Australians receive about twice as many government services per person as they did in 1990, pay a historically normal share of national income for them, and employ proportionally fewer people to deliver them, according to new research tracking 35 years of Commonwealth spending.
The study, the fifth report in The Balance Sheet research series, follows the tax dollar by function from 1990 to the 2026-27 Budget, counts the public workforce across all three levels of government, and tests the most common claims about Australian government against budget outcomes, audit reports and international data.
“The honest summary is that Australians buy about twice the government services per head they bought in 1990, pay a historically normal share of national income for them, and employ proportionally fewer people to deliver them,” the report finds.
The Commonwealth will spend $833 billion in 2026-27, about 26.9 per cent of GDP. The report finds that share held between 24 and 25 per cent for three decades before the pandemic, then settled about two percentage points higher, a shift driven almost entirely by care programs and interest costs rather than a change in trajectory.
“The honest summary is that Australians buy about twice the government services per head they bought in 1990, pay a historically normal share of national income for them, and employ proportionally fewer people to deliver them”
Of every $100 spent, $37.05 goes to social security and welfare, $16.43 to health, $13.33 is GST passed directly to the states, $6.88 funds education, $6.25 defence and $3.83 interest on debt. Only about a tenth of the budget pays for services the Commonwealth itself operates. Payments to the states total $207.8 billion, and Commonwealth money now supports 47.4 per cent of everything the states spend.
The composition of the budget has barely moved in a quarter of a century. Welfare took 37.1 per cent of spending in 2000-01 and takes 37.1 per cent in 2026-27. What changed is the money inside it. The report identifies the growth of the care economy as the largest structural change since 1990: the National Disability Insurance Scheme, which did not exist in 2013, now costs $56.1 billion a year, more than defence or Medicare, and together with aged care absorbs about $17 of every $100 the Commonwealth spends.
Several of the most repeated claims about government fare poorly against the data. “These claims are frequently repeated but less often tested systematically against the available data,” the report says.
The Commonwealth’s own workforce, including the defence force, is smaller in absolute terms than in 1990, at about 385,900 people against roughly 400,000, despite the population growing by 10.7 million
The Commonwealth’s own workforce, including the defence force, is smaller in absolute terms than in 1990, at about 385,900 people against roughly 400,000, despite the population growing by 10.7 million. Public sector employment per 1,000 Australians has fallen from about 101 to 94, and the public share of total employment from about 21 per cent to between 16 and 18 per cent, below the OECD average. Nearly all net growth in public employment over 35 years has come from state teachers, nurses and police.
Consultant spending, the subject of years of political argument, turns out to be about a tenth the size of its reputation. External labour, which includes contractors, outsourced services and labour hire, genuinely peaked at $20.8 billion in 2021-22, a shadow workforce built up while ministers capped permanent headcount. But consultancy proper, the advisory work of firms such as PwC, Deloitte, EY and KPMG, peaked at roughly $800 million a year, less than half of one per cent of the budget. After the PwC tax scandal, spending on consultants fell to $536 million, external labour to $6 billion, and PwC’s government practice was sold for one dollar.
On debt, the evidence cuts both ways. Commonwealth gross debt will pass one trillion dollars this year, about 34 per cent of GDP against less than 5 per cent in 2008, and state borrowings have grown even faster, with Victoria’s interest bill now $10.6 billion a year. But interest consumes 3.4 per cent of Commonwealth payments, less than half its 7.6 per cent share in 1996-97, and IMF figures put Australian government debt at roughly half the advanced economy average, well below Britain, Canada and the United States.
The international comparison runs against the idea of big government altogether. General government spending across all Australian levels is 38.6 per cent of GDP, below the United States at 39.1, Canada at 42.9, the OECD average of 42.6, Britain at 46.6 and Germany at 49.5. Tax takes 29.9 per cent of GDP against an OECD average of 33.7.
The most mixed evidence concerns what the money buys. Where spending met medicine and safety, the improvements are strong: life expectancy rose six years to 83.1, five-year cancer survival went from 50 to 72 per cent, and road deaths per person fell 65 per cent. Where spending met systems, results went the other way. Australian PISA mathematics scores fell from 524 to 487 between 2003 and 2022 despite record real per-student funding, the median elective surgery wait nearly doubled from 27 days to 49, and measured productivity in the government-dominated sectors has been falling since 2014.
The report tests six popular claims in a table against the assembled evidence, rating “the government workforce has grown sharply” as not supported in aggregate, “welfare spending has expanded” as mostly unchanged as a share, “consultant spending exploded” as partly supported, “debt is historically high” as supported domestically but not internationally, “government is large by world standards” as not supported, and “we pay more and get less” as mixed.
In keeping with the series format, the paper rates the confidence of its own findings and lists what could overturn them, noting that the 1990 employment comparison spans a statistical series break and that productivity measures largely cannot see quality, so that a cancer cured or a disability supported appears nowhere in the statistics.
“Overall, the evidence suggests Australia operates a comparatively small government by international standards, while spending substantially more per resident than in 1990,” the report says. “The central question is less the size of government than how effectively additional spending translates into measurable public outcomes.”
Among the areas it flags for future research: why record school funding and falling results have coexisted, whether the consultant cuts hold under the next headcount squeeze, and which state balance sheets face unsustainable interest burdens first.
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