What shock increase in Federal health and aged care spending may mean for promised tax cuts

Federal spending on hospitals will almost double within a decade as aged care costs also blowout, and it could spell bad news for promised tax cuts.

Commonwealth spending on public hospitals will almost double to $50 billion within a decade. Picture: Getty Images

Commonwealth spending on public hospitals will almost double to $50 billion within a decade while aged care spending will increase by three-quarter to $52 billion, new Treasury figures show.

The ten year projections of growing spending pressure on the fast growing sectors have been provided to News Corp ahead of this month’s budget.

In the March budget federal hospital spending was projected to be $27.3b in this financial year.

Treasury is now predicting it will jump to $50.7 billion in 2032-33 an annual growth rate of 6.4 per cent over the medium term.

This is higher than 6.1 per cent growth across the four year forward estimates in the March budget.

It does not include the $3.5 billion in extra money for Covid spending the government says wasn’t budgeted for by the previous government.

The picture is similar in federal aged care spending which is predicted to jump from $29.8b in 2022-23 to $52.5b by 2032-33.

Treasurer Jim Chalmers says no responsible government can ignore the need for strong investment in health and aged care. Picture: John Gass

Again, this is almost certainly an underestimate as it has been calculated by Treasury without reference to Labor’s election promise to improve the sector.

Nor does it take into account any pay rises to the sector’s workers that are likely to arise from the current case at Fair Work.

The growing spending demands on the budget are likely to increase internal pressure in the government to scrap or wind-back the stage three tax cuts Labor promised before the election.

Between 2024 when they come into effect and 2032-33, the tax cuts are estimated to be worth $243.5 billion in foregone revenue.

Treasurer Jim Chalmers said the government was battling rising expenses and hidden cost blowouts for which the previous government had failed to budget.

“Our job is to try and make sure there is sufficient room in the Budget to adequately fund services that Australians rely on and value, including spending on public hospitals and aged care,” he said.

He said while the worst of the pandemic might be behind the country, it continued to put spending pressures on the Budget which needed to be managed responsibly.

“Despite the significant economic pressures we face, no responsible government could ignore the need for strong investment in health and aged care - it’s spending that is either desirable or unavoidable or both, and must be paid for,” he said.

“These areas will be priorities in the Budget we hand down in just over two weeks’ time.”

Health Minister Mark Butler said it had never been harder or more expensive to see a doctor than it was now.

“The Commonwealth’s focus is to relieve pressures on the hospital system – that’s why we are strengthening Medicare, making medicines cheaper and fixing the aged care crisis,” he said.

Aged Care Minister Anika Wells said the government remained “committed to improving the lives of aged care workers and care recipients who have been neglected after successive liberal governments ignored their plight”.

Originally published as What shock increase in Federal health and aged care spending may mean for promised tax cuts