Expenditure on health in Australia has increased from $72.2 billion in 1999–00 to $121.4 billion in 2009–10. At the same time, Australia’s gross domestic product (GDP) increased from $951.0 billion to $1,284.8 billion, so health expenditure as a proportion of GDP has gone from 7.9% in 1999–00 to 9.4% of GDP in 2009–10. The $121.4 billion spent on health goods and services during 2009–10 averaged out at $5,479 per Australian.

This report looks at the period from 1999–00 to 2009–10 and includes important information about the costs of health care in Australia, in terms of both the total number of dollars spent and the proportion of Australia’s national income that is spent on health. It also looks at the types of health goods and services that attracted funding and where that funding came from. The report also examines Australia’s health spending from an international perspective—how it compares with the region and with other developed economies.

Shares of expenditure

Of the total spent in 2009–10, 95.8% ($116.3 billion) was recurrent expenditure on health goods and services. The remaining 4.2% was capital expenditure ($5.0 billion).

Spending on public hospital services in 2009–10 was estimated at $36.2 billion or 31.2% of total recurrent health expenditure. Expenditure on medical services at $21.2 billion, or 18.3% of recurrent expenditure, and medications, at $16.3 billion (14.0%), were other major contributors to total recurrent health spending.

Growth in expenditure

Total health expenditure grew by $7.9 billion between 2008–09 and 2009–10, representing growth of 7.0% in nominal terms or 3.6% in real terms (after adjustment for inflation).

Increased spending on public hospital services of $1.5 billion in real terms was the largest component of the overall increase in spending in 2009–10, accounting for just under one-third (30.7%) of the increase in that year, followed by spending on medications which grew by $1.0 billion.

Total recurrent funding for medications increased by 6.8% between 2008–09 and 2009–10, just under the average growth of the previous 7 years of 7.3% (2003–04 to 2009–10). A 7.5% growth in expenditure on benefit-paid pharmaceuticals between 2008–09 and 2009–10 strongly influenced this increase.

The area of expenditure with the highest percentage growth was health research, which grew by 10.8% in real terms; although this is likely to partly reflect the impact of a changed survey methodology that the Australian Bureau of Statistics (ABS) uses. Dental services (largely made up of private providers) had the second highest percentage growth in 2009–10—up 7.5%.

Between 1999–00 and 2009–10, Australia’s expenditure on health in real terms grew at an average of 5.3% per year, compared with average real growth in GDP of 3.1% per year. x

Percentage of GDP

Spending on health accounted for 9.4% of GDP in 2009–10, an increase of 0.4 percentage points from 2008–09. In 2008–09, Australia adopted a new international standard, the System of National Accounts 2008, with an increased scope of production activities. To enable comparisons on a consistent basis, percentages of health expenditure to GDP reported in this publication have been revised back to 1999–00. As such, they differ from previously published estimates.

Government share of expenditure  

Governments funded 69.9% of total health expenditure during 2009–10, up from 69.3% in 2008–09 and 69.2% of expenditure in 1999–00. The contribution of the Australian Government was 43.6% of total funding, while state, territory and local governments contributed 26.3% (non-government funding sources provided the remaining 30.1%).The Australian Government’s share of public hospital funding was 39.7% in 2009–10, less than its 44.6% share in 1999–00 but an increase from 38.6% in 2006–07. State and territory governments’ share of public hospital expenditure was 50.6% in 2009–10, down from 51.2% in 2008–09.

Expenditure in each state and territory

In 2009–10, the estimated national average level of recurrent expenditure on health was $5,251 per person. In that year, expenditure in Western Australia ($5,128 per person) was 2.3% below the national average, while the Northern Territory’s average spending ($6,549 per person) was 24.7% higher than the national average. The average annual real growth per person over the period 1999–00 to 2009–10 was highest in South Australia and the Northern Territory (4.3%) compared with the national average of 3.9.

The average annual growth in recurrent health expenditure between 2004–05 and 2009–10 ranged between 3.6% in the Australian Capital Territory and 7.5% in Queensland. In comparison, the national average growth in recurrent health expenditure was 5.4% in the same period.

International comparisons

According to the Organisation for Economic Co-operation and Development (OECD) definitions, Australia’s health expenditure as a proportion of GDP was 9.1%, which was 0.5 percentage points lower than the median in 2009 for member states of the OECD. Australia spent a similar proportion of GDP on health as Slovak Republic, Finland, Italy, Spain and Ireland. United States health expenditure as a proportion of GDP in 2009 was the highest at 17.4%. International comparisons are more difficult to interpret at the moment as not all countries have adopted the new international standard for measuring GDP.

Government funding of health expenditure as a proportion of total health expenditure was 68.1% for Australia in 2009 compared to the median for OECD countries of 75.0%.