Capital expenditure by the government in Australia - Data and Analysis (1973-2033)

IBISWorld forecasts capital expenditure by the government to drop by 0.2% in 2025-26, to $107.5 billion. Capital expenditure by the government consists of three components: national defence projects, national non-defence projects and state and local government capital expenditure. Capital expenditure by state and local governments is forecast to inch downwards during 2025-26. Many major infrastructure projects, including the Western Sydney Airport, West Gate Tunnel and Melbourne Metro Tunnel, that had propped up state government capital expenditures are now becoming operational, reducing their burden on capital budgets. Regardless, continued investment into ongoing capital projects, including preparations for the 2032 Brisbane Olympics and Victoria's Suburban Rail Loop, will moderate overall capital expenditure declines. Despite the expected decline in state and local government capital expenditure, capital expenditure on defence is forecast to grow strongly in 2025-26, fuelled by ongoing investment as part of the Federal Government's 2024 National Defence Strategy, limiting the overall decline.Government capital expenditure has grown strongly over the past five years. Capital expenditure by state and local government has climbed over the period, partly driven by infrastructure projects in Victoria as a part of Victoria's Big Build, which included the Melbourne Metro Tunnel and the West Gate Tunnel projects. The NSW Government has also been spending on new and improved transport infrastructure, including around $11.0 billion for the Sydney Metro to Western Sydney Airport line, which is set to open in 2026-27. In 2025-26, state and local governments are expected to account for 74.1% of total government capital expenditure.Defence capital expenditure has trended upward over most of the past five years, as the Federal Government has increased their focus on ensuring that the Defence industry can respond to new challenges as they emerge. This shift was kick-started by the 2020 Defence Strategic Update, released in July 2020, that brought forward a target of 2% of GDP spent on defence by 2023-24 to 2020-21. This plan was followed by the 2024 National Defence strategy, which outlined a further $5.7 billion in defence expenditure between 2024-25 and 2027-28. In 2025-26, capital expenditure on defence is expected to increase to 15.4% of total capital expenditure, a figure which is up from 11.5% in 2022-23. Overall, IBISWorld forecasts capital expenditure by the government to rise at a compound annual rate of 2.2% over the five years through 2025-26.