Statement 6: Expenses and
Net Capital Investment

Statement 6 presents estimates of general government sector expenses, allocated according to the various functions of government, and net capital investment on an accrual accounting basis.

The trends reported in this statement include:

• strong forecast growth in general government sector expenses as a percentage of Gross Domestic Product (GDP) in 2009‑10, reflecting the impact of government spending to help cushion the impact of the global economic crisis. General government sector expenses are expected to decline as a share of GDP from 2011‑12 as this fiscal stimulus is withdrawn;
• significant areas of expenses in 2009‑10 will be in the social security and welfare (32.8 per cent of total expenses), health (15.1 per cent), education (10.4 per cent) and defence (6.2 per cent) functions;
• the strongest real growth across the Budget and forward estimates period is expected to occur in the other purposes (39.4 per cent), transport and communication (17.3 per cent), general public services (7.6 per cent), mining, manufacturing and construction (6.8 per cent) and health (6.0 per cent) functions; and
• an increase in the net capital investment expenses in 2009‑10 and 2010‑11, dominated by the projected growth in defence investment.

There have been a number of Government decisions since the 2008‑09 Budget which have significantly affected trends in expenses by function. Further details of the impacts and explanatory data can be found in Box 1 and Table 2.1, respectively.

Additional funding to the States and Territories, arising from the overhaul of Commonwealth‑State financial relations by the Council of Australian Governments (COAG) in November 2008, is also reflected in increases in expenses across several functions. Further details are provided in Box 2 and Table 2.2 and in Budget Paper No. 3, Australia's Federal Relations 2009‑10.

During 2008‑09, the Government has introduced reforms, under the Operation Sunlight initiative, which have required agencies to review their functional expenditure by program. This process has resulted in an improved allocation of expenditure by function. For some functions, such as education and social security and welfare, these reclassifications have had a material impact on the functional expenses totals. More information is provided in Box 3.