Under Pressure: Australia’s $510B ‘Social Purpose’ Spend

Australia spends more than half a trillion dollars annually on “social purpose” goods and services directed at health, welfare and education, including more than $78 billion within the Not for Profit sector, according to a new report.

The report, called Australia’s Social Purpose Market: Understanding Funding Flows and Exploring Implications, was released Friday by PwC and the Centre for Social Impact Centre and found Australia’s social purpose “spend” was almost one-third of the nation’s gross domestic product.

The report estimated the social purpose market expenditure to be at $510 billion which includes social security and welfare ($171 billion or 34 per cent), health ($169 billion or 33 per cent), education ($113 billion or 22 per cent), and housing and community ($33 billion or 6 per cent).

The term social purpose market encompasses the scope of interactions between funders, service providers, including Not for Profit organisations, and consumers of social-purpose services.

The report said that the social purpose market was dominated by governments which contribute 81 per cent of the expenditure (Commonwealth Government $282 billion, state governments $121 billion, and local governments $10 billion). The report said that the Not for Profit sector (at $78 billion) and the for-profit sector (at least $21 billion) also played a key role in delivering services.

“This $510 billion a year spend will come under increasing pressure with rising citizen expectations, growing demand for services, introduction of the NDIS and challenges associated with Australia’s ageing population,”  PwC partner James van Smeerdijk said.

“Given the economic and fiscal challenges Australia faces, the challenge now is to design and deliver more effective solutions to our complex social issues at a lower cost.

“A more effective and efficient social purpose market is not only critical for the wellbeing of all Australians, it is also arguably Australia’s biggest productivity challenge.

“We need to recognise that services are increasingly provided in a complex, mixed market of providers including government, the Not for Profit sector and for-profit sector, which calls for more innovative and systemic solutions.”

Centre for Social Impact CEO Dr Andrew Young said: “Per capita, Australia is now among the wealthiest countries in the world.”

“For decades we have increased spending aiming to address disadvantage and improve social outcomes; for example, Commonwealth Government expenditures on health, welfare and education have grown by over five times on per-capita, inflation-adjusted basis since 1970.

“To be clear, in developing estimates of the quantity of social purpose expenditure we are not expressing judgement about whether this is too much or too little. Rather, we think it’s critical to move beyond the debate about raising more taxes versus cutting services, and develop an informed discussion about how we best use limited future resources to deliver the best outcomes we can for Australians.”

Young said the report represented a call to action for new thinking, collaborative problem solving and an evidence informed debate to develop a roadmap to improve productivity.  

He said the report identified seven key action areas: workforce, data and measurement, innovation, prevention and intervening earlier, technology, system and market design, and place-based reform.