Policy Approach

Federal Government Expenses

Each year, the government contributes in excess of 20% of the spending that occurs in the Australian economy. We rely on government spending for a significant number of things, including transfer payments, defence and public health. The major spending items in the federal budget are as follows:

Social Security – This is by far the most significant proportion of the federal budget. It is important to note that the spending on transfer payments is not considered part of aggregate demand. If it was, then the money would be double counted when the recipients of these funds finally spent their income. Social security is paid to the unemployed, those who are retired, veterans who have served in wars for Australia, the disabled and more. It is worth noting that as the largest revenue item is made up of income tax, and the largest spending item is social security, the government is clearly using this policy to focus on the goal of income distribution.
Health – The Australian health system is viewed enviously by many around the world. Although it consumes a significant proportion of the federal budget each year, the spending on health ensures that all Australians will have access to medical treatment when necessary. Spending on the public health system includes the wages for staff and some drugs. In addition, in this section we also record the 30% private health insurance rebate.
Defence – This is one area that has increased in prominence during recent years. Due to the involvement of Australia in the ongoing unrest in the Middle East, and peace-keeping activities in various countries around the world, spending on defence in this country has increased. Under this heading we also record any spending on new equipment, border protection and surveillance activities.
Education – Federal government spending on education has been quite controversial in recent years. Strictly, education is the responsibility of the states. This is set down in the Australian Constitution. However, the federal government has committed to spending money each year to assist both state and private schools to meet their financial needs.
Public Services – In this section we record all of the salaries for the running of government in Australia.
Transport – The federal government is responsible for maintaining many roads, the provision of rail services and also the shipping channels when they run between states. As such, they must spend a proportion of the budget each year to maintain these facilities.

There are many other expenses listed in the federal budget each year. You will need to know the regular payments, but you should also examine the discretionary payments that are made by the federal government each year. These are the payments that make each budget unique, and they will tend to give you the best idea of what the goals of the government are at that time. You can find a link to the federal budget website through the “Links” page.

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