Capital expenditure by the public sector

IBISWorld forecasts capital expenditure by the public sector to strengthen by 2.2% in 2025-26, to $19.0 billion. While the total value of public capital expenditure is expected to expand in 2025-26, a change from the 2024-25 financial year, where it receded by 0.5%, the current growth rate represents a slowdown compared to the years between 2019-20 and 2023-24. The Central Government's Budget 2025 stressed the need to balance the Government's spending through a more disciplined approach, stating that the Government would continue to fund a limited number of high-priority policy commitments.

Capital expenditure by the public sector often expands over the long term alongside growth in population and GDP. Additionally, governments tend to bolster public spending during economic downturns to stimulate growth. For example, public capital expenditure rose sharply throughout the pandemic-induced recession and recovery. In 2023-24, public capital expenditure continued the pattern of growth that begun during the pandemic, driven by significant increases in funding for rail projects and the Housing Acceleration Fund. Several capital investments in hospitals, roads and education facilities have also supported growth in public sector capital expenditure in recent years.

A more disciplined stance on capital investment by the Central Government is reflected in its decision to reserve net capital allowance for future Budgets, despite mounting infrastructure pressures for transport, health and education. This strategy suggests that while major, flagship projects in these sectors will continue to receive funding, lower-return initiatives may be delayed or forced to seek alternative financing arrangements like public-private partnerships, restricting the growth in public sector capital expenditure to a degree. Overall, IBISWorld forecasts capital expenditure by the public sector to strengthen at a compound annual rate of 4.2% over the five years through the end of 2025-26.