The State Government has foregone a promised return to surplus, instead investing an additional $2.3 billion in health and $21 billion in infrastructure. The Government is providing more support for first home buyers and affordable housing, including the delivery of around 3,600 new homes over five years. It has also provided targeted cost of living relief for those in greatest need, without adding to inflationary pressures.
Delivering on election commitments is taking precedence over the surplus promise made at the last State Budget, with the Treasurer cautious not to make the same promise. The $249 million deficit – instead of the touted $233 million surplus – has been attributed to unprecedented flood recovery packages totalling $100 million, extra child protection funding, a $95 million reduction in GST revenue, a $40 million stamp duty hit following a Supreme Court ruling, as well as increased infrastructure spending.
Cost revisions to previously announced major infrastructure projects have made a significant dent in the State Budget’s bottom line. In particular, the additional $1.2 billion for the new Women’s and Children’s Hospital – bringing the project to a total of $3.2 billion – and an additional $55 million for the new Adelaide Aquatic Centre.
The State Government is forecasting a return to surplus from 2023-24. However, non-financial sector net debt is forecast to increase by 44 per cent from 2022-23 figures to $37.6 billion by 2026-27 as key government initiatives and infrastructure delivery is prioritised.
An economic downturn is increasingly being anticipated with Gross State Product figures revised down slightly since last year’s Mid-Year Budget Review. The State Government expects just a 1 per cent growth in real terms for 2023-24, with a slight uptick to 2 per cent over the forward estimates to 2026-27.
The strong actions by the Reserve Bank of Australia to reduce inflation are continuing to impact the South Australian economy. While the Consumer Price Index is estimated to reach 7.75 per cent in the 2022-23 financial year, successive hikes on interest rates are likely to contribute towards the forecast fall to 3.75 per cent in 2023-24.
Employment is forecast to remain strong in 2022-23 with 3 per cent growth, moderating to a more sustainable 1 per cent over the forward estimates. Population growth figures and estimates remain strong, continuing to place pressure on housing and public services.
Health once again takes centre stage in the Malinauskas Government‘s second State Budget, injecting a further $2.3 billion over the next five years, on top of the $2.4 billion committed in the 2022-23 Budget. The promise of fixing the health system and ambulance ramping remains the State Government’s highest priority, with paramedics chalking up their ambulances during last year’s election campaign.
Most of this new funding focuses on building additional hospital capacity, reducing ambulance ramping and a living with a COVID framework. These additions bring the total operating Budget of health to $4.4 billion, more than the previous State Government’s investment.
Key pillars include $1.3 billion to meet activity demand and pressure in hospitals, $67.8 million to expand virtual care services, and $31.5 million to establish the State Health Control Centre. This is aimed at providing 24/7 oversight and management of critical health resources. $567 million over four years has also been committed to support the health system as it transitions from the COVID pandemic to ‘living with COVID’.
Other key initiatives within health include:
After weeks of promising significant cost of living relief measures, the State Government has committed $471.3 million to the cause.
This includes a previously announced energy concession initiative totalling $254.4 million over two years, providing much needed bill relief to those most in need. Co-funded with the Commonwealth, the plan will provide a rebate of up to $500 for around 420,000 South Australian households on their electricity bills, with approximately 86,000 small businesses eligible for a $650 rebate.
Other measures include $44 million over five years to increase to existing concessions in line with rising inflation rates, increased payments to carers, as well as $56.4 million towards cheaper parking and free public transport for health workers.
Other key initiatives include:
The announcement saved for Budget Day itself was the State Government’s $474.7 million investment in housing, directly supporting the delivery of around 3,600 homes over the next five years and providing substantial relief for first home buyers.
The State Government has been under pressure to act on the current cost of living pressures, which has included increases to house and land prices and soaring rents resulting in more people being pushed into homelessness, as well as insecure and unaffordable housing.
Another key Budget initiative includes the abolishment of stamp duty for first home buyers for new properties valued up to $650,000 or $400,000 for vacant land. First home buyers will also benefit from the expansion of the First Home Owner Grant, and enabling access to loans with a 2 per cent deposit.
Other key housing initiatives announced today include:
South Australia will see one of its most significant spends on public sector infrastructure with a staggering $21 billion committed over the next four years. Construction costs are almost certain to keep spiralling, considering the rapid march of inflation and interest rates.
$9.9 billion has been allocated to roads and public transport which includes $5.3 billion for the North-South Corridor in a 50-50 split with the Commonwealth, which will remain toll free.
Other key commitments include:
Appropriation and supply bills will now go through regular parliamentary processes, which includes estimates where the opposition can scrutinise the State Government’s spending decisions as part of the process.
It is clear the State Government is primarily focused on rectifying issues within the health portfolio, however challenging economic circumstances are making it difficult in terms of what the State Government can action and deliver.
Broadly, the reduction in GST revenue highlights the national discussion on current arrangements, with pressure placed on the Federal Government from both directions to come to an amicable solution.
Bringing the Budget back to surplus is the intention of the State Government, but spending to relieve a strained health system remains the focus. Engaging the State Government for funding of projects and initiatives will prove challenging, especially as its own infrastructure project costs and timeframes are likely to be under further pressure. Navigating these challenges and communicating the right message to the State Government is critical at this juncture.
If you’d like to discuss the State Budget or how to best navigate the State Government, please contact SEC Newgate’s SA Team:
Emma Schwartz, Associate Partner – [email protected]
Hannah MacLeod, Account Director – [email protected]
