In 2017–18, expenditure on welfare by the Australian Government and state and territory governments was $160.6 billion (excluding administration expenses such as program support or communication campaign expenses). This comprised:

  • $102.2 billion (64%) in cash payments to specific populations (not including unemployment benefits)
  • $48.1 billion (30%) for welfare services
  • $10.2 billion (6%) in unemployment benefits.

Welfare expenditure covers cash payments and spending on welfare services. This page also provides information on tax concessions and how Australia’s welfare spending compares with other countries. It covers the amounts spent on financial assistance and welfare services. It does not cover how well money was spent or outcomes achieved.

About welfare expenditure data

Where possible, welfare expenditure estimates have been developed for consistency with AIHW’s Welfare Expenditure Series of publications, in which welfare expenditure was last reported in full for 2005–06. This ensures trend data are consistent.

Expenditure is reported in constant prices (that is, adjusted for inflation) except where noted. Constant price estimates indicate what the equivalent expenditure would have been had 2017–18 prices applied in all years. It removes the inflation effect. The phrase ‘real terms’ is also used for constant prices. Constant price estimates for expenditure have been derived using deflators produced by the Australian Bureau of Statistics (ABS). The Consumer Price Index was used for cash payments and the government final consumption expenditure implicit price deflator for welfare services and tax concessions.

To maintain comparability, unemployment benefits are reported separately from other cash payments and welfare services. For the same reason, Youth Allowance, Austudy and ABSTUDY are not included in these estimates.

The most recent welfare expenditure data available for state and territory governments is for 2015–16, as published in the 2017 Indigenous expenditure report (Productivity Commission 2017). State and territory data were estimated for 2016–17 and 2017–18 using available trend data from the Indigenous expenditure report and Government Finance Statistics 2016–17 (ABS 2018). Based on estimated data, in 2017–18, state and territory governments spent $19.2 billion on welfare services (40% of government expenditure on welfare services and 12% on welfare overall).

Data are sourced from the AIHW welfare expenditure dataset, which is frequently sourced from publicly available data: Australian Bureau of Statistics, Department of Education, Department of Human Services, Department of Health, Department of the Prime Minister and Cabinet, Department of Social Services, Department of Veterans’ Affairs, Productivity Commission and Australian Treasury. Data for 2016–17 and 2017–18 are extracted from corresponding reports (ABS 2018; Australian Treasury 2017, 2018; Department of Health 2018, 2019; DET 2018, 2019; DHS 2018, 2019; DSS 2018, 2019; DVA 2018, 2019; PM&C 2018, 2019; Productivity Commission 2017).   

Trends in welfare expenditure

Figure 1 shows government welfare expenditure by type of expenditure for 2001–02 to 2017–18. The average annual growth rate of welfare expenditure throughout this period was 2.8%. However, the expenditure growth rate was lower in the last three years than this average, mainly caused by a decline in spending on selected cash payments to families and children, as detailed below.

Real expenditure grew slightly faster over the period than the population with per person expenditure rising an average of 1.3% a year (from $5,287 in 2001–02 to $6,482 in 2017–18). However, per person expenditure in constant prices decreased in the last two financial years in this period, once again due to a decline in real spending on selected cash payments to families and children.

In 2008–09, the Australian Government implemented initiatives as part of the response to the global financial crisis (GFC), causing a large increase in expenditure.

Expenditure on unemployment benefits is impacted by several factors, including the proportion of people receiving these benefits and changes in payment rates. Spending grew at an average of 2.0% per year throughout the period from 2001–02 to 2017–18. Government spending on unemployment benefits declined by 1.1% in 2016–17 in constant prices (as payments in current prices increased slower than inflation in that year) but picked up slightly by 0.4% in 2017–18.

Line graph showing government welfare expenditure by type of expenditure for the period 2001–02 to 2017–18 in constant prices. Over the whole period, cash payments has been larger than welfare services, followed by unemployment benefits. Welfare services and unemployment benefits have increased steadily over the period. Cash payments rose sharply in 2008–09 during the Global Financial Crisis and decreased slightly in the last two financial years.

The ratio of government welfare expenditure to tax revenue has trended downwards in the three most recent financial years (Figure 2). This suggests that the share of tax revenue being directed to welfare spending is declining.

Line graph showing ratios of welfare expenditure to tax revenue and GDP for the period 2001–02 to 2017–18. The average ratio of welfare expenditure to tax revenue was 33 percent over the period but peaked during the GFC in 2008–09. The average ratio of welfare expenditure to GDP was 9 per cent.

Cash payments

Cash payments to specific populations (excluding unemployment benefits) were estimated at $102.2 billion in 2017–18. This includes $47.6 billion spent for older people, $26.6 billion for people with disability and carers, $26.4 billion for families and children and $1.7 billion for other recipients (Figure 3).

Which cash payments are included?

These estimates of cash payments to specific populations include expenditure by the Australian Government such as Age Pension, Disability Support Pension and Carer Payment/Allowance. It does not include expenditure on unemployment benefits.

To maintain comparability, the Child Care Benefit and Child Care Rebate are included in the estimates of welfare services expenditure (rather than cash payments). Historically, these payments were paid to service providers rather than directly to households.

The total amount governments spent on cash payments to specific populations (excluding unempoyment benefits) declined by 3.9% in 2016–17 and by 0.9% in 2017–18. The likely main policy changes for this are the phasing out of the Schoolkids bonus program and removing Family Tax Benefit Part B for couple families (other than grandparents and great grandparents) with a youngest child aged 13 and over. Both policy changes became effective from 1 July 2016.

Among the groups of cash payments to specific populations (all measured at constant prices), government spending on payments to:

  • people with disability increased at an average rate of 4.6% per year throughout the period
  • older people increased at 2.8% per year on average
  • families and children decreased by 0.2% per year on average (all measured at constant prices).

Line graph showing government cash payments by target group over the period 2001–02 to 2017–18 in constant prices. Cash payment to older people was larger than that of families and children, followed by that of people with a disability. The cash payment to families and children has reduced since 2011.

Welfare services

In 2017–18, the estimated amount governments spend on welfare services was $48.1 billion, more than double the $21.4 billion in 2001–02.

Which welfare services are included?

Welfare services encompass services and programs to support and assist people and the community. Examples are family support services, youth programs, childcare services, services for older people, and services for people with disability.

Welfare services expenditure presented here is reported for four target groups as specified in the ABS Government Purpose Classification for welfare service financial transactions. These are welfare services:

  • for families and children, for example, youth support services
  • for the aged population, for example, home and community care services
  • for people with disability, for example, personal assistance
  • not elsewhere classified (ABS 2005).

Welfare services estimates include government expenditure only (including spending through non-government community service organisations).

Welfare spending defined according to the four target groups does not necessarily include all government spending on services that may have a welfare benefit. For example, some programs relevant to people with disability that might be considered welfare services are in the Government Purpose Classification categories of education, health or housing. Employment services are not included. National Disability Insurance Scheme (NDIS) expenditure is not currently included but will be reported in future years.

The average amount governments spent on welfare services per Australian resident in 2017–18 was $1,942, up from $1,102 in 2001–02 and $1,897 in 2016–17 (Figure 4).

Line graph showing government welfare services expenditure per person over the period 2001–02 to 2017–18. Welfare services expenditure rose steadily up to 2008–09 before declined in 2009–10. Then, it increased again in the next period with a slight decrease in 2013–14.

Non-government community service organisations

Both the Australian Government and state and territory governments indirectly provide welfare services through funding non-government organisations (NGOs) to deliver services. The NGO sector also contributes some welfare services expenditure from its own sources, including fees charged to individuals. Government funding to non-government community service organisations (NGCSOs) is included in welfare services expenditure. NGCSO expenditure that comes through fees paid by clients or NGCSOs’ own sources, such as fundraising, is not included, as comparable data on the sources of these funds is not readily available.

Tax concessions

A range of tax exemptions, deductions, offsets, concessional rates and deferral of tax liabilities are provided for welfare purposes. The tax expenditure on concessions by the Australian Government for welfare was estimated to be $51.4 billion in 2017–18 (excluding state and territory and local government expenditure). This amount is not included in the estimates of total welfare spending as it is generally in the form of foregone potential revenue rather than expenditure (Australian Treasury 2018).

Most of total tax concessions, $38 billion (75%) was for concessions for superannuation, aimed at assisting people to save for or fund their retirement. Of the remainder, $3.7 billion (7.0%) was for tax concessions for families and children. This includes taxation exemption for disaster relief and childcare assistance payments.

Australian Government tax concessions for welfare peaked in 2007–08 (Figure 5). The decline in concessions in 2008–09 and 2009–10 reflect the effects of the GFC, in particular slower growth in superannuation returns (Australian Treasury 2012). These tax concessions (mainly for older people) increased rapidly over the last four financial years. The increase could partly be explained by an increase of the superannuation guarantee rate from 9.0% in 2012–13 to 9.25% in 2013–14 then to 9.5% in 2014–15.  

Line graph showing tax concessions by the Australian governments for welfare by target groups in the period 2001–02 to 2017–18 in constant prices. The tax concessions for older people peaked in 2007–08. The tax concessions for families and children and for others has remained stable over the period.

International comparisons

There are recognised challenges in comparing welfare spending across countries. For example, the social support structures in many countries are complex, and not necessarily comparable. Systems generally involve mixtures of:

  • Government and non-government funding arrangements—including programs funded directly by governments, tax-based systems, employer-focused schemes and fee-for-service systems.
  • Redistribution models—social support structures in some countries focus on redistribution between sections of society at particular but often differing times. In Australia, for example, unemployment benefits transfer resources through the tax system from the employed to the unemployed. Other schemes redistribute resources over the life course (such as through savings and superannuation-based schemes).
  • Targeted versus non-targeted support arrangements—many countries use means-testing to target support, but do so in different ways with different thresholds.

Data from the Organisation for Economic Co-operation and Development (OECD) for 2016 (the latest available) show that welfare expenditure in Australia was 10.9% of GDP (using the OECD methods for calculating expenditure which differ from those used for estimates elsewhere on this page). This was lower than the median for OECD countries of 14% (Figure 6) and puts Australia’s expenditure in the lowest third of OECD countries (OECD 2018).

Horizontal bar chart showing welfare expenditure as a proportion of GDP across OECD countries in 2016. Finland had the highest proportion (23%), followed by France and Italy (21%). Mexico ranked the lowest (about 4%). Australia ranked below the OECD median.

Australia’s social security system differs from most other OECD countries in several ways, including:

  • benefits are generally more targeted to people in need through means-testing rather than on factors such as past income or tax paid
  • the system is largely funded by general government revenue rather than through contributions by employers or insured employees
  • benefits are not time limited.

Australia’s demographic and employment structure is different from many other OECD countries. For example, the proportion of the aged population differs and so do unemployment rates. This drives differences in aged and unemployment payment structures. Whiteford (2014) argues that these differences contribute to making the Australian system relatively efficient with the distribution of benefits to those who need it most due to its more targeted nature.

Where do I go for more information?

More information on welfare expenditure can be found in:

References

ABS (Australian Bureau of Statistics) 2005. Australian system of government finance statistics: concepts, sources and methods, 2005. ABS cat. no. 5514.0. Canberra: ABS.

ABS 2018. Government Finance Statistics 2016–17. ABS cat. no. 2212.0. Canberra: ABS. Viewed 2 November 2018.

AIHW (Australian Institute of Health and Welfare) 2011. Australia’s welfare 2011. Australia’s welfare series no. 10. Cat. no. AUS 142. Canberra: AIHW.

AIHW 2015. The health and welfare of Australia’s Aboriginal and Torres Strait Islander peoples: 2015. Cat. no. IHW 147. Canberra: AIHW.

Australian Treasury 2012. Tax expenditures statement 2012. Canberra: Treasury.

Australian Treasury 2017. Tax expenditures statement 2016. Canberra: Treasury.

Australian Treasury 2018. Tax expenditures statement 2017. Canberra: Treasury.

DET (Department of Education and Training) 2018. Portfolio Additional Estimates Statements 2017–18 Education and Training Portfolio. Canberra: DET.

DET 2019. Portfolio Budget Statements 2018–19 Education and Training Portfolio. Canberra: DET.

DHS (Department of Human Services) 2018. Portfolio Additional Estimates Statements 2017–18 Human Services Portfolio. Canberra: DHS.

DHS 2019. Portfolio Budget Statements 2018–19 Human Services Portfolio. Canberra: DHS.

Department of Health 2018. Portfolio Additional Estimates Statements 2017–18 Health Portfolio. Canberra: Department of Health.

Department of Health 2019. Portfolio Budget Statements 2018–19 Health Portfolio. Canberra: Department of Health.

DSS (Department of Social Services) 2018. Portfolio Additional Estimates Statements 2017–18 Social Services Portfolio. Canberra: DSS.

DSS 2019. Portfolio Budget Statements 2018–19 Social Services Portfolio. Canberra: DSS.

DVA (Department of Veterans’ Affairs) 2018. Portfolio Additional Estimates Statements 2017–18 Defence Portfolio. Canberra: DVA.

DVA 2019. Portfolio Budget Statements 2018–19 Social Defence Portfolio. Canberra: DVA.

OECD (Organisation for Economic Co-operation and Development) 2018. OECD.StatExtracts. Social expenditure aggregated data. Paris: OECD. Viewed 30 November 2018.

PM&C (Department of the Prime Minister and Cabinet) 2018. Portfolio Additional Estimates Statements 2017–18 Prime Minister and Cabinet Portfolio. Canberra: PM&C.

PM&C 2019. Portfolio Budget Statements 2018–19 Prime Minister and Cabinet Portfolio. Canberra: PM&C.

Productivity Commission 2017. Indigenous expenditure report 2017. Canberra: Productivity Commission. Viewed 9 November 2018.

Whiteford P 2014. The nature of Australia’s social expenditure. Presentation at the future of welfare conference 30 October 2014, Melbourne. Crawford School of Public Policy. Canberra: Australian National University.