Ensure government spending is sustainable by reducing it to less than 25 per cent of GDP

Every day the Federal Government spends $1.1 billion, but only raises $1 billion in taxes. The $100 million shortfall is money that Australia must borrow, and that must ultimately be repaid – with interest – by future generations.

Over time the problem will only get worse and deficits will grow. As Australia’s population gets older, there will be increased demand for government services, such as health, aged care and welfare, as well as the National Disability Insurance Scheme. Each of these will increase demand for tax dollars at a time when the proportion of the population that is of working age is falling.

If we do not ensure that this spending is targeted at people who really need it, then vital social programs will be put at risk. The sooner we act the easier it will be.

The best approach is to curb Government spending. Government payments as a proportion of GDP stood at 23.1 per cent in 2007-08 before rising to 26.0 per cent at the height of the Global Financial Crisis two years later. But even as the economy has recovered spending has remained high, at a projected 25.9 per cent in 2015/16.

A credible plan must be put in place to reduce government spending as a share of GDP to 25 per cent. This must involve greater public sector efficiency, tightened eligibility for government programs and greater competition in the provision of government services.


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