Australia’s Soaring Welfare Costs May Surpass New Zealand’s Entire Economy by 2027: An Economic Forecast

Australia is on the brink of a welfare expenditure surge so substantial that it might soon match or exceed the entire economic output of New Zealand.

Recent government data highlights that welfare spending is accelerating at a rate significantly beyond the predictions made by the Treasury, with numerous upward adjustments revealing a widening gap between initial forecasts and the current reality.

The most recent Mid-Year Economic and Fiscal Outlook (MYEFO) report projects that the Commonwealth’s social security and welfare spending will climb to $329 billion by the year 2029.

Given the Treasury’s history of underestimating growth, experts anticipate that this figure will likely see further increases in future fiscal updates.

The budget’s allocation for ‘social security and welfare’ encompasses a range of programs, including the Age Pension, Disability Support Pension, JobSeeker, as well as payments for families, students, and veterans, in addition to the National Disability Insurance Scheme (NDIS).

To put the scale in context, New Zealand’s entire economy is currently valued at about $368billion.

MYEFO data show Treasury has consistently assumed slower growth than has actually occurred, then quietly revised spending higher each year as costs blow past projections. 

If those misses persist, Australia’s welfare bill could realistically match, or exceed, New Zealand’s GDP by around 2030, or even earlier should current trends continue.

Total welfare spending in Australia could exceed the entire New Zealand economy by 2030

The NDIS sits at the centre of the surge. 

The scheme already costs taxpayers $46.2billion a year, making it one of the fastest‑growing expenses in the federal budget. 

It is expanding at 10.6 per cent annually, and government forecasts suggest its cost could climb to $60–70billion a year by the end of the decade unless growth is restrained.

Alarmed by that trajectory, the government has flagged plans in the May Budget to rein in NDIS growth, targeting a reduction in annual increases from around 8 per cent to a more ‘manageable’ 5 per cent. 

Whether that goal can be achieved remains uncertain, particularly given past difficulty controlling costs.

Treasury’s own revisions reveal the problem. 

In 2023–24, MYEFO projected welfare spending would reach $287billion by 2026–27.

The latest update now puts the figure at $303billion for the same year, a $16billion blowout in just three years. 

Treasurer Jim Chalmers (pictured) is under pressure to rein in spending in May’s budget

The revision highlights a familiar pattern, with Treasury understating welfare growth by as much as $15billion a year and repeatedly lifting forecasts as actual costs overrun expectations. 

Critics argue this pattern means the current $329billion projection for 2029 is unlikely to be the final figure, increasing the risk Australia’s welfare bill soon rivals the economic output of an entire neighbouring country.

Shadow Treasurer Tim Wilson accused the government of losing control of welfare spending and ignoring widespread fraud within the NDIS. 

Senate estimates hearings have previously heard that fraud, non‑compliance and inappropriate payments may account for up to 10 per cent of the scheme, costing taxpayers as much as $5billion a year.

‘We all support a welfare system that helps those in need,’ Wilson told Daily Mail. 

‘But when the government admits 10 per cent of the $50billion NDIS bill is going toward fraud and corruption, I have little confidence the Albanese government can contain spending.’

He said Labor’s fiscal management was also worsening inflation and debt.

‘With Jim Chalmers pouring debt petrol on the inflation fire, costs will continue to increase,’ Wilson said. 

The budget’s ‘social security and welfare’ package includes the Age Pension, Disability Support Pension, JobSeeker, family and student payments, veterans’ income support and the National Disability Insurance Scheme (NDIS) (pictured are people at a Melbourne Centrelink office)

‘They will outstrip any support Australians receive, while the debt bill continues to balloon.’

The government has rejected claims that Australia is facing an uncontrolled welfare blowout, insisting spending remains stable despite Treasury revisions. 

A spokesperson for the Department of Social Services said changes were modest and well within normal budget variation.

‘The Australian Government is committed to making sure it is there to support those who need it most when they need it, and ensure value for money for taxpayers,’ the spokesperson told Daily Mail.

They pointed to the latest MYEFO as evidence spending was tightly managed. 

‘In the latest 2025–26 MYEFO update, the variation on social security spending represented less than a one per cent change since the 2025–26 Budget,’ the spokesperson said.

The department said fluctuations were routine and largely driven by factors beyond the government’s control. 

‘It is normal for there to be expenditure variations in the Social Services portfolio, for instance due to changes in payment populations and indexation amounts,’ the spokesperson said.

They also stressed the higher projections did not reflect policy changes. 

‘The variation did not reflect policy changes to any payment in the Social Services portfolio,’ the spokesperson said, adding that social security spending had remained stable outside extraordinary events such as the Covid‑19 pandemic.