Intergenerational pressures could see Australian governments collectively running deficits of $70 billion a year by 2050 and facing ballooning debt.

The rapid growth in health and aged care spending both of itself and relative to other areas of expenditure is an important concern for both government and the whole community.

While spending in this area is expected to increase as Australian population ages and as expectations of health and aged care services rise, spending must be efficient and meet the needs and preferences of the community.

This Business Council of Australia paper, Long-term Funding of Health and Ageing: The Rising Pressure on Commonwealth and State Budgets, incorporates a report prepared for the BCA by Deloitte Access Economics titled ‘An Intergovernmental Report for the States: Health and Aged Care Expenditure’.

Long-term Funding of Health and Ageing explores two key questions.

• how is expenditure on health and aged care expected to grow compared to total government expenditure?
• what does growing expenditure on health and aged care mean for government budgets?

Among its findings are that:

1. the trend of rising expenditure on health and aged care will not reverse

2. there is no major efficiency and effectiveness strategy in place or planned

3. private sources are contributing less to expenditure on health and aged care

4. states face a particular funding challenge for health and aged care.

The paper provides further impetus to the BCA’s call for the federal government to commit to an independent review of the size and scope of government and the long-term structure of the federal budget.

In the paper we also call for a commitment to a whole-of-nation Intergenerational Report to confirm the economic and fiscal task ahead, including measuring the impact of already changing policy settings and circumstances on the long-term outlook.

Long-term Funding of Health and Ageing: The Rising Pressure on Commonwealth and State Budgets