Capital expenditure by the public sector in Australia - Data and Analysis (1960-2033)

Public sector capital expenditure spans a wide range of asset classes, from transport infrastructure, schools and hospitals to defence materiel, medical technology, rolling stock and government digital systems. Spending expanded at an accelerating pace through the three years to 2023-24, averaging 6.3% annual growth as governments deployed post-pandemic stimulus and ultra-low borrowing costs enabled ambitious investment programs across all of these categories. Spending rose from $124.3 billion in 2020-21 to $149.4 billion in 2023-24, with annual growth peaking at 7.6% in that year as major projects across infrastructure, health and defence reached their most intensive delivery phases simultaneously. A first sign of moderation emerged in 2024-25, when growth eased to 3.0% and the spending level reached $153.9 billion, reflecting the progressive wind-down of projects that had entered delivery during the stimulus period and a gradual tightening of state fiscal positions as borrowing costs climbed from their pandemic lows. Public sector capital expenditure recorded a compound annual growth rate of 4.4% over the five years through the end of 2025-26.IBISWorld forecasts public sector capital expenditure to remain essentially flat in 2025-26, pushing up marginally by 0.1% to $154.0 billion. The near-stalling reflects the completion of several large-scale capital works that had sustained the spending program over the prior three years. Major projects including Western Sydney International Airport have passed their peak construction phases, removing substantial injections from the program without an equivalent volume of new work reaching delivery stage to replace them. With fewer transformational projects advancing to the construction phase simultaneously, the aggregate spending base has plateaued while new approvals work through extended planning and procurement timelines. The Reserve Bank of Australia's (RBA) May 2026 policy decision compounded this by raising the official cash rate back to 4.35%, reversing cuts that had briefly eased borrowing conditions across the public sector. State governments, as among Australia's largest institutional borrowers, face higher debt servicing costs, reducing the capital available for new project approvals and constraining the volume of new investment that governments can commit to, even where headline budget figures appear unchanged. The result is that 2025-26 marks not a structural retreat in public sector investment but the end of the post-pandemic expenditure surge, with public sector capital expenditure consolidating before the next wave of defence and energy transition spending builds through the forecast period.