South Australian 2011-12 Mid-Year Budget Review

The South Australian Government announced today in its Mid-Year Budget Review that its record spending on infrastructure and investment in jobs will continue, despite a drop in forecast GST revenue of $259 million and reduced conveyancing duty of $679 million over the forward estimates. The full Review document can be accessed here.

The Review indicated that a return to surplus would be pushed back until 2014-15.
South Australian Treasurer, the Hon. Jack Snelling said that the Government was faced with a choice between cancelling important commitments in infrastructure development and deferring the budget’s return to surplus.
“We are however committed to those projects and the jobs and investment they are delivering and will continue to deliver for South Australia.”
Net debt is projected to reach $7.74 billion in 2015-16 when the New Royal Adelaide Hospital comes onto the state’s balance sheet. However, general government net debt remains below 50 per cent of overall revenue.
The 2011-12 Mid-Year Budget Review includes new savings and revenue measures totalling $141.1 million over four years which exceeds the cost of new policy decisions totalling $130.2 million over the same period.
Key policy decisions made by the State Government since the 2011-12 State Budget have included:
•         Allowance for two hours of free parking at all “open air” car parks at suburban hospitals at a cost of $4.2 million per year;
•         Relaxation of shop trading hours in the city and part public holidays after 5pm on Christmas Eve and New Year’s Eve at a cost of more than $5 million per year from 2012-13;
•         Doubling the operating funding to set up and run the Independent Commission Against Corruption to $32 million over five years;
•         Allocation of $4 million over four years to increase the number of operators in the State Fire and Emergency Communications Centre;
•         Termination of an existing development agreement with the Newport Quays Consortium ($5.9 million);
•          Establishment of a Health Resources Unit to focus on health spending at a cost of $2.5 million per year; and
•          Increased annual funding to the Royal Zoological Society of South Australia to $4.5 million per year.
Savings measures:
•         The abolition of stamp duty on non-real property transfers is to be deferred by one year until July 1, 2013, saving $36 million;
•         Abolishing the Renewable Energy Fund which will save $11.7 million;
•         The planned Southern Community Justice Court, announced in the 2010-11 State Budget will no longer proceed saving $12.8 million;
•         The recruitment of an additional 313 police officers will now be extended over six years instead of four years, saving more than $50 million;
•         The introduction of an Information and Communication Technology (ICT) efficiency measure, which will result in savings of $2.9 million in 2012-13 and $5.9 million per year from 2013-14;
•         Ending the Small and Medium Enterprise Investment Development Program and the National Medical Devices Partnering Program, saving $4.5 million over four years;
•         A combination of administration efficiencies within the South Australian Tourism Commission will save $3.6 million over four years; and
•         A reduction in support over the forward estimates for the Sustainability and Climate Change Division ($1.5 million), a mainstreaming of the social inclusion functions ($3 million), and a reduction in funding for the Commissioner for Integrated Design ($1 million).
The Government’s new fiscal targets now include:
•         A net operating surplus by the end of the forward estimates;
•         Once surplus is achieved operating expenditure growth will be limited to trend growth in household income; and
•         Achieve a level of general government net debt that remains affordable over the forward estimates – a maximum ratio of net debt to revenue of 50 per cent.
•         Underpinning the general government debt target the government continues its  commitments that:
•         Consistent with the government’s obligations under the Competition Principles Agreement operations of public corporations that cannot be paid for from their own revenue streams will be funded from the budget; and
•         The defined benefit unfunded superannuation liability will be fully funded by 2034.
The Mid-Year Budget Review also revises down the state’s forecast employment growth from 1.5 per cent to 1 per cent in 2011-12 but to rise back to 1.5 per cent in 2012-13.
Similarly, the forecast growth in South Australia’s Gross State Product has been revised down in 2011-12 from 2.75 per cent to 2.25 per cent, but is forecast to rise to 3 per cent in 2012-13.

For further information, please contact your Hawker Britton consultant.