Indonesia has been experiencing a rapid economic growth amid global crises in the United. States and the European Union countries. In addition, government expenditures in Indonesiahave also shown an increasing trend in recent years. Using panel data from 33 provinces inIndonesia from 2007 to 2012, this paper describes the current condition of GDP growth andgovernment expenditures, examines the relationship between government expenditure andeconomic growth, and formulates government expenditure policy in order to harmonize GDPgrowth, poverty alleviation, and income inequality. The result indicates that governmentexpenditure for development, such as building roads, hospital, bridges, electricity, and watersupply, has a significant and positive effect on the regional economic growth rate. Not onlycan government expenditures affect economic growth but it also can reduce poverty bystrengthening human capital through better education and health facilities.