the fiscal stimulus measures adopted to combat the effects of the 2008-2009 global financial crisis.

These measures were subsequently withdrawn by 2012/13.

The largest contributors to growth in spending over the 10-year period were social security and welfare, and health, which accounted for over one half of the growth in total spending.

The report is the first part of a study into government spending.

The second part will be released after the government releases the mid-year economic and fiscal outlook and will address forecast and projected spending trends over the 2013/14 budget forward estimates period.


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