The complex structure of Australia’s health system is reflected in its funding arrangement. The health system is funded by all levels of governments as well as non-government entities such as individuals, private health insurance providers, and injury compensation insurers.

How much does Australia spend on health?

Australia spent $185 billion on health goods and services in 2017–18, or $7,485 per person.

Between 2000–01 and 2017–18, total spending on health increased in real terms (after adjusting for inflation) from $91 billion to $185 billion—an average growth rate of 4.3% per year. Taking into account population growth, per person spending increased an average of 2.7% per year over the period in real terms (Figure 1).
 

This line chart shows that total health spending increased steadily from $91 billion in 2000–01 to $185 billion in 2017–18. Per person health spending increased overall from $4,772 in 2000–01 to $7,485 in 2017–18. Per person health spending decreased by 0.3% and 0.4% in 2012–13 and 2017–18 respectively.

Health expenditure

Health expenditure is defined as spending on health goods and services that includes: hospitals (both public and private); primary health care (unreferred medical services, dental services, other health practitioners, community health, public health and medications); referred medical services; other services (patient transport services, aids and appliances, and administration); research; and capital expenditure.

The AIHW has been reporting on health expenditure in Australia for more than 3 decades. The annual estimates are based on data from the AIHW health expenditure database, which is a collation of more than 50 data sources that capture health spending by governments, individuals, insurers and other private sources (AIHW 2019b).

Relative to gross domestic product

Health spending has generally grown faster than the rest of the economy since 2000–01. The ratio of health spending to gross domestic product (GDP) increased from 8.3% in 2000–01 to 10% in 2017–18 (Figure 2). During this period, although nominal growth rates in health spending were on average higher than growth rates in GDP, both growth rates began to slow after the Global Financial Crisis (GFC) in 2007–08. Since 2015–16, the health to GDP ratio has declined.
 

This line chart shows that annual growth rates for health spending and GDP were volatile from 2000–01 to 2017–18. Annual growth rates for health spending ranged from 2.9% to 10.9%. Over the same period, annual growth rates for GDP ranged from 1.6% to 9.0%. Health spending to GDP ratios increased overall from 8.3% in 2000–01 to 10.0% in 2017–18.

Relative to tax revenue

About two-thirds (68%) of health spending is funded by governments, and these funds are primarily raised through taxation revenue. While government health spending as a ratio of taxation revenue was lower in 2000–01 than in 2017–18 (19% compared with 24%), there was no consistent trend during the period (Figure 3). Prior to the GFC, the ratio tended to increase each year. Following the GFC, the trend has been less consistent. The ratio peaked at 26% in 2009–10. Largely due to increases in tax revenue, the ratio declined between 2016–17 and 2017–18 from 26% to 24%.
 

This line chart shows that annual growth rates for government health spending and tax revenue were volatile from 2000–01 to 2017–18. Over this period, annual growth rates for government health spending ranged from 1.1% to 11.2%. Similarly, annual growth rates for tax revenue ranged from –2.6% to 9.5%. Government health spending to tax revenue ratio increased overall from 18.8% in 2000–01 to 24.4% in 2017–18.

Relative to individual wealth

Between 2000–01 and 2017–18, personal health spending (individuals and non-government organisations, excluding private health insurers) grew by 4.9% per year on average per person, while individual wealth (net worth) grew nominally by 6.2% per year. In both 2016–17 and 2017–18, personal spending on health reflected less than 0.4% of individual wealth, the lowest since 2000–01 (Figure 4). It is important to note that these figures reflect the whole population in general and may not reflect the situation for certain individuals and population groups.
 

This line chart shows that annual growth rates for per person personal health spending and per person net worth were volatile from 2000–01 to 2017–18. During this period, annual growth rates for per person personal health spending ranged from –3.9% to 16.6%. Likewise, annual growth rates for per person net worth ranged from –4.9% to 12.6%. Over this period, per person personal health spending to net ratio was relatively constant at 0.4%.

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International comparisons

Using the Organisation for Economic Co-operation and Development (OECD) System of Health Accounts, Australia’s health spending to GDP ratio ranked between 18th and 8th among all OECD countries from 2000 to 2017 (Figure 5).

Before the GFC, in 2007, Australia’s health spending to GDP ratio ranked 10th of OECD countries. During the GFC, many OECD countries experienced very low (even negative) GDP growth rates and their health spending to GDP ratios increased. Australia’s rank in health spending to GDP ratio dropped to 16th in 2009 and 18th in 2010. In recent years (2014 to 2017), while growth in health spending was relatively high in Australia (5.0% per year on average, 13th in OECD), Australia’s GDP growth rate was only 3.7% per year on average (21st in OECD). As a result, Australia’s ranking grew to eighth with a ratio of 9.2% compared with the OECD median of 8.1% in 2017 (Figure 5).

See International comparisons of health data.
 

The line chart shows that from 2000–01 to 2017–18 Australia’s ranking increased from 10th to 8th out of 36 countries. Australia’s ranking was relatively volatile from 2007 to 2013.

The bar chart shows that in 2017 health spending as a proportion of GDP was highest in the United States at 16.2% and Japan at 10.9%. The lowest ratio was lowest in Luxembourg at 5.0% and Turkey at 4.2%. Australia’s health spending as a proportion of GDP of 9.2% was the 8th highest among OECD countries and 1.1 percentage point higher than the OECD median.

Organisation for Economic Co-operation and Development—System of Health Accounts

The OECD is a forum where governments come together to discuss a range of issues, such as health, with the aim of improving economic and social wellbeing of communities (OECD 2019a). The OECD currently has 36 member countries including Australia, which has been a member since 1971. For more information on the OECD, see the OECD website.

The OECD uses the System of Health Accounts (SHA) 2011 framework to collect and report data on health expenditure. This framework looks at the consumption, provision and financing of health care (OECD et al. 2017).

What is the money spent on?

Between 2000–01 and 2017–18, in terms of proportion of health spending, there was a shift away from primary health care to hospitals. In 2000–01, health spending on primary health care contributed about 37% of total health spending while hospitals accounted for 36%. In 2017–18, spending on hospitals made up 40% of total health spending and primary health care accounted for 34%. The remaining health spending was on referred medical services (10%), other services (7.4%), capital (5.0%) and research (3.0%). Capital spending increased in 2016–17 due to a one‑off large capital spend by South Australia related to the construction of the Royal Adelaide Hospital (Figure 6).
 

This line chart shows that about three-quarters of total health spending was spent on hospitals and primary health care during 2000–01 to 2017–18. In 2017–18, a larger proportion of total health spending (39.9%) was on hospitals than primary health care (34.2%). The remaining was spent on referred medical services, other services, capital and research in descending order.

Who pays for health?

Since 2000–01, on average, about two-thirds of total health spending has been funded by government with the remaining one-third funded by non-government sources. Between 2014–15 and 2017–18, the proportions of funding from the government sector (the Australian Government and the state and territory governments) and private health insurance providers increased while that of individuals declined. In 2017–18, government sources were responsible for 68% of health spending, with around 42% funded by the Australian Government and 27% by the state and territory governments. The remaining 32% was financed by non-government sources: 17% by individuals, 9.0% by private health insurance providers and 6.2% from other non-government sources (component figures may not add to the totals due to rounding) (Figure 7).
 

This line chart shows that proportions of total health spending was relatively constant from 2000–01 to 2017–18. In 2017–18, the largest proportion of total health spending (41.6%) was funded by the Australian Government. The next larger proportion of total health spending funded by state and territory governments and individuals were 26.7% and 16.5% respectively. The relative small proportion ones were health insurance providers and other non-government, amounting to 9.0% and 6.2% respectively.

The Australian Government’s proportion of spending was highest for research (78%) and lowest for capital (1.3%). State and territory governments contributed the most for hospital (42%) and lowest for research (15%). Non‑government funds accounted for the largest portion of capital (57%) and smallest for research spending (7.2%) (Figure 8).
 

This bar chart shows that in 2017–18 health spending was highest for hospitals at $74.0 billion and lowest for research at $5.6 billion. Proportion of source of funds vary across the different areas of spending. The state and territory governments contributed to above 41% of spending on hospitals, the Australian government funded 35.7%.  As for primary health care, the Australian government funded about 44% of health spending while the non-government sector accounted for almost 40%. The non-government one was also the main contributor to capital formation.

Where do I go for more information?

For more information on health expenditure, see:

Visit Health & welfare expenditure for more on this topic.

References

ABS (Australian Bureau of Statistics) 2018. Australian system of national accounts, 2017–18. ABS cat. no. 5204.0. Canberra: ABS

ABS 2019a. Australian demographic statistics, December 2018. ABS cat. no. 3101.0. Canberra: ABS

ABS 2019b. Australian national accounts: national income, expenditure and product, December 2018. ABS cat. no. 5206.0. Canberra: ABS.

ABS 2019c. Taxation revenue, Australia, 2017–18. Customised report. Canberra: ABS.

AIHW (Australian Institute of Health and Welfare) 2019a. Australia’s health expenditure: an international comparison. Cat. no. HWE 75. Canberra: AIHW

AIHW 2019b. Health expenditure Australia 2017–18. Health and welfare expenditure series no. 65. Cat. no. HWE 77. Canberra: AIHW

OECD (Organisation for Economic Co-operation and Development) 2019a. About the OECD. Paris: OECD.

OECD 2019b. Health statistics 2019. Paris: OECD. Viewed 20 November 2019.

OECD, Eurostat & WHO (World Health Organization) 2017. A system of health accounts 2011: revised edition. Paris: OECD Publishing.