Expenditure on health in Australia has increased from $10.8 billion in 1981–82 to $103.6 billion in 2007–08. At the same time Australia’s gross domestic product (GDP) increased from $172.3 billion to $1,132 billion, so health expenditure as a proportion of GDP has gone from 6.3% in 1981–82 to 9.1% of GDP in 2007–08.

This report looks at the period from 1997–98 to 2007–08 and includes important information about how much health care costs 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.

The $103.6 billion spent on health goods and services during 2007–08 represented 9.1% of GDP and averaged out at $4,874 per Australian.

In 2006–07 the proportion of GDP spent on health was also 9.1% and totalled $94.9 billion.

Of the total spent in 2007–08, 95% ($98.0 billion) was recurrent expenditure on health goods and services. The remaining 5% was capital expenditure ($5.5 billion).

Spending on public hospital services in 2007–08 was estimated at $30.8 billion or 31.4% of total recurrent health expenditure. Expenditure on medical services at $18.3 billion, or 18.7% of recurrent expenditure and medications at $13.7 billion (14.0%) were other major contributors to total recurrent health spending.

Total health expenditure grew by 6.0% in real terms in 2007–08. The area of expenditure with the highest growth was public health which grew by 20.7% in real terms. A large part of this growth in public health expenditure was in respect of organised immunisation programs, which grew by 55.9% in that year (Table 4.19), mostly due to the costs associated with the implementation of the national human papillomavirus vaccination (HPV) program.

Health research had the second highest growth in 2007–08 —up 12.0%.

Increased spending on public hospital services of $2.1 billion was the largest component of the overall increase in spending in 2007–08, accounting for almost one-third (32.5%) of the $8.6 billion increase in that year.

Governments funded 68.7% of total health expenditure during 2007–08 compared to 67.4% of expenditure in 1997–98.

The Australian Government’s share of public hospital funding was 42.5% in 1997–98 and decreased to 38.6% in 2006–07 (Table 4.6). Its share of public hospital funding then increased to 39.2% in 2007–08. This was largely due to an extra $0.5 billion of general funding provided by the Australian Government. The Australian Government also provided specific additional funding to public hospitals via the Elective Surgery Waiting List Reduction Plan ($75 million), funding of the Mersey Community Hospital ($36 million) and other programs.

Australia’s health expenditure as a proportion of GDP according to OECD definitions was 8.9% which was the same as the median in 2007 for member states of the OECD. United States health expenditure as a proportion of GDP in 2007 was 16.0%.

Government funding of health expenditure as a proportion of total health expenditure was 68% for Australia in 2007 as compared to the median for OECD countries of 75%.

Between 1997–98 and 2007–08, Australia’s expenditure on health in real terms (after adjustment for inflation), grew at an average of 5.2% per year, compared with average growth in real GDP of 3.5% per year. Health prices moved at a slower rate than prices in the general economy in the 3 years from 2004–05 to 2007–08. This resulted in 3 years of negative excess health inflation. Up to 2004–05 health prices had generally increased more rapidly than other prices.