Health spending linked with both population factors and wealth growth

The last 25 years in Australia was a period marked by a growing, ageing population, a growing economy, significant improvements in medical technologies and treatments and increased spending on health.

The AIHW report, 25 years of health expenditure in Australia: 1989–90 to 2013–14, shows that health spending rose by more than $100 billion (207%) over the period 1989–90 to 2013–14-from $50.3 billion (6.5% of gross domestic product, or GDP) to $154.6 billion (9.7% of GDP), adjusted for inflation (Figure 1).

Figure 1: Expenditure on health, current and constant prices, 1989–90 to 2013–14

Expenditure on health, current and constant prices, 1989–90 to 2013–14

Government spending and revenue

'About 68% of health spending is funded by governments, so it is worth exploring the relationship between government revenue and health spending,' Dr Webster said.

'Both government health expenditure and taxation revenue rose over the 25 year period but there were particular periods when growth in government spending was greater than growth in taxation revenue,' Dr Webster said.

This was mostly during periods of relatively slow revenue growth—for example, following the global financial crisis that commenced in 2008–09 (Figure 2).

Figure 2: Government health expenditure as a proportion of taxation revenue, current prices, 1989–90 to 2013–14

Government health expenditure as a proportion of taxation revenue, current prices, 1989–90 to 2013–14

Spending by individuals

Around one-third of health expenditure (32%) comes from non-government sources—ultimately individuals.

Non-government health spending tended to keep pace with growth in individual net worth (assets less liabilities) over the period, although it grew faster than average incomes.

'These findings suggest that the economy plays a role in health expenditure alongside population and other factors,' said Dr Webster.

A link between wealth and health expenditure has been found in other countries. The OECD noted that increasing wealth tends to correlate with increasing health expenditure and that, following the global financial crisis, health spending slowed in many countries.

See report 25 years of health expenditure in Australia: 1989–90 to 2013–14.

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