Do Australians rely too much on government?*
I think the question is timely and regrettably the answer is yes.
Australia risks becoming a mendicant society, far too reliant on government and future generations for its own good.
How indebted must our nation become before we Australians change our expectation about what governments can and should do for our common good.
At a time when most Australians rank cost of living as their most important issue, economists have singled out government spending for putting upwards pressure on demand and prices, leaving the Reserve Bank with little option but to increase interest rates again.
That means bigger mortgage interest payments for people buying a house and a stronger dollar making our exports less competitive.
Australians already pay the three levels of government more than $800 billion in taxes and charges.
That’s about 30% of GDP – but so strong is the demand for government spending and so weak is support for taxation reform that State and Federal Governments anticipate budget deficits for much of the coming decade.
The Parliamentary Budget Office points to a worsening national fiscal outlook, because it seems no matter how much revenue government raises, “the increases in forecast expenses have more than offset these improvements”.
In just over three years the Federal Government has increased its spending by more than $140 billion.
A recent Productivity Commission report pointed to $412 billion or 70% of recurrent government expenditure going to social services such as crime and justice, disability and aged support, health, and education.
In its annual assessment of the health of the Australian economy, the International Monetary Fund this year has warned as a country we are living well beyond our means and that with the States and Territories particularly, a further deterioration in credit ratings was on the cards and that some were getting to the point of bail-out.
Historically, governments used debt to fund physical infrastructure like utilities, roads and railways because the benefits would be shared over generations.
But poll driven politics and an electorate unwilling to accept hard choices has seen governments extend their use of debt to recurring operational expenditure, pushing the national net debt upwards towards to $1.22 trillion or 37.9% of GDP by 2028-29.
Compounding the problem, as RBA Governor Michele Bullock warned last week, has been years of “weak to no productivity growth” – now idling at a lamentable 0.6% and leaving Australia near the bottom of the OECD’s economic growth ladder.
Inevitably, interest rates and mortgages will be under pressure, so long as monetary policy must mitigate the inflationary impacts of government fiscal outlays and wage rises decoupled from real increases in productivity.
It’s time for an independent and comprehensive review of government spending that should be undertaken robustly and critically at least every two years.
As the Australian Financial Review reported recently, the OECD points to Australia as one of the few of its members that does not undertake annual reviews of spending.
Among the 35 advanced economies Australia is one of nine that does them periodically.
Corporate Australia has called for $50 billion to be cut from this year’s Federal budget to lessen pressure on rates
But even though that might help a stronger more competitive private sector and more affordable mortgages, there is a long-established reliance on government that will be difficult to dislodge, especially as half the population draws most of its income from the public purse.
Recently, I suggested to the Commonwealth Joint Parliamentary Committee on Electoral Matters during its Queensland sittings that it would best help the cause of democracy in Australia by recommending a bipartisan collaboration to better manage public expectations about what government can and cannot do.
Of course, such an idea is a pipe dream in today’s divided political setting, but the point remains, we the voters get the governments we elect and deserve, and we all must do more to lessen the burden on Australians not yet born who will be left paying the debt being run up on our behalf.
We can start as the IMF suggests by framing a Team Australia approach to debt reduction by much better coordination of Federal and State budget strategy with eliminating waste as a priority.
*A shorter version of this article appeared in the Queensland Country Life as “Rising spending and debt force a reckoning”, 12 February 2026, page 27.
Professor John Cole 