Inflation and deflators
Inflation refers to changes in prices over time. It can be positive (prices are rising over time and the same volume of goods cost more, so money is losing value) or negative (the same volume of goods are costing less).
Inflation is measured using price indexes, also known as deflators. These show the amount a price has changed over time relative to a base year. The reference year, or base year, for the deflators used in this report is 2019–20.
Health inflation is a measure of the average rate of change in prices within the health goods and services sector of the economy.
See Australian National Health Account: concepts, methodology and data sources for more information on health deflators and industry-wide deflators.
General inflation refers to the average rate of change in prices throughout the economy over time. There are different ways to measure the economy, and many methods for deriving deflators. The specific deflator can affect whether prices in the health sector appear to have risen slower or faster than the general inflation rate (excess health inflation).
In this report, the measure used for this is the IPD for GNE. GNE is a measure of the value of final expenditures on the goods and services purchased in the economy, including imports but excluding exports. IPD is an indicator of changes in the purchase price of these goods.
Excess health inflation
Excess health inflation is the amount by which the rate of health inflation exceeds general inflation. Excess health inflation will be positive when health prices are rising more rapidly than prices generally throughout the economy. It will be negative when the general level of prices throughout the broader economy are rising more rapidly than health prices.
Health spending and gross domestic product
The ratio of health spending to GDP, showing the proportion of total economic activity represented by the health sector, is an indicator of the contribution of health spending to the overall economy.
In 2019–20, health spending accounted for 10.2% of GDP in Australia, 0.2 percentage points higher than in 2018–19. This is largely attributed to slower growth in nominal GDP coinciding with the early stages of the COVID-19 pandemic (Figure 6).
Figure 6: Ratio of total health expenditure to GDP, and annual growth rate, current prices, 2009–10 to 2019–20