Statement 6: Expenses and Net Capital Investment

Statement 6 presents estimates of general government sector expenses and net capital investment, allocated according to the various functions of government, on an accrual accounting basis.

General government sector expenses are expected to decline as a share of Gross Domestic Product (GDP) in 2011‑12, largely reflecting the continued withdrawal of the Government's stimulus spending initiatives introduced in 2008‑09 and 2009‑10 in response to the global financial crisis.

In this Budget, the Government has more than offset all new spending proposals. Of the savings in this Budget, $14.8 billion relate to savings in expenses and net capital investment.

The most significant areas of expenses in 2011‑12 are for the social security and welfare (33.3 per cent of total expenses), other purposes (19.7 per cent), health (16.4 per cent), education (8.2 per cent), defence (5.8 per cent), and general public services (5.7 per cent) functions.

The strongest real growth in expenses across the Budget and forward estimates period is expected to occur in the other purposes (17.9 per cent) and the social security and welfare (5.5 per cent) functions. These increases are offset by significant declines in real growth in the agriculture, forestry and fishing (‑36 per cent), other economic affairs (‑19.7 per cent) and transport and communication (‑16.3 per cent) functions.

The modification to the financing arrangements under the proposed new National Health Reform Agreement to be agreed with States and Territories by 1 July 2011 has affected functional expenses since the 2010‑11 Budget. As a portion of the Goods and Services Tax is no longer to be dedicated to health spending, that amount of funding has been transferred back from the health function to the other purposes function. The changed health funding arrangement is a major factor driving growth in the other purposes function.

In response to the Queensland and Victorian floods and Cyclone Yasi, which occurred over the 2010‑11 summer, the Government has provided financial support through the natural disaster recovery packages.

The Government is committed to improved and more accessible reporting of its fiscal activities. As well as providing details of expenses at the functional level in this Statement, the Government has also published a Ministerial Statement entitled Investing in Regional Australia. This Ministerial Statement represents an important first step in the roll‑out of better reporting of Government expenses in regional Australia.