Health expenditure exceeded 10% of gross domestic product for the first time in 2015-16, data released on Friday shows.

The growth in health spending continues to slow, but not to the same extent as GDP growth. Last year, $170.4bn was spent on health, $6bn (3.6%) more in real terms than in 2014–15, the figures from the Australian Institute of Health and Welfare show. It was the fourth consecutive year growth was below the 10-year average of 4.7%.

A health economist with the Grattan Institute, Dr Stephen Duckett, said the share of the economy represented by health had hit 10.3% largely due to a slowing increase in GDP.

It was good news that health spending was not growing as fast as previously, he said.

“But breaching that 10% level is still important, because this means one in every $10 in the economy is being spent in the health sector. Almost 70% of health spending is government spending.

“I think it’s a sign that the overall settings that the previous Labor government put in place for public hospital spending is working. No dramatic changes are necessary. We’ve had in the past discussions about healthcare being unsustainable and unaffordable, but the rate of that growth is slowing without any draconian steps like co-payments being required.”

But a professor of health economics with the University of Melbourne, Philip Clarke, said state and federal governments needed to act now to avoid a spending and funding crisis.

“Inevitably this involves either spending less on other things and/or raising taxes,” Clarke said.

“The other option, which is the most politically difficult, is to look at ways of improving the efficiency of the system. In some cases this would involve tackling waste and reducing unnecessary care.”

The data showed that state and territory governments contributed 26.1% ($44.4bn) to health expenditure in 2015–16, up from 25.9% ($41.9bn) the previous year.

Over the same period, the share of spending by nongovernment funders, including individuals and private health insurers, fell. Individual spending fell only marginally, from 17.7% to 17.3%.

“I think as the economy slows down people are having second thoughts about purchasing over-the-counter medicines,” Duckett said.

“We also know that when people don’t have as much money to spend sometimes they won’t get their prescription medications filled, as they can’t afford them.”

In 2015–16, 68% of individual expenditure was spent on primary healthcare and 19.5% on dental services. Hospital costs accounted for 11.1%, a figure that has more than doubled since 2005–06.