Estimates Vote

Department of Treasury and Finance, $49,379,000

Administered Items for the Department of Treasury and Finance, $1,392,192,000

Minister:

Hon. A. Koutsantonis, Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy, Minister for Small Business.

Departmental Advisers:

Mr B. Rowse, Under Treasurer, Department of Treasury and Finance.

Mr D. Reynolds, Executive Director, Budget Branch, Department of Treasury and Finance.

Mr A. Blaskett, Executive Director, Government Accounting, Reporting and Procurement Branch, Department of Treasury and Finance.

Mr P. Williams, Director, Financial Services, Department of Treasury and Finance.

Mr G. Goddard, Deputy Under Treasurer, Department of Treasury and Finance.

The CHAIR: The estimates committee, as we all know, is a relatively informal procedure and, as such, there is no need to stand to ask or answer questions. The committee will determine an approximate time for consideration of the proposed payments to facilitate a change of departmental advisers. I ask the minister and the lead speaker for the opposition if they could indicate whether they have agreed on the timetable for today's proceedings and, if so, provide the Chair with a copy. Changes to the committee membership will be notified as they occur.

Mr MARSHALL: I would like to note that we found it very inconvenient in the opposition that the government would not agree to schedule the Premier's estimates and the Treasurer's estimates at different times. Of course, I represent the Hon. Rob Lucas on Treasury matters, and it seems an extraordinary departure from the standing practice of this parliament to work with the opposition to ensure that all committees can be represented by their rightful representative. In this case, the government did not agree to this and we find it very disappointing and would like it noted.

The CHAIR: Member for Dunstan, it is duly noted. If the minister undertakes to supply information at a later date, it must be submitted to the committee secretary by no later than Friday 26 September 2014. This year, the Hansard supplement, which contains all estimates committee responses, will be finalised on Friday 10 October 2014.

The minister and the lead speaker for the opposition are allowed 10 minutes each for opening statements, if they so wish. There will be a flexible approach to asking questions based on about three questions per member, but I am happy to be flexible about that. A member who is not part of the committee may, at the discretion of the Chair, ask a question. Questions must be based on lines of expenditure in the budget papers and must be identifiable or referenced.

Members unable to complete their questions during the proceedings may submit them as questions on notice for inclusion in the House of Assembly Notice Paper. There is no formal facility for the tabling of documents before the committee. However, documents can be supplied to the Chair for distribution to the committee. All questions are to be directed to the minister, not the minister's advisers. The minister may refer questions to advisers for a response. I also advise that, for the purposes of the committee, television coverage will be allowed for filming from both the northern and southern galleries.

As I said, we are here for the Treasurer's estimates committee. I declare the proposed payments open for examination and refer members to the Agency Statements, Volume 4. I call on the Treasurer to make a statement, if he wishes, and to introduce his advisers.

The Hon. A. KOUTSANTONIS: Thank you very much, Mr Chairman. I think it is again important to place on the public record the context in which the budget was framed. The commonwealth in its budget of 13 May forced upon us, and indeed the nation, some of the most draconian and brutal funding cuts ever witnessed in our federation. It is clear that the commonwealth has decided to walk away from health care and education funding. It is clear it has decided to abandon pensioners and the vulnerable in our community. It is clear that binding agreements signed by premiers and prime ministers were torn up and dishonoured.

These decisions have ripped $898 million from the South Australian budget over the next four years and will take $5.5 billion over the next ten years. Cuts include $655 million to health spending across the forward estimates, $123 million to pensioner concessions over the next four years, $47 million to funding for schools and vocational education, and $45 million to schools funding under the Gonski funding agreement, which will rise to a reduction of more than $200 million by 2019.

A state of our size cannot absorb these cuts. The Premier and the government made it clear on budget day that we will fight these cuts, but if they are not reversed, we will be forced to take action to repair our budget. This fight continues. On a positive note, in this budget the government has fully funded our election promises, and we will deliver on each and every one of those over the next term of government.

We continue our commitment to infrastructure and will invest $10.1 billion over the next four years to keep building South Australia. We will continue to provide incentives to business to employ people and grow our economy. We will honour our commitment to increase energy, medical and heating/cooling rebates for pensioners by $50 to a maximum of $215. Unlike the commonwealth, we value the contributions of our pensioners and we will shield them from its cuts in 2014-15. The budget returns to surplus, with a surplus of $406 million in 2015-16, and these surpluses grow in the out years and provide a buffer against the commonwealth government's next round of budget repair, whenever that may be.

This budget has been framed in exceptionally difficult circumstances. The commonwealth's decision to rip funding from the state in such an unprecedented fashion will have profound impacts on South Australia for many years to come. I have said before that the budget I delivered on 18 June was a budget that we were forced to deliver, not the one that we wanted to deliver. We will continue to fight these cuts and we will continue to stand up for the people of South Australia.

I take the opportunity now to introduce, to my left, surprisingly, the Under Treasurer, Mr Brett Rowse. To my right, appropriately, are Mr David Reynolds and Mr Andrew Blaskett. Mr Reynolds is the executive director of the Budget Branch. Mr Blaskett is the executive director. Behind me is Mr Garry Goddard, the deputy under treasurer, and joining him is Mr Paul Williams. I am the Treasurer and I am happy to take your questions.

The CHAIR: The Leader of the Opposition, do you have an opening statement?

Mr MARSHALL: No.

The CHAIR: Then we will move straight to questions. Are there any questions for the Treasurer?

Mr MARSHALL: Yes. I would like to start with Budget Paper 3, page 6, and in particular look at table 1.3, the commonwealth government budget cuts. Just to clarify how this works, if we take any item there, let's just say the National Partnership Agreement on Preventative Health, there is a $3.9 million cut for this current financial year. There is not an additional $3.9 million next year. It is the same $3.9 million carried through for the remaining years. Is that correct?

The Hon. A. KOUTSANTONIS: I am advised yes.

Mr MARSHALL: You have presented this with cuts to the forward estimates of $885 million over the forward estimates. These are the cuts. Have you done any modelling on whether there have been any increases in commonwealth government revenue to South Australia over those same four years?

The Hon. A. KOUTSANTONIS: The increase in funding, I am advised, is what was previously known as nation building. I am not sure of the new term that the current government is using. That was an increase in funding. That is obviously to meet—

Mr MARSHALL: Are they capital items?

The Hon. A. KOUTSANTONIS: Yes and GST.

Mr MARSHALL: Are they the only items that increase? So, the only recurrent item is GST?

The Hon. A. KOUTSANTONIS: Like I said on budget day, there are some special-purpose payments that do increase over the forward estimates, but not by what the agreements were. For example, as I made very clear, there is a discrepancy between what commonwealth ministers are saying and what I am saying. The actual fact is that we are both right. You may have heard assistant minister Briggs and minister Pyne saying that they are actually increasing funding for health and education over the forward estimates. That is true but they are not increasing it by what they promised to increase it by, by the agreements. The commonwealth's own budget papers show that, while there is a gradual increase, it is not by what we had agreed, so in real terms it is a cut.

Mr MARSHALL: Yes, but I suppose my question really is regarding table 1.3. It is not headed commonwealth government budget impacts. It is headed Commonwealth government budget cuts. Is there a corresponding model that shows increased revenue that needs to net off to actually show the net position, because here you are saying that there is $885 million worth of cuts—well, we would like to know what the net position is.

The Hon. A. KOUTSANTONIS: I think what you are asking me is that, on the basis of the commonwealth budget brought down in May, where have we highlighted the increases? I think the best way I can explain it to you is that we are comparing our last year's budget, our Mid-Year Budget Review, and now. So we are looking at our forward estimates and what we had estimated that we would receive rather than what the commonwealth is doing. Remember, they are two separate budgets but they both impact on each other.

Mr MARSHALL: But if we take that Treasurer—

The Hon. A. KOUTSANTONIS: Can I just finish. I do not mean to interrupt you. We will not be asking any questions so you will have the full time to ask.

Mr MARSHALL: Okay, thank you.

The Hon. A. KOUTSANTONIS: When the commonwealth increases a specific-purpose payment or a national partnership, it is spent on what they ask us to spend it on. We do not take it necessarily and distribute it elsewhere. So I think that is probably going to answer your question but I think you are probably looking for a political answer rather than a finance answer.

Mr MARSHALL: No, not at all, sir.

The Hon. A. KOUTSANTONIS: I like you calling me 'sir', that is very respectful of you.

Mr MARSHALL: What I am failing to understand—no, well, he is the Treasurer of the state, like it or not, so we have to offer the due respect to the position.

The Hon. A. KOUTSANTONIS: I want to thank you for your efforts in making me Treasurer.

Mr MARSHALL: What is that?

The Hon. A. KOUTSANTONIS: I want to thank you for your efforts in making me Treasurer.

Mr MARSHALL: That is not in the spirit, so we might have to go to the second folder of questions! I suppose what I am failing to understand is the reconciliation between what you have said we were going to receive from the commonwealth with table 1.3 on page 6 of Budget Paper 3, because if I take a look at what you provided in last year's budget for total grant revenue—take, for example, this financial year—there you said that you would be receiving $8.235 billion from the commonwealth.

Your own table on page 6 shows that that will be cut by $101 million, so one would assume that the revised commonwealth revenue would be down to $8.132 billion. Well, it is not: it is significantly higher and that is the point that I am trying to make. In fact, if we look at what it is, your revised money coming in is $8.269 billion. In fact, from that, we can ascertain that that budget cut of $101 million is grossly overestimated because of some other items which are coming in to net off against it.

The Hon. A. KOUTSANTONIS: The advice I am receiving is that while, yes, the figure does show an increase, the cuts that have been made by the commonwealth are real. You can look at their own budget papers; they do not walk away from them. Things change throughout the year and I can probably give you on notice the detail of what has changed throughout the year. But again, the specific purpose payments and the other national agreements we have are spent on the commonwealth's priorities, not ours, so the cuts that we have made to health and education are real. But, yes, there has been an increase in GST, but a corresponding reduction in the state's finances and state taxation. I suppose if you are getting at the point that the commonwealth's cuts are only about $100 million, no, that is not right. The cuts the commonwealth are making over the forward estimates are $889 million and the commonwealth budget papers bear that out.

Mr MARSHALL: What are you saying they are cut by?

The Hon. A. KOUTSANTONIS: I think it is $889 million.

Mr MARSHALL: Is it 885?

The Hon. A. KOUTSANTONIS: It is 898 over the forward estimates.

Mr MARSHALL: That is over five years, though, isn't it?

The Hon. A. KOUTSANTONIS: Over four years.

Mr MARSHALL: I think that is over five years in your table.

The Hon. A. KOUTSANTONIS: Yes, over five.

Mr MARSHALL: Over five years, so what is it over four, because you have repeated that it is 897 over four years. It is actually not. That is over five years.

The Hon. A. KOUTSANTONIS: 885.

Mr MARSHALL: 885—yes, that is my number. If I am right on that one I might be right on this one as well. This table really only presents the budget cuts. It does not present the net situation. I have reconciled it against last year's budget numbers and I am happy to do the same reconciliation over the Mid-Year Budget Review because you said there may be an update. I have done that calculation as well because, originally in the Mid-Year Budget Review—the most recently updated figures from you—you said we would receive $8.274 billion in revenue from the commonwealth. In your own table, it says this will be diminished by $101 million.

Therefore, we would assume that the budget from the commonwealth this year would diminish to $8.173 billion if your table was the net rather than just the gross cuts. But of course when we go to table 3.13 on page 55, we see quite clearly that the budget revenue from the commonwealth is actually $8.269 billion. In other words, the net is not there at all. There is not $101 million. There might be $101 million worth of cuts. I am not doubting that, but the net situation is that there is an increase over and above—

The Hon. A. KOUTSANTONIS: Remembering that the commonwealth specify where their money is spent.

Mr MARSHALL: That has nothing to do with my question.

The Hon. A. KOUTSANTONIS: Well, it does, because in terms of the cuts to health and education, if we have national partnership arrangements that are not being honoured, then that money is taken out. I cannot move specific payments that the commonwealth has made for other measures and move them into these lines to make up the difference. I suppose the point you are getting at—I am guessing; I could be wrong—is that you are saying that the cuts that the government has said the commonwealth have made are not real and in fact—

Mr MARSHALL: No, I've never said that.

The Hon. A. KOUTSANTONIS: —that there are windfall gains for us, but the reality is that when the commonwealth assigns money, I cannot move South Road money, for example, onto anything else. I cannot move specific purpose payments from national partnerships to my priorities. They are spent on agreement with the commonwealth, so I suppose we will just agree to disagree.

Mr MARSHALL: No. The point that I am trying to make is that your table 1.3, as it is correctly titled, only identifies cuts, but where are the increases? Have you done any corresponding modelling because it just does not reconcile unless there is a corresponding increase? You have identified all of the areas where cuts have occurred and you have added them all up, but there must be a whole pile of areas where there are revenue increases, otherwise those figures that I reconciled against last year's projections and the Mid-Year Budget Review's projections would reconcile, and they simply do not. I presume you have done a reconciliation at some point in your life.

The Hon. A. KOUTSANTONIS: If you go to page 17 and look at table—

Mr MARSHALL: Which paper are we looking at?

The Hon. A. KOUTSANTONIS: Budget Paper 3, table 1.14, will give you the differences in changes since the Mid-Year Budget Review on all the grant lines and you can probably reconcile it from there.

Mr MARSHALL: I did and if you are talking about the special purpose payment grants and the national partnership grants, that set of numbers that you have got between 2013-14 and 2016-17 adds up to a total diminution of revenue to the government of $202 million, whereas when I go back to your own table, the one that is in question, that number there adds up to a significantly higher amount, in fact, I think it is closer to $498 million and I have not been able to reconcile those numbers either.

The Hon. A. KOUTSANTONIS: Look, I will get you the discrepancy on notice.

Mr MARSHALL: I think we need to discuss it; it is pretty significant.

The Hon. A. KOUTSANTONIS: You can keep on asking questions; I am not stopping you.

Mr MARSHALL: Do you have any explanation why in the table that you have identified, table 1.14—and this is the whole point that I am trying to make, it is pretty simple, you keep talking about cuts and I want to talk about net—the net cuts in your own table 1.14, not the gross, the net is $202 million, yet the gross in table 1.3 is $498 million? It would seem to me that that is absolute proof positive that you are only presenting the cuts in table 1.13 and we need to see the corresponding increases so that we can look at the net effect of the federal budget.

The Hon. A. KOUTSANTONIS: I am happy to offer you a full reconciliation on notice.

Mr MARSHALL: You will accept though today—

The Hon. A. KOUTSANTONIS: I am not accepting anything you are saying. I am saying I will offer you a full reconciliation, so you can satisfy yourself.

Mr MARSHALL: But are you suggesting to me that there are—

The Hon. A. KOUTSANTONIS: I am not suggesting anything to you.

Mr MARSHALL: —increases over and above the cuts?

The Hon. A. KOUTSANTONIS: No, I am saying to you I will offer you a full reconciliation. I cannot be clearer.

Mr MARSHALL: But you cannot provide any explanation for the massive variance? We are talking about a variance of $300 million.

The Hon. A. KOUTSANTONIS: I do not think you are interested in an explanation. I think you are just interested in making a political point, and that is fine, congratulations, go ahead. I will offer you a full reconciliation. I cannot be more open and clearer than that.

Mr MARSHALL: I cannot be any more open and clear about the fact that one page has only got cuts—

The Hon. A. KOUTSANTONIS: Leader, I am offering you the explanation and will give it to you on notice. I am not trying to hide it from you.

Mr MARSHALL: When is that likely to come through?

The Hon. A. KOUTSANTONIS: Whenever the statutory requirement is, we will provide it to you.

The CHAIR: I think it is before 26 September, so let us move on.

Mr MARSHALL: I have heard that promise year after year, but okay.

The Hon. A. KOUTSANTONIS: You have only been here four.

Mr MARSHALL: That is why I say year after year. I did not say decade after decade.

The Hon. A. KOUTSANTONIS: That is how we measure government.

The CHAIR: Do you have any further questions, leader?

Mr MARSHALL: Yes, I do. If we go to page 28, operating savings, one of the things that concerns me also is that it seems to be a different format for presentations than what you have had previously, so when we compare those to the cuts on table 1.3 and then your own cuts in table 2.6—or as you refer to them, they are not cuts; if you make them they are operating savings, which I think is interesting—if you look at what you delivered in 2013-14, am I reading this correctly that you made $282 million worth of savings in that year?

The Hon. A. KOUTSANTONIS: The advice I have received from my Under Treasurer is that the $282 million figure you are pointing to is the new amount of savings we will achieve for that year; it is not the total amount of savings we will have achieved.

Mr MARSHALL: Yes; so in the 2013-14 year there were new operating savings of $232 million as the delivered estimate.

The Hon. A. KOUTSANTONIS: That's $282 million.

Mr MARSHALL: Thank you, $282 million. So the new savings measures to commence this financial year are $276 million—

The Hon. A. KOUTSANTONIS: Yes; that is correct.

Mr MARSHALL: Just to clarify, the $282 million achieved last year would be added to the $276 million in the same way that your table provides for in 1.3. It is not like there is a reduction; it is the 282 plus the 276.

The Hon. A. KOUTSANTONIS: That is correct, yes.

Mr MARSHALL: So the following year, the 2015-16 year, will essentially be the 282 plus the 276 plus the 313 million?

The Hon. A. KOUTSANTONIS: Yes.

Mr MARSHALL: Okay. If I take that to its logical extrapolation, the government is providing, over the forward estimates, $4.2 billion worth of cuts; is that correct?

The Hon. A. KOUTSANTONIS: I do not have the full amount—

Mr MARSHALL: I just added them up using your own methodology.

The Hon. A. KOUTSANTONIS: Congratulations. I made no secret of the fact that we are trying to get our expenses down to below 15 per cent of our gross state product by 2017-18. I think it is important to note that the story of the South Australian budget has not necessarily been overexpenditure; it has been us chasing our revenues down. The thing about revenues in the state system is that most of our taxes are transactions, so when transactions stop occurring our revenues drop dramatically, and when our revenues drop it is very hard to correspondingly drop your expenditure.

So what we show over the forward estimates—and I refer you to page 13 of that budget paper, which is a graph showing the story of our revenues and expenditures (the revenue being the solid line and the dotted line is our expenses line)—what we are attempting to do in this budget is to get our expenses down to below 15 per cent of our gross state product. I would have thought that the people who sit on the opposition benches would be applauding the government.

Mr MARSHALL: I am certainly not criticising it; I am just trying to clarify this table, because it is presented in a completely different format from the other ones. So, to read this accurately over the forward estimates you basically need to add them together in a similar way to the other table, which comes up with $4.2 billion worth of cuts over the forward estimates. I suppose my question is: if there is $4.2 billion worth of cuts over the forward estimates and only $885 million is imposed upon it by the commonwealth, is the Treasurer accepting that the vast majority—something like $3.25 billion—is completely the responsibility of the state government? Because they would therefore pale into complete insignificance.

The Hon. A. KOUTSANTONIS: First and foremost, it is only appropriate that we cut our own cloth. We have always said that we would. Those saving measures or cuts—call them whatever you like—are known; every six months, whether it is a budget or a Mid-Year Budget Review, we talk about it, we know that they are coming, agencies prepare for them. What the commonwealth has done is make cuts without any consultation with us. We have been building capacity, preparing to meet activity, whether it is in our schools or hospitals, and that has been taken away from us without any consultation. So for us to re-profile our own budget to meet the shortfall means that something else has to miss out.

I make no apology for what I have said. Every government is cutting the cloth. The Queensland government is making dramatic cuts to its expenditure, as is the New South Wales government, as is the Victorian government. They have all said the same things that we have said. People in your party have come out and said that these commonwealth cuts are unsustainable. So, are we making our own savings? Yes. Are we trying to get our expenditure down? Yes. Are we trying to push it down to record levels? Yes. Do the commonwealth cuts have an impact? Yes, they do. Are they severe? Absolutely they are. I understand; you are the only Liberal leader in the country defending this commonwealth budget. Congratulations. If you think their cuts are not as dramatic as what Mike Baird says they are or what Campbell Newman says they are or what Denis Napthine says they are, then you are a very brave and loyal Liberal. Congratulations.

Mr MARSHALL: My question is really: what is the magnitude of the state cuts relative to the federal cuts?

The Hon. A. KOUTSANTONIS: Well, if you look over the next 10 years, it is 5½ billion dollars.

Mr MARSHALL: What about over the forward estimates?

The Hon. A. KOUTSANTONIS: It is $889 million, I think I said to you earlier.

Mr MARSHALL: Versus how much in state cuts?

The Hon. A. KOUTSANTONIS: Well, we are making our own efficiencies, but we knew they were coming.

Mr MARSHALL: But is it not true, Treasurer, that the state cuts are three to four times higher than the federal cuts which are demonising? They are three to four times higher. So all of this rhetoric that you have been putting out there about the federal government budget, you need to times that by three or four to condemn your own budget.

The Hon. A. KOUTSANTONIS: No. I refer you to one of the graphs we gave in South Australia’s response document, which was an addendum to the budget. On page 3 there is a graph that Treasury has provided to me. In 2014-15 the cuts to national health reform payments in South Australia are $37 million. The following year (2015-16) it is $74 million. In 2016-17 it goes to $116 million. Then it nearly doubles to $217 million in 2017-18. When you move forward, in 2018-19 it goes to nearly $300 million. In 2019-20 it goes to $378 million. Then we get really serious and it goes up to nearly half a billion dollars in 2021. In 2021-22 it is over half a billion dollars. It nearly reaches $700 million in 2022-23, climaxing in 2024-25 at $969 million in cuts. These are annual cuts. So, that is just one reform payment, that is one partnership that the commonwealth has cut.

We have been factoring in our savings measures over subsequent budgets. People know that they are coming. Agencies can prepare for them. We have been planning for them. These are the same problems that the New South Wales and Queensland governments are facing. It is a political question. If you think it is okay that the commonwealth has scrapped a program that would have seen them by the end of a 10-year period reach over 40 per cent of activity funding in our hospitals to drop down to 22 per cent—that dramatic change is fundamental to the way we deliver health care in this state. We run a number of services across South Australia and, if the commonwealth retreats from those, the gap gets larger and larger exponentially and we have to meet them. This may be a problem that you have to face one day.

I would have thought that, rather than trying to make a political point defending the commonwealth government in the first year of your new term as opposition, you would get behind us and do all you possibly could to try to reverse these cuts in the hope that one day you may win an election and you will not be faced with the same problems that I am faced with, trying to meet the shortfall that the commonwealth has given us. However, if you want to be a loyal Liberal, go ahead.

Mr MARSHALL: It is not about being a loyal Liberal; I am here as the Leader of the Opposition to hold you to account. I think what we have already established is that we have no clear picture. You have said that you are going to do a reconciliation, but we have no clear picture—

The Hon. A. KOUTSANTONIS: We do and we will provide it to you.

Mr MARSHALL: You will provide it? Thank you. You have no clear picture on what the net impacts of the federal government budget were. You have only told us what the cuts were. But even if we take your exaggerated situation and we take the cuts and we think there is no offsetting income—and we know immediately that there is $355 million worth of offsetting GST revenue, but even if we leave that completely aside, even though your figures do not reconcile, let us look at the next four years. Your budget provides for $558 million worth of cuts this financial year, of which the commonwealth’s is $101 million, and the state’s is $457 million, 4½ times higher. Next year, the commonwealth cuts are 160, the state government cuts are 711, to take it to a total of 871. Of the 871 next year, 711 are your cuts, not the commonwealth's, and the following year it is the same story. You have $1 billion worth of cuts that year, 223 of them are commonwealth gross cuts (not the net cuts, gross cuts) and 856 at the state level. The following year, your cuts, the state cuts, are $966 million in a single year.

I mean, it is quite clear to me, it is quite clear to anybody who is reading these, that the state government cuts are in an order of magnitude greater than any federal government gross or net costs that you have provided to date.

The Hon. A. KOUTSANTONIS: I thought that was just a rant. Was that a question?

Mr MARSHALL: Well, is it not true—

The CHAIR: Treasurer, would you like to respond to that question again?

Mr MARSHALL: Is it not true that you have misrepresented to the people the magnitude of the federal government cuts when you have not made any reference to your own cuts, which are four to five times higher?

The Hon. A. KOUTSANTONIS: I have said this before, and I have said it many times, if you do not want to believe me that is fine, I understand that you have your own personal political prejudice, but I would say to you that I do not believe Mike Baird is misrepresenting the impacts, I do not believe that Campbell Newman is and I do not believe that Denis Napthine is.

Mr MARSHALL: I do not think anybody is doubting that there are cuts, it is just the order of magnitude is that your cuts at the state level are four to five times higher.

The CHAIR: Leader, the Treasurer is answering. You had quite a long question, so—

The Hon. A. KOUTSANTONIS: It is okay. He has had a bad year.

The CHAIR: We do not want it to turn into a brawl, Treasurer. It is early; we have all day.

The Hon. A. KOUTSANTONIS: No, it will not be a brawl. He has had a bad year. He is allowed to vent, by all means. I think it is fair to say that nationally in almost every published commentator, most economists realise that this is a watershed commonwealth budget because they are making massive cuts. The one cut that they flag in their budget overview that I think is the most symbolic of what they have done is their $80 billion in cuts to health and education, which the then federal Treasurer did not even mention in his budget speech.

I am not going to downplay it because the impacts of it are significant. We know what our cuts are. We have planned for them and we have been preparing for them. The cuts the commonwealth made were unseen and unbudgeted for and we had to meet the change. So, I think it is entirely unfair for you to be saying to us, 'You've got your own savings measures in place, you announced them in previous budgets and in previous Mid-Year Budget Reviews.' People have known what they are going to be. Departments are planning for them and communities have prepared for them. We are expecting revenue to come in from the commonwealth, that revenue then disappears and then you say, 'But their cuts aren't as big as yours therefore their magnitude and their impact isn't as large because of the size.'

The first thing I say to you is that most of the commonwealth grants that we get are not just in terms of grants, they are tied, there are functions that we have to perform, so I cannot move that money around. The only money I can really move around is, generally, GST payments and our own state-based revenues that we raise. The rest of the commonwealth payments that we get are tied to specific purposes and national partnerships that we have signed up to. So, we agree to disagree, leader. I do not accept that the commonwealth cuts do not have a dramatic impact on South Australia. I know you do: I don't; I think they have dramatic impacts.

I also accept that our own savings measures have dramatic impacts on South Australians and they are difficult but, as you say constantly, it is important that we achieve a surplus and it is important that we achieve a surplus for a number of reasons. So, on one aspect you criticise me for not achieving surpluses and even today on the radio you were saying that the state had made a loss this year of $1.2 billion.

Mr MARSHALL: Last year.

The Hon. A. KOUTSANTONIS: Yet, when I am attempting to remedy that and get expenditure down, you try to make a political point to say that the commonwealth cuts are not as big or as important as ours. Well, which one is it? What is more important to you? Do you want to maintain a surplus? Do you want to reach a surplus? Or do you want to maintain spending? I think—

Mr MARSHALL: Well, anyway, I think we are asking the questions today.

The Hon. A. KOUTSANTONIS: I think your narrative changes, depending on what venue you are in, and that is probably why you don't win elections.

Mr MARSHALL: Table 2.6 on page 28 provides the operating savings or cuts over the forward estimates. Have you done a similar one for major project savings? Presumably this is your recurrent expenditure—you have a capital expenditure?

The Hon. A. KOUTSANTONIS: Can you repeat the question?

Mr MARSHALL: This is your operating savings table. Do you have a capital major projects saving table? For example, you previously talked about trams down Port Road, electrification of the Gawler line and the $600 million prisons project. You have provided this going back to 2009, your operating expenditure cuts. Do you have one for your capital expenditure cuts?

The Hon. A. KOUTSANTONIS: I am advised that we disclose them individually in the budget, but we have not provided a table, but I can provide you a table if you like.

Mr MARSHALL: I would be delighted, thank you very much. Budget Paper 3, page 55, table 3.13: just so that I have this right—and I think you have made this point, so I am not trying to make a political point here as you say—

The Hon. P. Caica interjecting:

Mr MARSHALL: Well, I'm just asking decent questions here. The budget for commonwealth revenue to South Australia increases from an estimated result this year of $7.8 billion up to $8.2 billion this current year, $9 billion the year after, then $9.6 billion in 2016-17 and nearly $9.9 billion in 2017-18. So you are accepting that each and every year of the forward estimates, far be it that there are cuts to revenue to the state, there are increases in commonwealth revenue to the state, but not as large as you would have previously anticipated?

The Hon. A. KOUTSANTONIS: I refer you to page 67, table 3.1—and I will read from the budget papers:

Total GST revenue grants as a proportion of gross domestic product (GDP) have declined since the introduction of the GST. If the 2017-18 projection of GST revenue grants as a proportion of GDP was consistent with the proportion in 2001-02, an additional $3 billion in GST revenue grants would be available to the states.

Non-GST Commonwealth Government grants to the states as a proportion of GDP have been volatile since 2001-02 due to economic stimulus and infrastructure spending. Nonetheless, if the 2017-18 projection of non-GST Commonwealth Government grants to the states as a proportion of GDP was consistent with the proportion in 2001-02, an additional $11 billion in funding would be available to the states.

I do not think you can say that South Australia or the states are getting the windfall gains we were promised from the GST. We are getting revenue, but not what we expected to get in 2001-02 as a proportion—

Mr MARSHALL: But revenue is increasing each and every year of the forward estimates.

The Hon. A. KOUTSANTONIS: Yes, and I have said this many times, whether it is the commonwealth cuts or GST: yes, they are increasing, but you also budget year on year. We do not hold one budget in isolation and never again. Every budget you make an assessment about what you are going to get. For example, the numbers you read out, up to $9.6 billion—

Mr MARSHALL: $9.9.

The Hon. A. KOUTSANTONIS: As they go up we make an assessment. If they go up to $9.5 billion that is a $100 million decrease on what we budgeted for, but you would be right here sitting saying, 'But GST's gone up,' but I'm right in saying, 'Yeah, but also it's less than we though we'd get.' So that is the dilemma states have across the federation: we always get less than we expect, but it does increase.

Mr MARSHALL: Is it increasing by more than inflation each year?

The Hon. A. KOUTSANTONIS: If you look at the graph you are talking about, grant revenue, table 3.13, you have nominal growth and real growth. Some years it does, some years it doesn't. In you look below it, the revenue grants, excluding GST from the commonwealth, nominal growth—some are real growth, some are above CPI, some are below CPI.

Mr MARSHALL: GST, in the current financial year, is set to increase by 7.3 per cent, is that correct?

The Hon. A. KOUTSANTONIS: Yes. As the Under Treasurer tells me, it is coming off a very low base. We received a series of capital grants through Nation Building which affect our GST payments. They have now finished, so we get a dramatic increase on the basis that those capital grants have now completed.

Mr MARSHALL: When you say 'off a low base', it was above inflation last year and it is going to be significantly above inflation next year, the year after, the year after and the year after, so it is a pretty significant increase in GST revenue each and every year.

The Hon. A. KOUTSANTONIS: You cannot just look at CPI. There are wages growth and population growth.

Mr MARSHALL: There was real growth last year, so there was no diminution, and there is real growth each and ever year of the forward estimates, so you are over and above the cost of inflation, every single year, coming from the commonwealth.

The Hon. A. KOUTSANTONIS: Yes, but, as I mentioned to you earlier, it is down on forecasts of what the states were expecting to be getting over that period of time.

The Hon. I.F. EVANS: Treasurer, you mentioned in your answer just then that there was a GST impact of certain capital grants under Nation Building. Could you provide the committee, on notice, a list of all of the capital items that impacted the GST and what the impact was? For instance, from memory, the desal plant was something like a $228 million grant and there was a clawback of some $212 million or $216 million.

The Hon. A. KOUTSANTONIS: I would refer you to the Budget and Finance Committee, where we provided that information but, If you want that same information, we can provide it to you.

The Hon. I.F. EVANS: That would be good.

Mr MARSHALL: Budget Paper 3, page 33 states that there are going to be 200 FTE cuts associated with federal government cuts. Can you tell us how that was arrived at?

The Hon. A. KOUTSANTONIS: As I said on budget day, we have assigned the remainder of the commonwealth cuts to health presentationally in the budget. They have made a calculation—Treasury has made an estimate—on what they think the FTE count is corresponding to the cuts but, ultimately, the government is going to be out there talking to the community about how to implement these cuts. It may not be 200 FTEs. It may be more, but it may be less. We will have a much more concrete figure probably at MYBR or maybe at the next budget.

Mr MARSHALL: Given that there are 200 additional cuts, can you tell us what the total Health FTE cuts are going to be each year of the forward estimates?

The Hon. A. KOUTSANTONIS: I do not have those numbers with me. I can either refer them to the Minister for Health for when he does his estimates, or I can get them for you on notice. Either way is fine by me.

Mr MARSHALL: If you can get them for me, that would be great. In the second to last paragraph on page 33, it talks about a correction in the Department for Health and Ageing's FTE cap. It says, 'The main factors in this increase were a correction in the Department for Health and Ageing's FTE cap, reflecting improved information on staffing levels.' What went wrong there?

The Hon. A. KOUTSANTONIS: I refer you to the Minister for Health.

Mr MARSHALL: It is not something that you know about?

The Hon. A. KOUTSANTONIS: No, I do not have that off the top of my head. I can find out for you but you would be more likely to get more success with the Minister for Health.

Mr MARSHALL: Can we go to page 14 of Budget Paper 3 and look at table 1.1 and, in particular, the GST revenue grants? Can you explain what assumptions led you to the budget for an additional $320 million worth of GST grants in the forward estimates over and above what the federal government was predicting when it handed down its budget?

The Hon. A. KOUTSANTONIS: Generally the states are much better at estimating their GST receipts on the basis of the way HFE is distributed.

Mr MARSHALL: Really?

The Hon. A. KOUTSANTONIS: Yes, apparently. Traditionally, historically, the states do it much better than the commonwealth Treasury. The commonwealth Treasury accepts that. I have the highest of confidence in my Treasury officials to make those assessments.

Mr MARSHALL: What is the methodology that you use that is different from theirs? They are giving you an estimate of what they are going to send to you and a couple of days later you say, 'Well, actually we think we are going to get another $320 million.'

The Hon. A. KOUTSANTONIS: I will ask the Under Treasurer, who makes these forecasts, to give you a fuller answer.

Mr MARSHALL: Just for clarification, is it the Under Treasurer who does that modelling work?

Mr ROWSE: The staff who work for me do, yes.

Mr MARSHALL: So there is an economic modelling unit now within Treasury? That was previously in the Premier's department.

The Hon. A. KOUTSANTONIS: I will let the Under Treasurer answer your first question. Subsequent questions will come through me.

Mr ROWSE: The commonwealth Treasury adopts a methodology whereby they adopt the last annual relativity and then roll that annual number forward to derive the three-year average numbers. What we do is a little bit more sophisticated. We know that the last annual relativity may have been influenced by special factors. To give an example, if it was influenced by the fact that we had larger capital grants in the previous three years, we would expect that to roll off in the future.

What we can provide for you is a table which shows our accuracy in forecasting the number versus the commonwealth, and you will see that we have been far more accurate in predicting the numbers. When the commonwealth makes those large changes at budget time, more often than not we have already incorporated those in the previous budget or the previous midyear review. We can give you that reconciliation and show you the performance of the two entities.

Mr MARSHALL: So you are saying that this methodology, which even I understand, is not one that is known to the commonwealth, which you would think would be better resourced than the South Australian treasury modelling, especially given the wild inaccuracies in past models and past forecasts that have been provided by Treasury. On this one issue, you have it all over them?

The Hon. A. KOUTSANTONIS: Remember, because they are not a subnational jurisdiction, all that matters to them is the pool. What goes to individual states is not as important to them as how big the pool is. Because the pool is important but the distribution to the states is much more important, all the states have built up a better understanding of how the distribution from the pool occurs. What the commonwealth is good at is the size of the pool.

Mr MARSHALL: Can we take a look at page 57 on Budget Paper 3? It says here that the Commonwealth Grants Commission has been requested to produce a draft report by 21 June 2014, which will be considered by the Council for Federal Financial Relations. After a final round of submissions on the draft report, a preliminary final report will be produced by the end of December 2014 for further comment, prior to the release of the final report by the end of February 2015. Have you seen the draft report? Have your officers seen the draft report? Is there anything that we should be concerned about here in South Australia?

The Hon. A. KOUTSANTONIS: I have not seen the draft report, because it is still with the commonwealth, but yes, you would be right to be concerned, because if you look at what premiers Barnett, Baird and Napthine are saying—and their Labor counterparts are no better—you will find that they are urging on the commonwealth to change the way GST is distributed to the states. Queensland, South Australia and Tasmania are right to be worried. In terms of—

Mr MARSHALL: Will we get—

The Hon. A. KOUTSANTONIS: I imagine we would.

Mr MARSHALL: I would like to have a look at the table that is on page 9, table 1.8, which is really all about your fiscal targets and in particular your target to return to surplus. You promised a surplus in 2016-17 which I think will be $776 million. Will that be the largest surplus in the history of the state?

The Hon. A. KOUTSANTONIS: I do not know; I will have to check.

Mr MARSHALL: Can you envisage another year where we would have got anywhere near $776 million?

The Hon. A. KOUTSANTONIS: I do not know; I will have to check.

Mr MARSHALL: Do any of your officers know whether that is the largest surplus in the state's history?

The Hon. A. KOUTSANTONIS: I will get back to you.

Mr MARSHALL: With the 2013-14 result, can you confirm that the deficit achieved last financial year is the largest deficit in the state's history?

The Hon. A. KOUTSANTONIS: I do not have the final result as yet from the end of the financial year but as soon as we have that we will know.

Mr MARSHALL: If the estimated result is realised, though, will that be the worst result in the history of the state?

The Hon. A. KOUTSANTONIS: I think the worst result in the history of the state was the State Bank disaster.

Mr MARSHALL: That was a significantly lower amount, wasn't it?

The Hon. A. KOUTSANTONIS: It was a different accounting method but I think it is fair to say that the biggest financial disaster ever to have befallen the state was the State Bank disaster and I think wiser heads would agree. Do not poke the bear!

The Hon. I.F. EVANS: Can the Treasurer confirm that in the historical record of the budget—which is usually in Budget Paper 3 at the back, there is a historical record of surpluses and deficits—that the deficits recorded during the State Bank years were around $300 million a year, not $1.2 billion?

The Hon. A. KOUTSANTONIS: I do not know what they are as a percentage of gross state product but I will find out for you and let you know.

Mr MARSHALL: How does the Treasurer plan to convince the people of South Australia that he is going to take the state's finances from the worst deficit in the state's history to the best surplus in the state's history in just a three-year period?

The Hon. A. KOUTSANTONIS: In the same way we defeated you at the last state election: we will go out and campaign, we will talk to people and show people what the facts are, and I think they will judge us on what we deliver.

Mr MARSHALL: If we do judge you on what you deliver, you have actually promised a surplus in each of the last seven years, and you have only delivered a surplus in one year. When we do the reconciliation, that is because of a range of issues as covered off in this and we will not go into that at the moment but, essentially, you achieved one surplus in seven years in which you promised that there would be a surplus.

The Hon. A. KOUTSANTONIS: Yes, you also said that you would win 27 seats and you did not, so we all make estimates—

Mr MARSHALL: Do not be so defensive. I am just asking a question.

The Hon. A. KOUTSANTONIS: I am not defensive. I have waived all of our questions and I am answering all of your questions. I am just saying to you that this is my first budget as Treasurer—

Mr MARSHALL: I think you are talking after each of the questions but I am not getting too many answers.

The Hon. A. KOUTSANTONIS: —and I have pinned my colours to the mast. We want to achieve surpluses and we are going to do our very best to do so, but I have also prefaced that with the fact that Treasurer Hockey has said this is stage 1 of his budget repair. He is making increasingly erratic statements about his budget and its passage through the Senate. I am very concerned about what is next.

Mr MARSHALL: Budget Paper 3, page 31, how is it that only three out of 28 government agencies have an estimated result coming in under their budget this year? Three out of 28. How extraordinary. Do you have any checks and balances in place?

The Hon. A. KOUTSANTONIS: We do have checks and balances in place.

Mr MARSHALL: They are not working, are they?

The Hon. A. KOUTSANTONIS: We do not turn people away. We express our values.

Mr MARSHALL: How do you express your values in the Treasury department because you are $15 million over there, so people come along and say, 'Look, I want some more money.'

The Hon. A. KOUTSANTONIS: They do exceptional work in Treasury.

Mr MARSHALL: Why are they $15 million over budget?

The Hon. A. KOUTSANTONIS: I will find out what it is and get back to you.

Mr MARSHALL: Okay. I want to take a look at page 126 where you talk about the establishment of the future fund. I am interested to know how this is going to operate and when the legislation is going to be introduced? In particular I would like you to address comments by the Under Treasurer sitting to your left—as inappropriate as you say it is for him to be sitting to your left. The Under Treasurer said any new revenues, including those received from mining, should be committed to paying off existing obligations in the first instance. Are you going to proceed with the establishment of this future fund as you have previously talked about, and when will you introduce the legislation?

The Hon. A. KOUTSANTONIS: You will have to wait and see, but the government is entitled to its own views about the importance or otherwise of a future fund. Putting money into the future fund does net off debt, so I am not as concerned about it as anyone else may be. I think it is a good and prudent thing to do. I think future funds are a great way of preserving prosperity for future generations and, when the state can afford to do so, we will start implementing it.

I do not think it is fair to say that future funds are not the appropriate use of moneys. Former treasurer Costello established a future fund that is many multiple billions of dollars now that is doing good work. He is now chair of that, I understand. I have to say that at the time I was a supporter of it. I thought it was a very good idea and it is something that I think the state should embark on.

Today we had a decision to open up the Woomera Prohibited Area. Over the next decade or so, there are going to be more mines discovered and more prosperity will come to the state. Our oil and gas sector is going to take off. We are going to come out of the current situation that we are in now and the question that will have to be asked is: what do we do with that prosperity? The future fund will be a very good option for us, and for future governments, to have in place and I hope that when that legislation does come to the parliament, the opposition supports it.

Mr MARSHALL: The difference with the commonwealth and the state future funds is that the commonwealth had money in the bank. Do you stand by the fact that we should essentially have significantly higher debt levels in South Australia and, rather than pay that off, when we return to surplus, we should put that money in the bank, make investments on it and try to generate funds in that way?

The Hon. A. KOUTSANTONIS: This is the fundamental difference between the conservative parties and Labor parties. You believe that if we cut taxes, that generates growth and stimulates the economy and creates more revenue.

Mr MARSHALL: Hear, hear.

The Hon. A. KOUTSANTONIS: Former president George Bush called that voodoo economics.

Mr MARSHALL: What is their debt level in the US?

The Hon. I.F. EVANS: I didn't realise you were a backer of Bush.

The Hon. A. KOUTSANTONIS: George Herbert Walker Bush was a good man. He is a good man. I think it is fair to say that if you think that by cutting taxes you increase revenues, it just does not add up and it does not work. That does not mean you should have high taxes for the sake of having high taxes either, but future funds do net off debt. Again, it is the story of the last election campaign. We were investing in productive infrastructure to keep South Australians working and using debt to do that and I think South Australians accept that. I think if you look at debt levels in South Australia in comparison to other subjurisdictions around the world, we are in a very good position in comparison to them.

Mr MARSHALL: How does it net off? Just run through how that works.

The Hon. A. KOUTSANTONIS: If you look at the way it is calculated, we look at net debt and if you have a financial asset, it is rounded off against it. I suppose it is a difference in priorities. If you were premier, you would do something different from us. We have made the decision that we want to have a future fund. If you were successful, you would do something different. Either one is appropriate for the people who are in power at any one time. For us, we believe in future funds.

Mr MARSHALL: But you are at odds with your own Under Treasurer's advice.

The Hon. A. KOUTSANTONIS: So?

Mr MARSHALL: He made it clear that it does not make any sense.

The Hon. A. KOUTSANTONIS: That is why I am elected and he is not, and that is the way it works.

Mr MARSHALL: I have been wondering why that is.

The Hon. A. KOUTSANTONIS: I am not his rubber stamp. That is just how it is. The idea of this parliament, just to give you a lesson, is that the elected representatives govern, not the unelected bureaucrats.

Mr MARSHALL: Okay, so you think it is a good idea though, essentially, when we return to surplus, to stick that money in the bank and earn interest on it rather than reduce our debt that we pay interest on which is directly in contrast with the advice of the Under Treasurer?

The Hon. A. KOUTSANTONIS: The Under Treasurer gives advice all the time on many things—

Mr MARSHALL: Should you not take it?

The Hon. A. KOUTSANTONIS: Not always.

Mr MARSHALL: Should you sack the Under Treasurer?

The Hon. A. KOUTSANTONIS: No, absolutely not. He is probably one of the most talented treasury officials in the country.

Mr MARSHALL: You are not taking his advice. He is telling you not to do this.

The Hon. A. KOUTSANTONIS: Let me finish. If you look at the fiscal outlook you will notice over the forward estimates that we are paying down debt. We have paid down debt dramatically. After we peak in 2015-16 with the NRAH coming online we do start paying down general government debt, so I do not think it is fair to say that we are not paying down debt. We are paying down debt, but, look, you and I have different philosophies.

Mr MARSHALL: Hear, hear! I think it is incredible that you are ignoring the advice of the Under Treasurer but, nevertheless, what we are going to do is clear; that is, not pay down debt with any return to surplus, we are going to stick the money in the bank.

The Hon. A. KOUTSANTONIS: That is not what I said. I am happy to have an intelligent conversation with you in this estimates hearing, waive all of our government questions, where you can ask questions and if I do not know the answer I will get back and give it to you, but what you are attempting to do is to put words in my mouth and verbal me. I never said that. I said we are paying down debt, but I also believe in future funds. We can do both; I can walk and chew gum.

Mr MARSHALL: So the $776 million that you plan to have as a surplus, will that all be applied to the future fund?

The Hon. A. KOUTSANTONIS: We will have to wait and see.

Mr MARSHALL: What about the $406 million surplus that you are going to make next year, is that going to be applied to the future fund?

The Hon. A. KOUTSANTONIS: As I said on budget day, I am building capacity within the budget because I do not know what the commonwealth is going to do next.

Mr MARSHALL: Sure.

The Hon. A. KOUTSANTONIS: One of the reasons we are privatising the Motor Accident Commission, which I am sure you will have questions about in the next line of questioning, is that I need to build capacity.

Mr MARSHALL: Sure.

The Hon. A. KOUTSANTONIS: And building that capacity means having operating surpluses and paying down debt, and we are doing that. That is why I am not going to commit one way or another right now about how those surpluses will be spent because I do not know what is going to be in the MYEFO and I do not know what is going to be in the next commonwealth budget.

Mr MARSHALL: I understand that point, so what you are saying is the $406 million is an estimate at the moment, it might vary, but the question is: will all of the surplus be applied to the future fund?

The Hon. A. KOUTSANTONIS: I just said, you will have to wait and see.

Mr MARSHALL: I see, not what the number is, but what you are going to do, so the future fund might just be a fraction. It might be $5 million of the $406 million.

The Hon. A. KOUTSANTONIS: It depends on what the legislation is that passes through the parliament. How do I know what amendments you will move in the upper house?

Mr MARSHALL: What are you envisaging at this stage? You have been out there talking about it for more than a year.

The Hon. A. KOUTSANTONIS: I have also envisaged revenue from the Transport Development Levy.

Mr MARSHALL: You do not really believe in this future fund, do you?

The Hon. A. KOUTSANTONIS: Yes, I do.

Mr MARSHALL: No right-thinking person does, do they?

The Hon. A. KOUTSANTONIS: I think Peter Costello is a right-minded thinking person.

Mr MARSHALL: He was in surplus—

The Hon. A. KOUTSANTONIS: Yes, he was.

Mr MARSHALL: —and there was no debt at the commonwealth level. We have got record levels of debt.

The Hon. A. KOUTSANTONIS: No, we do not have record levels of debt as a proportion of our gross state product and, in fact, they are quite moderate. Again, these political points you are trying to make did not serve you at the last state election and you obviously have not learned your lesson.

Mr MARSHALL: Can we just have a quick exploration of interest expenses, so Budget Paper 3, page 167, interest expenses. There seems to be a significantly different methodology for looking at interest expenses over the Mid-Year Budget Review. If we look at the Mid-Year Budget Review, interest expense in 2016-17 was over $1 billion and now in the budget it is down to $805 million. Now, there is a footnote there that says that you are netting off this expense. What is the reason for that? Just to make it look smaller?

The Hon. A. KOUTSANTONIS: The advice I have received is that much like a family may have an offset account for their mortgage, the arrangement between the Treasurer and SAFA is the same, so as much as I have interest earnings, I can offset them against liabilities and offset the payments, therefore the lower cost, but if you want to delve deeper into it I can give you the exact methodology through a briefing or an answer on notice.

Mr MARSHALL: I think a briefing would be great, thank you. One quick question while we are here: you say in note (b) on page 167 that that is netted off but, of course, it is not all netted off. There is $37 million in the 2016-17 year of interest income. You have not netted it all off; why have you chosen to net off some and not all of it?

The Hon. A. KOUTSANTONIS: I will take that on notice and get back to you.

Mr MARSHALL: Also, is it correct to show, in this Table B.9: Non-financial public sector operating statement, that interest expenses, for example in the 2016-17 year, are $805 million when it is clearly not? It is clearly considerably higher. It seems an extraordinary thing to do to just net these things off; it diminishes what people would think we are paying in interest in these entities. We are paying significantly more—hundreds and hundreds of millions of dollars extra per year—than what is being presented in these statements. I understand the netting off, but it does not present a very clear picture to the people of South Australia as to what interest they are actually paying on the debt that Labor has run up.

The Hon. A. KOUTSANTONIS: Again, you are just trying to make a political point. I understand—

Mr MARSHALL: It is the point of transparency, sir.

The Hon. A. KOUTSANTONIS: Yes, sure. I understand why you are doing it, but I have answered it.

Mr MARSHALL: You might need to take this on notice as well, but what financial instruments is the interest income earned upon that still appear in the table under the revenue? What sort of things would that be?

The Hon. A. KOUTSANTONIS: I am advised that is essentially deposits for SAFA.

Mr MARSHALL: But aren't they the ones that (b) says are netted off?

The Hon. A. KOUTSANTONIS: No; I am advised they are the deposits.

Mr MARSHALL: Can we also get a reconciliation of what the change is between the Mid-Year Budget Review and the budget—

The Hon. A. KOUTSANTONIS: I will get you a full methodology and reconciliation.

Mr MARSHALL: I will just finish the question: a reconciliation between what is due to netting off and what is due to increased debt?

The Hon. A. KOUTSANTONIS: Sure.

Mr MARSHALL: Thank you. While we are talking about debt transfers, can you just walk me through the issue related to the SA Water debt transfer? You have said that this will have no future impact upon water price decisions. Can you just walk me through that statement? If you want a reference, Mr Chairman, it is page 8 (and welcome back).

The Hon. A. KOUTSANTONIS: The advice I have received from Treasury is that it will have no impact on ESCOSA's pricing determinations.

Mr MARSHALL: So even though in other points in your budget it makes it clear that there is an increased interest expense for SA Water, somehow you are going to net that off against the interest expense that was previously borne by the general government sector?

The Hon. A. KOUTSANTONIS: ESCOSA, when they are calculating their price determinations, assume levels of debt. So that assumes something like about 60 per cent gearing; SA Water's gearing is about 27 per cent, and we have increased that to 45 per cent and it had no impact. I understand there is a slight benefit to the budget of about $5 million in interest payments, but that is neither here nor there.

Mr MARSHALL: Five million, neither here nor there; okay. Is it correct that the government is undertaking a scoping study to sell some of the assets within SA Water? That's Budget Paper 3, page 8.

The Hon. A. KOUTSANTONIS: As I have said in the House of Assembly, judge the government on its actions. The government has no plans whatsoever to privatise SA Water.

Mr MARSHALL: It is not about privatising SA Water; I think you have ruled that out previously. It is about selling assets. We have already had the transfer of one asset; is there any plan to transfer or divest or sell any of the other assets within SA Water?

The Hon. A. KOUTSANTONIS: Not at this time, no.

Mr MARSHALL: That was not really the question. The question was: has the government undertaken a scoping study?

The Hon. A. KOUTSANTONIS: Again I say, regardless of what Treasury does or does not do, the elected government, the parliament, and the cabinet will decide what we do with the state's assets. Thus far the cabinet and the parliament have not decided to privatise SA Water, and we won't.

The Hon. I.F. EVANS: Just on that, Treasurer, you said that what Treasury does Treasury does, and to consider what the cabinet does. However it is true, isn't it, that Treasury only scopes the sale or divestments of some of SA Water's assets at the request of the Treasurer of the day? It may not have been you, but a request of the Treasurer of the day. That is true, isn't it, that Treasury would not have been scoping the sale of SA Water assets without a request from the Treasurer of the day?

The Hon. A. KOUTSANTONIS: Let me put it to you this way: I am not going to talk to you or the parliament about any cabinet deliberations. I am allowed to answer the question the way I want to answer it.

The Hon. I.F. EVANS: So you are confirming that cabinet has discussed it.

The Hon. A. KOUTSANTONIS: No.

The Hon. I.F. EVANS: Well, if cabinet has not discussed it, you do not have to say that you are not going to discuss it. The only reason you would say that you are not going to discuss it is if cabinet discussed it.

The Hon. A. KOUTSANTONIS: Sure. You can verbal me all you like.

The Hon. I.F. EVANS: I am not verballing you.

The Hon. A. KOUTSANTONIS: You are. The reality is that governments are judged on what they do. We have not sold SA Water, nor do we plan to.

The Hon. I.F. EVANS: Can you rule out divesting any of SA Water’s assets?

The Hon. A. KOUTSANTONIS: I have no plans to divest any of SA Water’s assets but, again, if a board owned assets, like any other pieces of property, if they wished to divest, that is their choice. But in terms of our controlling interests in the assets, no decision has been taken to privatise any of those assets.

The Hon. I.F. EVANS: Are you concerned then that the SA Water board, to reduce the $2 billion debt that you have transferred to your sector, will divest assets such as water treatment plants, sewerage plants or desal plants to reduce their debt?

The Hon. A. KOUTSANTONIS: No, I am not.

The Hon. I.F. EVANS: Are you saying that that will not happen or that you are not concerned about it?

The Hon. A. KOUTSANTONIS: I am not concerned that it will happen and I do not think it will happen. I am not sure they can even do it without my express permission anyway, or the parliament’s.

The CHAIR: The member for Goyder has a question.

Mr GRIFFITHS: Treasurer, you have identified as part of your budget speech that there is a reduced cost of $5 million as a result of the transfer to SA Water.

The Hon. A. KOUTSANTONIS: Yes.

Mr GRIFFITHS: Are you able to confirm what the cost of borrowings to SA Water is? Because of the increased debt, is that increasing their exposure? Is there a higher interest rate?

The Hon. A. KOUTSANTONIS: I am advised that they borrow through SAFA, so they would be paying the same rates that we would.

The Hon. I.F. EVANS: Plus a guarantee fee.

The Hon. A. KOUTSANTONIS: Plus a guarantee fee.

The Hon. I.F. EVANS: So you would make money out of the guarantee fee?

The Hon. A. KOUTSANTONIS: Yes.

The Hon. I.F. EVANS: Right, that is what I thought.

The Hon. A. KOUTSANTONIS: Yes, that is right. That is the benefit of owning these assets in government hands, unlike ETSA. When ETSA borrows money to prune trees or do works, they borrow from the market and pay a higher rate and they pass on those costs to consumers. Because we own SA Water, we do not have those problems. The benefits that SA Water achieve and their profits come back to the taxpayer and we spend that money here in South Australia. That is the benefit of government ownership of monopoly utilities.

The Hon. I.F. EVANS: On that basis then, why are you privatising the MAC?

The Hon. A. KOUTSANTONIS: Because the MAC is not a utility. The MAC is a provider of insurance policies. The experience we have had with monopoly providers such as SA Power Networks is that when you have a regulated monopoly like the Motor Accident Commission there is no guarantee we are getting the best value for money from compulsory third-party premiums. Also, they are building up substantial surpluses. I think those surpluses should be spent on state assets that motorists use because they have paid for it. It is only proper. I have to say that if you had been successful and you were sitting here, I would probably be where you are asking you questions about your plans to privatise the Motor Accident Commission.

The Hon. I.F. EVANS: Well, you could have answered the question.

The Hon. A. KOUTSANTONIS: I am sure I could have, because I have met with a number of insurance companies and I have had some interesting discussions with them about who they have met with previously.

Mr MARSHALL: Just getting back to the SA Water restructure, whose advice did you receive to restructure the debt from the general government sector to SA Water’s balance sheet?

The Hon. A. KOUTSANTONIS: I understand it was the Under Treasurer’s.

Mr MARSHALL: So you are listening to the Under Treasurer on this one?

The Hon. A. KOUTSANTONIS: I think it is fair to say that on most things he agrees with me entirely and I agree with him about most things some of the time.

Mr MARSHALL: It is in the contract. Did the advice provided to you regarding the debt restructure include reference to the potential impact that the restructure would have on the sale price of any SA Water assets in the future?

The Hon. A. KOUTSANTONIS: Not to my memory, no.

Mr MARSHALL: You could ask.

The Hon. A. KOUTSANTONIS: I could. Given that we are not planning on selling SA Water, it is redundant.

Mr MARSHALL: No, but we are trying to clarify—

The Hon. A. KOUTSANTONIS: Unless you are planning on selling SA Water and you would like some information to plan for that.

Mr MARSHALL: No.

The Hon. A. KOUTSANTONIS: If you are successful in four years—

Mr MARSHALL: No, we have ruled it out.

The Hon. A. KOUTSANTONIS: That is what it sounds like you are doing.

Mr MARSHALL: We are talking about SA Water assets.

The Hon. A. KOUTSANTONIS: You have ruled it out? You have ruled out privatising SA Water?

Mr MARSHALL: I think what we have clarified here today is that you have sought a report regarding the potential sale of SA Water assets—not SA Water but SA Water assets. You have considered it. You have not taken anything to cabinet, cabinet has made no decision and you say you do not have any plans. Nevertheless, somebody has requested this scoping study to be done, and it has been received. Subsequent to that report being received, you have actually transferred assets, on the advice of the Under Treasurer, to the SA Water—

The Hon. A. KOUTSANTONIS: No; I think I can cut you off there and say that is not accurate. I do not think it is accurate.

Mr MARSHALL: Well, that is just a recap of what you said.

The Hon. A. KOUTSANTONIS: Hang on. I am saying it to parliament, so when I speak in this place it has to be accurate. The idea that the Under Treasurer did some scoping study on the sale of SA Water and then said, 'Look, I know you can't do it right now but to prepare SA Water for sale why don't you do this regearing,' that is not how it operated at all, and I am saying that in parliament. The gearing change was a presentational representation that the Under Treasurer said we should make to make our utilities more comparable to our interstate counterparts. This government has no plans to privatise SA Water.

Mr MARSHALL: So, the only reason why the Under Treasurer recommended to you to restructure the debt was so that there could be more equitable comparisons with other state utilities?

The Hon. A. KOUTSANTONIS: To the best of my knowledge, yes.

Mr MARSHALL: Surely not?

The Hon. A. KOUTSANTONIS: Why? I do not see the great conspiracy here, I am sorry. There is no change to overall debt.

Mr MARSHALL: And that is the total reason—

The Hon. A. KOUTSANTONIS: It is neither here nor there.

Mr MARSHALL: —that you were provided with by the Under Treasurer, the complete and total reason?

The Hon. A. KOUTSANTONIS: I will go back and check, but I think it is pretty clear to say that the government's view on the privatisation or sale of assets is that we do not support it. We have owned SA Water now since 2002 (since we have been in office) and we have not sold it, so I am not sure why we would do it now.

Mr MARSHALL: But it is true to say that you have received some—

The Hon. A. KOUTSANTONIS: The government receives advice on all sorts of things.

Mr MARSHALL: Correct; and you have received some on the potential sale of SA Water assets, not the entire entity?

The Hon. A. KOUTSANTONIS: I am not confirming anything. I am just saying to you—

Mr MARSHALL: Well, you are not ruling it out.

The Hon. A. KOUTSANTONIS: I am ruling out the sale of SA Water.

Mr MARSHALL: Thank you; but you are not ruling out the sale of SA Water assets?

The Hon. A. KOUTSANTONIS: What is the difference? It is the same thing.

Mr MARSHALL: No; I think you have made it fairly clear in the parliament on many occasions that assets come and go. If the government sells a building—

The Hon. A. KOUTSANTONIS: If SA Water has bought a building and they want to move buildings and rent rather than own, that is different. I am talking about the function of delivering water, the function of processing sewage, the pipes that go along with it. The government has—

Mr MARSHALL: So, you rule out all of those things, you rule out—

The Hon. A. KOUTSANTONIS: The government has no plans to privatise.

Mr MARSHALL: No; but you rule it out is a bit different from plans. You could have no plan today but a plan tomorrow. You are ruling out, for example, the sale of the desal plant?

The Hon. A. KOUTSANTONIS: Yes.

Mr MARSHALL: You are ruling out the sale of the wastewater treatment facilities? You are ruling out the sale of the pipe network in South Australia? You are ruling all of those things out?

The Hon. A. KOUTSANTONIS: I think that is an interesting admission from the Leader of the Opposition because during the last election campaign, and subsequently, when you have been asked directly about whether you will privatise SA Water you said you had no plans to. Just in your explanation then you said that plans and ruling it out are two very different scenarios. So, that is a very interesting admission you have just made. What I think you have just told the committee and the public and the media is that while you may not have any current plans now you do not rule it out, do you, if you are successful in 2018?

Mr MARSHALL: Will you answer the question though?

The Hon. P. CAICA: That is what I heard.

The Hon. A. KOUTSANTONIS: I think that is what everyone heard, clearly.

Mr MARSHALL: But will you answer the question rather than giving a commentary on my pre-election comments?

The Hon. A. KOUTSANTONIS: I could go for hours on your pre-election comments and your conducting of your election campaign.

The CHAIR: Let us not, Treasurer. I think you have answered the question, to be fair. I think the member for Davenport has a question.

The Hon. I.F. EVANS: There is a $2 billion increase in SA Water's debt, which is, essentially, transferred across to the general government—

An honourable member interjecting:

The Hon. I.F. EVANS: 2.7, okay—transferred across to the general government sector. The pricing mechanism for water is capped by ESCOSA; they are limited to an amount of revenue to collect. So, if they have $2.7 billion extra in debt, if you work on about a 4 per cent interest rate, they are paying something like about $100 million to $110 million extra in interest. If they cannot collect extra revenue because of their price cap, which ESCOSA sets, does that not mean they have to find $100 million to $110 million in savings in their operations and will that not lead to less capital works and less maintenance and repairs as a direct result of the increase in the interest payments?

The Hon. A. KOUTSANTONIS: You are not factoring in that we have also announced there will be lower dividends to government on the basis of this transfer.

The Hon. I.F. EVANS: How much is the lower dividend?

The Hon. A. KOUTSANTONIS: The reduction in dividends is $96 million, and a reduction in income tax equivalents of $43 million. We receive an increase in guaranteed fees from SA Water of $27 million and a decrease in interest on the Treasurer's debt of $117 million. So, while there is a decrease in dividend, there is a benefit for us in decreased interest payments, which basically levels them out.

The Hon. I.F. EVANS: What is the net position for SA Water?

The Hon. A. KOUTSANTONIS: For SA Water I do not have that here, but the net position for us is $5 million.

The Hon. I.F. EVANS: Can you get the net position for SA Water for us?

The Hon. A. KOUTSANTONIS: I will, yes. Remembering that in ESCOSA's price determination they assume a gearing of 60 per cent of the assets. From memory, SA Water's gearing rises from 27 per cent to 45 per cent.

The Hon. I.F. EVANS: Okay, then the dumb question is: why stop at 45 per cent? Why did you not take 55 per cent and put the other 10 per cent into your future fund if it is costing you nothing?

The Hon. A. KOUTSANTONIS: Because we wanted to make SA Water more comparable to its interstate counterparts, and 45 per cent gearing is the average.

Mr MARSHALL: I have a question from Budget Paper 6, page 110, relating to the Festival Centre car park. We have an investment payment in 2015-16 of $16.5 million for the provision of a new car park there. Is the government letting the contracts for this work or is it paying the Walker Corporation to do so?

The Hon. A. KOUTSANTONIS: Can you repeat the question, leader?

Mr MARSHALL: On page 10 you have $16.5 million for the Walker Corp. Will you be letting the contracts for the revision of the upgrade of the car park or will it be done by Walker Corp?

The Hon. A. KOUTSANTONIS: My advice is that that is not for the Walker Corporation. That $16.5 million, I am advised, is for ancillary works to be done for the Festival Centre Plaza to interface with the new plaza. As you come out the back of Parliament House you notice that the plaza stops and then there is a gap between the shells where the lowered road is, the underpass. My understanding is that the festival plaza will use the $16.5 million to facilitate new entries into the shells from the plaza entry.

Mr MARSHALL: So this is from street level: where is the gap, the gap will be gone?

The Hon. A. KOUTSANTONIS: There is the gap. I think the festival plaza is envisaging that, if the plaza is upgraded and there is a new entertainment precinct, piazza or square, the festival plaza, rather than its main entry being underground or below level, they would like to have a plaza-level entry, so that money is there for that.

Mr MARSHALL: So that money will be administered by who? Will that be given to the Festival Centre to do the work?

The Hon. A. KOUTSANTONIS: I will have to refer you to minister Mullighan.

Mr MARSHALL: Very good. Budget Paper 3, page 25—one of my favourite pages in the document—under Savings it talks about $200 million over four years by reducing unallocated provisions for major capital projects. What capital projects does this $200 million include?

The Hon. A. KOUTSANTONIS: It is being held in contingency for programs and we have reduced it by $200 million.

Mr MARSHALL: So is that money held centrally and just applied as a single provision or is there a separate provision per capital project?

The Hon. A. KOUTSANTONIS: We plan for contingencies. Sometimes it is allocated to various projects, other times it is unallocated.

Mr MARSHALL: Can you give some clarity over the $200 million that you have listed there as savings on page 25? Which of these—

The Hon. A. KOUTSANTONIS: Unallocated contingencies.

Mr MARSHALL: It is all unallocated?

The Hon. A. KOUTSANTONIS: That is.

Mr MARSHALL: The $200 million is all unallocated?

The Hon. A. KOUTSANTONIS: Yes.

Mr MARSHALL: Can you provide the committee with what the unallocated provisions for major capital projects are for each of the 2014-15, 2015-16, 2016-17 and 2017-18 years?

The Hon. A. KOUTSANTONIS: I will endeavour to find out for you.

Mr MARSHALL: What are you now budgeting in unallocated provisions for major capital projects in each of those same years?

The Hon. A. KOUTSANTONIS: I do not have those numbers here.

Mr MARSHALL: For clarity, those $200 million worth of unallocated cuts would not be linked to any federal project, so there would not be any flow-on problem for us. If we are cutting funding for a project, there would not be a corresponding cut in a federal government project?

The Hon. A. KOUTSANTONIS: No, it is unallocated.

Mr MARSHALL: Can we take a look now at Budget Paper 5, page 35, and it is to do with the $36 billion 30-year state transport plan that was announced before the election. You said that, over the next 30 years, $23 billion will be spent between state and commonwealth grants on infrastructure. By my calculation, this equates to about $770 million a year. As the budget for DPTI capital works is about $200 million short of the required figure, can you advise what capital works spend is in each of the remaining three years of the forward estimates?

The Hon. A. KOUTSANTONIS: First of all, it is important to note that the Integrated Transport and Land Use Plan that we announced before the election also envisaged commonwealth funding. You will notice one of the key recommendations in that plan was the north-south corridor. What you are seeing in the north-south corridor is upgrades to Darlington and Torrens to Torrens but, again, I refer you to minister Mullighan for the complete answer.

Mr MARSHALL: You may refer me there on this one as well but, given that the following projects were listed as priorities for the next five years in your own budget—the building of a tram loop around Adelaide, for example—do you have a cost?

The Hon. A. KOUTSANTONIS: Sure, but we also have the O-Bahn extension in there, the electrification to Salisbury is in the forward estimates, and a whole series of road and rail and infrastructure. You are asking why trams are not in here. The whole idea of the ITLUP was that governments of either persuasion, Labor or Liberal, could pick and choose.

For example, we know that the commonwealth government has made a decision that they will not be spending money in public transport. They say public transport is purely a state responsibility so there will be no public funding for that. That is a dramatic change from the previous government. I will not make a comment about whether that is the right thing or wrong thing to do, but what the ITLUP is trying to do is a lot like what you are asking us to do, that is, have an independent process where we can say, 'What are the plans for the next 30 years?'

It gives governments the ability to still be political in what they choose, because politicians make decisions. We think there is a need for more public transport infrastructure: you may make a decision there is more need for more freight movements. What we have decided is that we want a mixture of both, so we have decided on freight in the north-south corridor, public transport for the O-Bahn and the electrification to Salisbury. So we have a mix. If you are successful in 2018, you may change those priorities and you may say, 'For us, it is more rail lines out to the Mid North,' it may be a port, or it may be something else. That is what we have tried to do.

Mr MARSHALL: In your own document, though, you say there is a range of projects that are priorities for the next five years, that is, from 2013 to 2018. I list them now—build a tram loop around the Adelaide CBD, complete the electrification of the Gawler train line, convert the Outer Harbor train line to a tram service, convert the Grange train line to a tram service, the Mike Turtur Bikeway and Goodwood overpass, and others that are all in your own document taken to the election to be delivered by the end of 2018. Of course, when we look at the capital statement over all but six months of that time frame there is no mention of anything in there. It could come in next year and be delivered in a two-year period.

The Hon. A. KOUTSANTONIS: Exactly, but also we are not factoring this. Again, what I said to you earlier is that the integrated transport and land use plan also calls on and expects commonwealth funding. Given we have lost a funding partner who does not want to fund public transport, it makes doing things like the tram loop and the tram down to the Outer Harbor line a lot more difficult. That does not mean we cannot do it or we will not do it; it just means that we have to work within the means we have available. Given it is a partnership between the commonwealth and the state, they are more interested in freight than they are in public transport, so Darlington comes on line.

Mr MARSHALL: But have you got money held in contingency in those years for these projects?

The Hon. A. KOUTSANTONIS: The government has made no decision on a tram loop and made no decision on extending the tram to Outer Harbor.

Mr MARSHALL: No. What about the Grange train line?

The Hon. A. KOUTSANTONIS: A very worthwhile decision. My personal view on it is that, given that AAMI stadium is now almost redundant, other than the Crows training there (which is probably redundant also), you probably will see some development of land at West Lakes. You would want to look at some sort of mass transit system. I think light rail, or rail, works well, but we have not made a decision yet, because it is not going to be a matter of build it and they will come; let's wait and see what development occurs there first. What is the nature of the development ? It could be retirement living. If it is retirement living, it will be a different type of public transport need. I suppose what the ITLUP does is give us the flexibility to make decisions as needed, but of course the overwhelming factor that we keep in mind is the state's finances.

Mr MARSHALL: Hear, hear! I just want to ask one question regarding something which I have never understood, which is the GST offset for commonwealth capital that comes in for a project.

The Hon. A. KOUTSANTONIS: HFE.

Mr MARSHALL: Sorry?

The Hon. A. KOUTSANTONIS: Horizontal fiscal equalisation.

Mr MARSHALL: Budget Paper 5, on the same page. What are the implications, for example, of the Torrens to Torrens money that is coming in? If we have the money coming in for Torrens to Torrens, or if we did not have the money coming in, what would be the difference in the GST distribution?

The Hon. A. KOUTSANTONIS: As long as we are receiving what our per capita share of infrastructure spending is, whether we will receive above it or below affects the way GST is distributed, but for a more fulsome answer, I will ask the Under Treasurer to give you an explanation.

Mr MARSHALL: Thank you.

Mr ROWSE: What the Treasurer says is totally correct. There can be some timing differences because different states will get their funding from the commonwealth at different points in time, so that can move the GST relativities around between years. As long as over the total program length a state only receives its per capita share it will balance out over a longer period, but there can be impacts between years depending on the timing of when you receive those capital grants.

Mr MARSHALL: But my question was really: what would be the impact if we did not go ahead with the Torrens to Torrens? Let's put it in the reverse. If we did not go ahead with the Torrens to Torrens, what would be the uplift in GST that we would receive by forgoing that capital that came?

The Hon. A. KOUTSANTONIS: One, it is difficult to answer because it is hypothetical. Two, the commonwealth is funding 50 per cent of it, so the only way we get the capital is by matching their spend. It is difficult to say what the impact would be, but I can do some analysis for you and get that to you.

Mr MARSHALL: I just ask that question because if they are giving us on a project $1 billion, I would like to know how much we forgo from receiving that $1 billion as a grant rather than as a GST distribution.

The Hon. A. KOUTSANTONIS: The federal treasurer and the federal cabinet have the ability to exclude certain payments from the Commonwealth Grants Commission's consideration. So if we started strategically saying to have an increased windfall in GST, we will not be building this infrastructure, they can exclude certain payments from CSG which means we have a net detriment to our GST payments. So, while I know people applaud the impacts of GST, it can be used by the commonwealth as a stick to make us do certain pieces of infrastructure like, for example, Darlington.

Mr MARSHALL: I do not seem to be getting an answer to my question but maybe I do not understand it in its complexity. It is a difficult area, I appreciate that, but I suppose I want to know what is the incremental gain to a state from receiving money as a grant for a capital project versus receiving it as recurrent—

The Hon. A. KOUTSANTONIS: It depends—

Mr MARSHALL: People are saying to me it is as low as 7 per cent.

The Hon. A. KOUTSANTONIS: It depends on how they issue the grant. It depends on how they allocate the grant.

Mr MARSHALL: We could just do it on the example I have asked.

The Hon. A. KOUTSANTONIS: For example, the South Australian Medical and Health Research Institute was exempted from HFE principles, so we got that grant and it did not affect our GST payments, whereas other payments we receive do affect our GST payments. So it depends entirely on the nature of the grant and what it is used for. For example, the 15 per cent Asset Recycling Fund will be exempt from the Grants Commission process. As Treasurer, I would have preferred it to have been subject to the Grants Commission process. So, for example, we are not selling SA Water so we cannot benefit from the 15 per cent asset recycling program. Other states who are privatising their assets will, but we get no benefit through the HFE process.

Mr MARSHALL: Is it true to say, apart from the exemptions, that a state almost gets an opportunity to say what would they value more highly, capital or recurrent income?

The Hon. A. KOUTSANTONIS: Yes, but they can be punitive by the way in which they treat the grants so you have to be very careful about what you say yes to and what you say no to.

Mr MARSHALL: Sure.

The Hon. A. KOUTSANTONIS: Usually what you say yes to rather than what you say no to. If you accept too much, you see your GST receipts down and you are spending your funding on a capital project that is their priority rather than ours. Luckily for us, in the past it has been on our priorities and we have been quite lucky, but if you have a commonwealth government for example that decides that everything that you want to build is irrelevant and only offers funding for other projects, it can have a detrimental effect.

Mr MARSHALL: What commonwealth money did we receive from the superway?

The Hon. A. KOUTSANTONIS: I would have to check and get back to you. I cannot remember what it was.

Mr MARSHALL: But it was a significant sum and I suppose at that point when—

The Hon. A. KOUTSANTONIS: The problem occurs when you get these big capital infrastructure grants, if you get above your per capita share in the pool. So, South Australia's per capita share in whatever nation building projects there were was about 7 or 8 per cent based on our population. If you receive above that, you get a detrimental impact on the GST. So with the superway, I think the funding was a fifty-fifty arrangement through Nation Building, but at that point it was about our per capita share within the pool so there was not a detrimental impact.

Mr MARSHALL: But if we did not have that project then we would have essentially received the lion's share of that money anyway, but as operating income rather than as a capital grant.

The Hon. A. KOUTSANTONIS: Basically, if you attempt to game the system, which I think is what you are politely getting at, the commonwealth can exclude payments from the system and be punitive and we would also miss out on a piece of infrastructure that is a once-in-a-generation build that is going to free up freight.

Mr MARSHALL: Is one of the reasons our GST distribution is so high relative to other states that the commonwealth is not investing in capital projects in South Australia as evidenced by the fact that in the most recent federal budget there was $50 billion worth of capital projects announced by the government and we received two?

The Hon. A. KOUTSANTONIS: If that will not show up now, it will show up in the forward estimates and in future years because of the lag effect, but you are right, the commonwealth government is spending a considerable amount of money on infrastructure and a relatively small amount of that is being spent in South Australia. That is very disappointing given that we have such high-ranking cabinet ministers from this state sitting in and around the cabinet table.

Mr MARSHALL: But, minister, if we did get more capital investment from the commonwealth into South Australia, that would immediately diminish the GST which flows to our income statement and massively increase our deficits; is that correct? You are probably delighted that we got very little from the commonwealth.

The Hon. A. KOUTSANTONIS: What the Under Treasurer is advising me, and he is absolutely right, is that it depends on the nature of the grant and it depends on the nature of the project and how it is assessed, so I really cannot give you an overarching general answer to the question.

Mr MARSHALL: Alright. Referring to Budget Paper 3, page 33, I would like to look at the employee expenses. You have said on page 4 of the budget that you will limit future wage growth to 2½—

The Hon. A. KOUTSANTONIS: Is that this one—the overview?

Mr MARSHALL: We are still on Budget Paper 3. It is one of my favourites in the set.

The Hon. A. KOUTSANTONIS: I thought that was page 25. You have moved to page 33, now.

Mr MARSHALL: I was oscillating.

The Hon. A. KOUTSANTONIS: Do you have numerous favourite pages?

Mr MARSHALL: I was oscillating between pages 33 and 4. Page 4 is where you say that you will limit growth to 2½ per cent and of course page 33 is where we are provided with the detail in table 2.9. Really, just to go through this, what you are saying is that you would like to contain wages growth to 2½ per cent; is that correct?

The Hon. A. KOUTSANTONIS: Yes.

Mr MARSHALL: Does this take into account a practice that the state government has had in the past of having a wage increase as well as a lump sum or, in your calculation of the 2½ per cent, are those two calculations added in together?

The Hon. A. KOUTSANTONIS: Ideally, I would want it be overall and if there is any increase above the 2½ per cent, as we said in the budget, there would have to be corresponding offset savings within the department.

Mr MARSHALL: If the wages negotiation does negotiate for one of these $1,000 payments, as has happened in recent years, the wage increase would be significantly less because you basically want the 2½ to be the total wage package increase?

The Hon. A. KOUTSANTONIS: That is what I want. Often if it goes to arbitration or goes to the commission, it is out of my hands, but that is generally what I would like it to be.

Mr MARSHALL: What have been the wage growth figures in the past in South Australia? Can you give us the last 10 years of wage growth figures?

The Hon. A. KOUTSANTONIS: Private or public? I would love to have the private sector wages growth figures factored into the budget. I know retail workers and hospitality workers get just about CPI, so I would like to see the same for the public sector, but I can get that for you.

Mr MARSHALL: How often has the government successfully limited wages growth to 2½ per cent?

The Hon. A. KOUTSANTONIS: I will get back to you and check.

Mr MARSHALL: Thank you. On page 26, where we talk about the efficiency dividends, health is not excluded from that additional dividend in this year's budget. Is there a reason for that? It has been excluded in the past.

The Hon. A. KOUTSANTONIS: Why should it be excluded?

Mr MARSHALL: Your practice in the past has been to exclude it.

The Hon. A. KOUTSANTONIS: No, I think it should be included. We all need to make efficiencies. I am sure it is a good discipline to have on departments to always try to make efficiencies. It is very hard in the health system, given that doctors drive a lot of the activity, as well as patients. It is only proper that we have an efficiency dividend on them as well.

Mr MARSHALL: On page 30, your first dot point says that $94.1 million in employee expenses was associated with an increase in targeted voluntary separation packages, of which $80 million was provided after the 2013-14 Budget Update. How does this reconcile with table 2.10 on page 33, which indicates that the FTE reductions have again slipped behind schedule since the 2013-14 budget? In one area, you are saying that you are having to take a hit of $94 million associated with an increased payment of TVSPs, $80 million of which was provided after the 2013-14 Budget Update. On the very next table, it says you have not got anywhere near achieving what you said you were going to achieve.

The Hon. A. KOUTSANTONIS: I am advised that we had an incorrect FTE count in health and that accounts for the discrepancies.

Mr MARSHALL: How far was that out?

The Hon. A. KOUTSANTONIS: I do not know, but I can get it for you.

Mr MARSHALL: It must be pretty significant because basically what it is saying here is that you have paid $94 million more than you envisaged and it actually had less of the effect that you were seeking in terms of reducing the number of full-time equivalents. Are we are talking about hundreds and hundreds of health employees that you just did not know you had?

The Hon. A. KOUTSANTONIS: I will take the first part of the question first. It is a good thing that the packages were taken up earlier. We are attempting to meet our targets but also, at the same point, there was an incorrect assessment of the FTE numbers and I will get those for you so you know exactly what they are. I am not attempting to hide them in any way.

Mr MARSHALL: On page 20—

The Hon. A. KOUTSANTONIS: Sorry, there you go, we published them in the Mid-Year Budget Review. On page 20 of the Mid-Year Budget Review, chapter 1, it states:

Since the 2013-14 Budget, the Department of Health and Ageing's FTE cap has been reviewed to ensure it remains consistent with the level of agency expenses. This resulted in a parameter increase of around 620 FTEs in 2014, rising to around 760 FTEs in 2017. There is no adjustment to employee expenses associated with this correction of the FTE cap. The department has also had its cap revised up by around 180 FTEs in 2014, reducing to around 70 FTEs from 2017 associated with the continuation of programs covered by National Partnership Agreements.

So, we published it just before the election in the Mid-Year Budget Review.

Mr MARSHALL: I do not know what you were saying then. You are saying that you found 700 additional employees in the health department?

The Hon. A. KOUTSANTONIS: It is always difficult to know FTE equivalents in health—

Mr MARSHALL: Is it?

The Hon. A. KOUTSANTONIS: —given the nature of the work, people come in—

Mr MARSHALL: So, you do not know how many people work in the health department?

The Hon. A. KOUTSANTONIS: We announced in the Mid-Year Budget Review, which you obviously did not read—

Mr MARSHALL: So, you said you had it wrong by 700, was it?

The Hon. A. KOUTSANTONIS: Hang on, we announced this before the election—

Mr MARSHALL: Sure.

The Hon. A. KOUTSANTONIS: —so I would imagine that opposition strategists would have gone through the Mid-Year Budget Review, but obviously you missed it. We talked about trying to get that, so we have a figure we worked out. I do not have the exact numbers on me now, but I would refer you to the Minister for Health for the answer. We are not trying to hide this; we made it public in the Mid-Year Budget Review.

Mr MARSHALL: How many?

The Hon. A. KOUTSANTONIS: I just referred you to the Minister for Health.

Mr MARSHALL: Sorry, you just answered a question and I think you gave us a number. I not have that document that you referred to in front of me.

The Hon. A. KOUTSANTONIS: It is the Mid-Year Budget Review.

Mr MARSHALL: You have it in front of you, how many extra staff did you find in the health department?

The Hon. A. KOUTSANTONIS: 'This resulted in a parameter increase of around 620 FTEs in 2014.'

Mr MARSHALL: So, the reason for the $94 million we are referring to in this in terms of additional TVSPs is because we found 630 additional full-time equivalent employees in the health department that we did not know were there at the beginning of the year?

The Hon. A. KOUTSANTONIS: I am advised it is unrelated.

Mr MARSHALL: Alright, well, then let us go back to the question then. So, we found those employees—that is good, I am glad we found them—but what is the reason for the increase in the $94 million in TVSP payments?

The Hon. A. KOUTSANTONIS: An increased demand for them.

Mr MARSHALL: But you have more people than you planned to. You set your TVSP budget based upon how many people you thought that you were going to actually be reducing it down by, you reduce it by significantly less than what you planned for, but your TVSP payments went through the roof.

The Hon. A. KOUTSANTONIS: That is good because we want people to come forward and take the packages.

Mr MARSHALL: But they did not?

The Hon. A. KOUTSANTONIS: They did, that is why the increased costs.

Mr MARSHALL: But at the end of the year you are left with more people than you planned to. You set a budget for the TVSPs that you were going to make to reduce that number. You did not reduce it, so you would think that you would actually have a positive variance on your TVSP payments but, in fact, you had an $80 million increase.

The Hon. A. KOUTSANTONIS: Yes, and I mentioned this on budget day and I suppose for a fuller answer I would refer you to the Minister for Health, but what I would say is when we do have a larger than expected uptake in TVSPs, that is a good thing because what it means is that we are reducing the size of the public sector.

Mr MARSHALL: Which you did not do.

The Hon. A. KOUTSANTONIS: Well I suppose you will have to wait and see. We have made a commitment to a 4,100 reduction in the public sector and I think we will meet that target. It is a lot less than the 20,000 you were planning.

Mr MARSHALL: On 1 July the tenure disappeared. How does this work then? How do you decide, and at what period of time do you decide, that someone is no longer required? If they are already on deployment—so you have already identified that you don't need them—can they be terminated immediately now?

The Hon. A. KOUTSANTONIS: I refer you to the Minister for the Public Sector, minister Close.

Mr MARSHALL: Alright. Can you, though, clarify whether those people who are made redundant will receive a termination payment commensurate with the TVSP?

The Hon. A. KOUTSANTONIS: I would refer all those questions to minister Close. She is best placed to answer all those questions, and it is appropriate that she does.

Mr MARSHALL: Budget Paper 3, page 25. You have said that, as a new initiative, you are going to freeze executive numbers for two years, except in special circumstances. Can you explain what those special circumstances are?

The Hon. A. KOUTSANTONIS: Well, if the cabinet decides that we need more executives or there is some—

Mr MARSHALL: So it is a cabinet decision?

The Hon. A. KOUTSANTONIS: It could be a cabinet decision or it could be a recommendation—

Mr MARSHALL: From whom?

The Hon. A. KOUTSANTONIS: It could be from the department chief executive—

Mr MARSHALL: To the minister or the cabinet?

The Hon. A. KOUTSANTONIS: To the minister or the cabinet.

Mr MARSHALL: So only a minister or the cabinet can—

The Hon. A. KOUTSANTONIS: I will have to go back and check, but these are all questions for the Minister for the Public Sector.

Mr MARSHALL: Can we go to page 146? I could be reading this incorrectly but, when we look at the net cash flows from operating activities, in the middle of that table, we have a negative cash flow of $290 million. Does that indicate to you, Treasurer, that we are continuing to borrow money to pay wages in South Australia?

The Hon. A. KOUTSANTONIS: No.

Mr MARSHALL: Why is that?

The Hon. A. KOUTSANTONIS: Because there are a number of expenses in there, not just wages.

Mr MARSHALL: But are there any that are non-cash items in that list? I cannot see any that are non-cash items.

The Hon. A. KOUTSANTONIS: I will get you a full list and provide it to the committee.

Mr MARSHALL: So you are saying unequivocally that we are not borrowing money to pay wages?

The Hon. A. KOUTSANTONIS: If you look at this table, as the Under Treasurer points out, there are payments for goods and services, there are grants and subsidies paid, there are interest payments, and there are other payments. I do not think it is fair to categorise it the way you put it.

Mr MARSHALL: Well, they are cash payments. We do not have non-cash items in there and depreciation. You have your net cash flow; it is negative—

The Hon. A. KOUTSANTONIS: I have answered the question.

Mr MARSHALL: So you are saying that we are definitely not borrowing money to pay wages?

The Hon. A. KOUTSANTONIS: I have answered your question.

Mr MARSHALL: Well, can—

The CHAIR: Leader, the Treasurer has answered your question. Do you have another question? I should point out at this point that we are going to move on to some other agencies soon; does the Treasurer want to change his advisers at 11 o'clock?

Mr MARSHALL: Do we also need to read in the omnibus questions at each session?

The Hon. A. KOUTSANTONIS: I would not have thought so, but I am happy—

The Hon. I.F. EVANS: Once per minister.

Mr MARSHALL: Once per minister?

The Hon. A. KOUTSANTONIS: If you want to read them out, go ahead.

The CHAIR: He will remember them, whenever you read them.

The Hon. A. KOUTSANTONIS: They will be the same as last year, and the last 12 years before that.

Membership:

Mr Knoll substituted for Hon. I.F. Evans.

The CHAIR: Treasurer, would you like to change your advisers? When you are ready you can introduce your new advisers and, if you wish, make another opening statement.

Departmental Advisers:

Mr B. Rowse, Under Treasurer, Department of Treasury and Finance.

Mr K. Cantley, General Manager, South Australian Government Financing Authority.

Mr M. Walker, Commissioner of State Taxation, Revenue SA, Department of Treasury and Finance.

Mr G. Goddard, Deputy Under Treasurer, Department of Treasury and Finance.

Mr D. Reynolds, Executive Director, Budget Branch, Department of Treasury and Finance.

Mr R. Smith, General Manager, Funds SA.

Mr A. Blaskett, Executive Director, Government Accounting and Reporting Procurement, Department of Treasury and Finance.

The Hon. A. KOUTSANTONIS: I have no opening statement and the government will not be asking any questions.

The CHAIR: Does the leader wish to make an opening statement or does he want to head straight into questions?

Mr MARSHALL: I think we will just go to questions.

The CHAIR: Excellent.

Mr MARSHALL: My question relates to Budget Paper 3, page 46 and in particular to guarantee fees under property taxes in that table. Guarantee fees paid into the budget by government businesses such as SA Water and the Housing Trust to offset the cost advantage they gain from access to cheaper finance of government has been something that you have spoken about in the past. You told estimates last year—sorry, it was not you, it was a different treasurer. We have had so many lately, three in the last—

The Hon. A. KOUTSANTONIS: It is like leaders of the opposition.

Mr MARSHALL: Don’t worry, you are my favourite.

The Hon. A. KOUTSANTONIS: And can I just say: you are mine.

Mr MARSHALL: Thank you.

The Hon. A. KOUTSANTONIS: Because without you, I would not be here. You are like my lucky charm.

Mr MARSHALL: Thank you, Treasurer.

The Hon. A. KOUTSANTONIS: You are welcome.

Mr MARSHALL: I feel so reassured.

The Hon. A. KOUTSANTONIS: Long may you prosper.

Mr MARSHALL: The treasurer last year told estimates that guarantee fees paid into the budget would drop because of the loss of the AAA credit rating. The 2011-12 SA budget predicted guarantee fees of $87 million for the 2013-14 year. This was forecast prior to the loss of the AAA and the subsequent ratings downgrades. The 2014-15 budget indicates $76 million as the 2013-14 estimated result. What part of the $11 million difference is the result of the ratings downgrades?

The Hon. A. KOUTSANTONIS: The Under Treasurer points out to me that on page 46, on that table, last year we said the guarantee fees would be $77 million, and this year’s estimated result is $76 million.

Mr MARSHALL: Yes, but it was the 2011-12 budget that was the comparator because that was before the drop of the AAA credit rating.

The Hon. A. KOUTSANTONIS: I do not have those figures here.

Mr MARSHALL: There is no point in doing it after the credit rating change, with respect, Treasurer.

The Hon. A. KOUTSANTONIS: The rate remains the same, but it depends on the level of debt.

Mr MARSHALL: Yes, but that is really not my question. My question is whether or not that $11 million difference is the result of the ratings downgrade. What proportion of it is due to the ratings downgrade?

The Hon. A. KOUTSANTONIS: I will have to take that on notice.

Mr MARSHALL: Okay. Has the government done any work—and we will just stay in the same area, table 3.4—to compare the interest rate spreads of SA’s debt compared to Victoria’s debt or other jurisdictions that have a AAA credit rating?

The Hon. A. KOUTSANTONIS: I will get Mr Cantley to give you a more fulsome answer over the spread.

Mr CANTLEY: Thank you, Treasurer. SAFA’s spreads to other states—and I will use our August 2019 bond maturity and take the last 12 months. So 30 June 2013, for example, our margin to the commonwealth bond was about 84 basis points. By 30 June 2014 it had fallen to 30 basis points. New South Wales, for the same period, 30 June 2013, we were 24 basis points higher; that has now fallen to around nine. Victoria was around 25 basis points, we were 25 basis points over. It has now fallen to about 10 and, relative to Queensland, Tasmania and WA, we are on about the same borrowing rates now. So, our spreads over the last 12 months have come down a lot, but that has really been driven by improvements of credit around the world and demand from banks for SAFA's paper to meet some of the new Basel III APRA liquidity requirements.

Mr MARSHALL: Can you provide that spread before and after the ratings downgrade?

The Hon. A. KOUTSANTONIS: We will endeavour to get you something.

Mr MARSHALL: Thank you. In 2012, the Queensland Audit Commission's interim report states on page 16, and I quote, 'Debt servicing costs are approximately $100 million per annum higher than if Queensland had a AAA credit rating.' Queensland, at that time, had borrowings of about seven times our size here in South Australia and they had a AA+ rating. South Australia now has the AA rating. Can you make some comment about the likely additional costs to South Australia of being with the AA rating rather than the AAA rating?

The Hon. A. KOUTSANTONIS: First and foremost, I do not know and I do not think you explained in your question how the Queensland government or the Audit Commission in Queensland came to that figure.

Mr MARSHALL: No, I did not.

The Hon. A. KOUTSANTONIS: We do not know how they have measured that. So, if you are trying to make a comparison with Queensland's results and South Australia's results, I do not think you will get an accurate one. In terms of getting a number, it fluctuates so dramatically throughout the year it would be very difficult to give you a number about what the cost or benefit otherwise is, whether you have a AAA or AA+, whatever it might be, on the difference, but we will endeavour to do so for you.

Mr MARSHALL: Just for clarity, the benefit of having the AAA, from a bottom line perspective, would be two things: lower interest costs and higher guarantee fee—

The Hon. A. KOUTSANTONIS: No. I think the benefit of a AAA credit rating is just good discipline on a government. It is prestige.

Mr MARSHALL: Hear, hear!

The Hon. A. KOUTSANTONIS: It talks about the government's handling of its finances, but let us be clear about this: we made a decision to abandon the AAA. It did not happen to us, we decided to remove it and the reason we did so was a prudent one. We did so because there was an economic downturn, we had debt down to, basically, zero and we were not going to see South Australians lining up around welfare agencies looking for work. We decided that now was exactly the time to start investing in productive infrastructure. I think that what you are seeing in Victoria, where they have maintained their AAA credit rating, is the private sector clamouring for the Napthine government to start spending on productive infrastructure to maintain their levels of growth.

So, while you might argue that the AAA rating is important for a cost analysis, what we have done is we have chosen jobs. I would hate to think what our unemployment rate would have been if we had maintained our AAA credit rating and what good it would have been to anyone if we had maintained it and had unsustainable levels of unemployment without the economy being diversified and without us investing in productive parts of the economy.

Mr MARSHALL: Budget Paper 2, page 9, the second paragraph, on your capital spend that you have just been talking about you said that you are spending $10.1 billion across the forward estimates to support 4,700 jobs per annum. This is an average of $2½ billion a year. By my calculations that works out at $537,000 per job. Is that not a huge amount of public money to spend per job?

The Hon. A. KOUTSANTONIS: I know that you and I disagree on this. You think government spending money on infrastructure is a false economy, you said so publicly, because you do not believe that the government plays a role in our economy: we do, and we won the last election on the basis that we offered a vision to keep building South Australia. The reason we believe that is because if we withdrew from the economy now it would be a disaster. The infrastructure in which we are investing is in productive infrastructure—it is roads, schools, hospitals and things that improve our productivity, so I do not accept your assertion, but it is a political difference between Labor and Liberal.

Mr MARSHALL: So at $537,000 per job, how much would we need to spend on capital investment to create the 100,000 jobs that you promised at the 2002 election?

The Hon. A. KOUTSANTONIS: Again that is typical of someone who does not believe in public spending on infrastructure. What you have simply done is said that the government has created 4,500 jobs based on infrastructure. You are forgetting all the associated small businesses and economic activity it does. Those workers have an income, they pay their mortgages, they go off and spend money. They go to Barossa Fine Foods and buy a nice cut of meat and take it home to their family: that gets the butchers working. They might even buy some furniture. They might go out and spend some other money, they might go to a McDonald's—

Mr MARSHALL: Wok in a Box.

The Hon. A. KOUTSANTONIS: —or Hungry Jacks, because the burgers are better at Hungry Jacks, apparently. Or Wok in a Box. I do not think it is a fair assessment to say that we are a planned economy, we will spend X, yet we are only creating 4,500 jobs and no more. That is not right, because we know that indirectly we create more jobs and that money washes through the economy and we get a benefit from it. You and I disagree. You believe that all public expenditure on infrastructure is a false economy.

Mr MARSHALL: I don't—

The Hon. A. KOUTSANTONIS: They are your words, not mine. I did not say 'false economy', you did.

Mr MARSHALL: Anyway, the government made it clear that they were going to lose the AAA credit rating to create jobs; we have actually lost jobs, not created jobs.

The Hon. A. KOUTSANTONIS: Well, I would say to you again: what would it be if we had not done that?

Mr MARSHALL: What would it be if we actually had lower taxes and less regulation?

The Hon. A. KOUTSANTONIS: We probably would have a larger deficit.

Mr MARSHALL: Give me a break.

The Hon. A. KOUTSANTONIS: Well, that is the question. We can revert to voodoo economics again, where you say that if we cut taxes we will get more revenue.

Mr MARSHALL: Works for every other state in Australia. Has the government investigated the increased interest costs of further credit rating downgrades?

The Hon. A. KOUTSANTONIS: Not to my knowledge, but if we have I will get back to you, but I do not think we have.

Mr MARSHALL: Moody's made a comment immediately after the budget was brought down and they made it quite clear: 'We now think it is a high risk that Moody's will change its credit outlook to negative.' Has the government met with Moody's since the budget?

The Hon. A. KOUTSANTONIS: That's not a downgrade.

Mr MARSHALL: Well, AA negative versus AA.

The Hon. A. KOUTSANTONIS: No, the outlook.

Mr MARSHALL: Negative outlook. Has the government met with Moody's since the budget?

The Hon. A. KOUTSANTONIS: Yes.

Mr MARSHALL: And have they indicated that they are keeping South Australia on negative watch?

The Hon. A. KOUTSANTONIS: They will put out a press release. It is not something done in secret. When they do you will know and I will know.

Mr MARSHALL: They did not indicate to you that they would put you on to negative watch, or did they tell you that you were on negative watch, as reported in comments made by the ANZ Bank?

The Hon. A. KOUTSANTONIS: The press release speaks for itself. If you want to question Moody's, give them a call and ask them. We will do all we can to maintain fiscal disciplines within the band where we are now. Where we are now, I think we can maintain it, but again I go back to the original point: we made a decision to lose a AAA credit rating. It didn't happen to us.

Mr MARSHALL: Not a good one.

The Hon. A. KOUTSANTONIS: Okay, that is interesting because when the Leader of the Opposition and the alternative government say that a AAA credit rating is the aim, the obvious question that follows that is: what do you cut, what do you sell, what taxes do you increase to get there?

Mr MARSHALL: My next question relates to Budget Paper 3, page 63. It says in the second to bottom paragraph:

SAFA's distribution is also expected to be higher in 2013-14 as it includes a special dividend of $20 million from the return of excess capital in SAFA's fleet business.

Can you provide some clarity on that?

The Hon. A. KOUTSANTONIS: It has been in the forward estimates now for a number of years.

Mr MARSHALL: I am just asking about what it is.

The Hon. A. KOUTSANTONIS: It is surplus capital to our requirements and has been paid back to the budget.

Mr MARSHALL: Do you envisage any other transfers like that from SAFA, going forward?

The Hon. A. KOUTSANTONIS: If they are not in the forward estimates, no.

Mr MARSHALL: Budget Paper 6, page 92, I assume that SAFA still administers industry assistance contracts, is that correct?

The Hon. A. KOUTSANTONIS: Yes, we do.

Mr MARSHALL: What was the Treasury advice prior to the election regarding the $5.5 million of additional funds for the Hewlett Packard expansion, and was there a cost-benefit analysis undertaken?

The Hon. A. KOUTSANTONIS: Regardless of the Treasury advice, that is advice for the executive and the executive can choose to accept it or ignore it.

Mr MARSHALL: So Treasury advice was sought, it was received. We do not know what it was.

The Hon. A. KOUTSANTONIS: Treasury costs every spending.

Mr MARSHALL: So they did a cost-benefit analysis?

The Hon. A. KOUTSANTONIS: I am not going to reveal any of that to you, but the Hewlett Packard deal is a good deal for South Australia and the government stands by it.

Mr GRIFFITHS: Supplementary, if I may. Treasurer, as a former chairperson of the Economic and Finance Committee, surely this would have met the criteria for an industry development committee review.

The Hon. A. KOUTSANTONIS: That is entirely a matter for the appropriate minister.

Mr GRIFFITHS: In this case, that is who?

The Hon. A. KOUTSANTONIS: The minister for, I think, manufacturing, innovation and trade. I am not sure. I would have to check.

Mr GRIFFITHS: So you have no supervisory roles over these things?

The Hon. A. KOUTSANTONIS: I appoint my representative, which is the Under Treasurer, I am advised.

Mr MARSHALL: Can we talk to Funds SA now?

The Hon. A. KOUTSANTONIS: Yes.

Mr MARSHALL: Budget Paper 3, page 99, which deals with public financial corporations. Moody's put out a briefing on 25 April 2012 which stated on page 4, 'The government in an emergency situation can borrow temporarily from superannuation fund assets.' Has the government ever done this? Has the government ever sought or received advice about this?

The Hon. A. KOUTSANTONIS: The first part of that question is: no, we have not. Whether we have sought advice on it or not I would have to check, but I doubt it very much.

Mr MARSHALL: That is the sum of my questions for Funds SA. Perhaps we could move to RevenueSA and Budget Paper 3, page 46. I suppose what I am not understanding here, from what is projected in terms of that revenue model, is how South Australia, which has the slowest economic growth rate and the slowest jobs growth rate on the mainland, over the forward estimates will achieve the fastest tax revenue growth of all states over the forward estimates. I wonder whether you can explain that to me, Treasurer.

The Hon. A. KOUTSANTONIS: The first principle is that I do not accept the assertions in your question about South Australia's economic performance, and I am not sure what you are basing them on but I assume it is just political. Part of the government's strategy is that we do think there will be a return to trend and an increase. It is a relatively low base. But the big story of the budget, as we talked about in our first session, was not so much revenues. It was getting expenses down to below 15 per cent of gross state product. That is the key to the surpluses.

Mr MARSHALL: But that was not really the question. The question was not about surpluses. I asked about the fastest tax revenue growth of all states. You say—

The Hon. A. KOUTSANTONIS: I do not know on what you are basing that. That is obviously a body of work you have done. I cannot compare that to know whether it is accurate. Please quote me the report you are quoting from, where it says that. Is that just your own work?

Mr MARSHALL: I will show you. There is the work of each state's economic growth forecast, their jobs forecast and their revenue increase.

The Hon. A. KOUTSANTONIS: So you have done the analysis?

Mr MARSHALL: Yes, of course I have. That is the job. I do not know why you have not done it; that is more to the point. In every single one of these, jobs growth is higher, economic growth is higher and revenue is lower. How do you work that out?

The Hon. A. KOUTSANTONIS: Again, I do not accept your assertions.

Mr MARSHALL: Well, choose a state and I will go through it with you line by line. This goes to the core of the budget.

The Hon. A. KOUTSANTONIS: It does, and you will have four long years of opposition to judge us on it.

Mr MARSHALL: We are asking questions today in estimates.

The Hon. A. KOUTSANTONIS: I will answer them for you.

Mr MARSHALL: You have provided us with the fastest tax revenue growth of any state in Australia.

The Hon. A. KOUTSANTONIS: I just do not accept that. I do not think you can compare like for like. I would love to see your methodology. Show it to us. Table it; table it to the committee.

Mr MARSHALL: I am happy to go through it with any state that you like. Choose a state. It is humiliating for you.

The Hon. A. KOUTSANTONIS: No. Humiliating is telling everyone to vote Labor on the last day before an election; that is humiliating.

Mr MARSHALL: Do you want to just stay focused on this?

The Hon. A. KOUTSANTONIS: Exactly. Being Treasurer is not humiliating. Being Treasurer is trying to do our very best to provide good economic outcomes for the people of South Australia. You will judge us on our performance.

Mr MARSHALL: I think the people of South Australia are judging you on your performance and quite clearly your performance has not lived up to expectations. Let's move on. Based upon what evidence—

The Hon. A. KOUTSANTONIS: Page 47, payroll tax. I will read from the budget:

Payroll tax receipts have been revised down by $61 million since the 2013-14 Budget reflecting a lower than budgeted outcome for 2012-13 and softer than expected employment conditions in 2013-14. Growth in both employment and hours worked is expected to be weaker than originally estimated.

Growth in payroll tax revenue in 2013-14 is impacted by the temporary small business payroll tax concession, which is available in 2013-14 and 2014-15.

Mr MARSHALL: What is the growth rate, then, in that year?

The Hon. A. KOUTSANTONIS: Hang on.

Growth in payroll tax revenue of between 4.3 per cent and 3.1 per cent in real terms is expected over the forward estimates consistent with the outlook for employment and wages growth.

Although growth in employment and wages is expected across the forward years, employment and wages growth assumptions from 2015-16 are affected by the planned cessation of vehicle manufacturing operations by GM Holden...

So we take into account pessimistic outcomes and have very moderate outcomes in there. Property taxes—

Mr MARSHALL: Let's just stick with payroll tax.

The Hon. A. KOUTSANTONIS: Let me finish.

Mr MARSHALL: No, because you—

The Hon. A. KOUTSANTONIS: Well, I am going to. The budget continues:

Property taxes include stamp duties (…conveyance of property and transfers of non-quoted marketable securities), land tax, the ESL on fixed property, the Save the River Murray Levy, regional natural resources management levies, guarantee fees, the transport development levy…and other minor taxes.

Property taxes are expected to grow in real terms by 14.2 per cent in—

Mr MARSHALL: Are you just reading from the document?

The Hon. A. KOUTSANTONIS: Yes, I am, because you obviously have not. You obviously have not. I have to, because you are not paying any attention.

Mr MARSHALL: Alright; let's talk about payroll tax. I can see in the table that you are reading from that you are predicting a 6.8 per cent growth in payroll tax for this year, higher than Victoria and Queensland.

The Hon. A. KOUTSANTONIS: Different base. You cannot make the comparisons. It is just ridiculous.

Mr MARSHALL: It is a percentage! That is how you do make comparisons. It is a percentage. You are predicting a 6.8 per cent increase in payroll tax this year.

The Hon. A. KOUTSANTONIS: We will see. The Leader of the Opposition can get as agitated as he likes.

Mr MARSHALL: It is not about getting agitated. When are you going to give us an answer?

The Hon. A. KOUTSANTONIS: I am attempting to, but you are not interested in an answer. You are just making a political point.

Mr MARSHALL: Here is the question then: why do you believe that you will have higher payroll tax revenue increases than Victoria and Queensland when they are growing employment faster than we are?

The Hon. A. KOUTSANTONIS: You are basing your question on an assertion that is not proven.

Mr MARSHALL: It is a fantasy, isn't it? Pure fantasy. You will never achieve them anyway. I do not know why you put them together. Regarding stamp duty, how will South Australia achieve the fastest stamp duty revenue growth of all states over the forward estimates/

The Hon. A. KOUTSANTONIS: I think the latest ABS figures bear out some evidence. We are coming from a very low base. The other states have experienced dramatic increases in property values and clearance rates at auctions. It is only fair to assume that South Australia coming off a low base will have a dramatic increase. You can laugh all you like.

Mr MARSHALL: I hope Daniel Wills from The Advertiser was listening to that last comment because that would make a great spread for Saturday.

The Hon. A. KOUTSANTONIS: I am sure Daniel Wills and you have a wonderful relationship and he does all sorts of things for you but I am sure he is also an independent journalist who makes up his own mind about what he writes no matter how much you try to flatter him in the parliament for your own personal gain.

Mr MARSHALL: The reason we are going to have the biggest stamp duty increase is because we have had the worst performance in the past so we are going to have a rebound.

The Hon. A. KOUTSANTONIS: It is fair to say—

Mr MARSHALL: What is going to drive that rebound?

The Hon. A. KOUTSANTONIS: I think the Leader of the Opposition's assertion is that South Australian economic conditions are so bad that everything will grind to a halt. That is a damning indictment on Prime Minister Abbott, it is a damning indictment of this government and it is a damning indictment of the people of South Australia, and I think they will prove him wrong.

Mr MARSHALL: Can I point the Treasurer to the most recent ABS statistics, the March quarter report, which showed that dwelling unit commencements in South Australia had fallen behind by 8 per cent over December and they were the worst in Australia. They were the worst in Australia for the March quarter, they were the worst in Australia for the past 12 months, but now just to get this right, the Treasurer is saying that, because we are the worst in Australia, we will be able to make up the most. Is that correct?

The Hon. A. KOUTSANTONIS: No, that is not what I said at all. Again, you are trying to verbal me. It may work in your party room but it will not work in the parliament.

Mr MARSHALL: Okay, well give us the answer.

The Hon. A. KOUTSANTONIS: For example, in the latest housing indicators, dwelling approvals, trend growth from May 2014, year to year to May, is up 17.7 per cent. They are the ABS figures and I know you want to selectively quote but that is entirely up to you.

Mr MARSHALL: What about the March figures? They are the most recent ones.

The Hon. A. KOUTSANTONIS: Dwelling unit commencements year to December quarter 2013, up 21.5 per cent. Residential property price index is up 4.9 per cent in Adelaide. Retail trade is up. Sales of new motor vehicles is up. New business investment is down. Capital new expenditure is up. Private new capital expenditure is up, seasonally adjusted. Exploration spending is up.

Mr MARSHALL: With respect—

The Hon. A. KOUTSANTONIS: Exports are up.

Mr MARSHALL: —that has nothing to do with stamp duty.

The Hon. A. KOUTSANTONIS: No, because your argument is that the general malaise in the economy will not fuel this growth. Well, I have just read out to you a whole series of ABS stats that show the economy is growing but you stubbornly refuse to accept that South Australians are doing their very best to grow the economy and there will be a corresponding increase in transactional taxes off a low base.

Mr MARSHALL: Okay, so you stand by your commitment made in this parliament today that South Australia will have the fastest growing stamp duty revenue in the entire commonwealth?

The Hon. A. KOUTSANTONIS: I do not accept the way in which you have asked the question. I do not know how you have calculated the premise on which you asked your question.

Mr MARSHALL: So, we are not going to have the fastest growing?

The Hon. A. KOUTSANTONIS: In comparison to what? To what is in your head?

Mr MARSHALL: Every other state in Australia. We are in a commonwealth. There are five other states.

The Hon. A. KOUTSANTONIS: Show me the work you have done.

Mr MARSHALL: On what basis were you expecting—

The Hon. A. KOUTSANTONIS: I have just explained to you that a whole series of indicators are showing growth in our economy.

Mr MARSHALL: On what basis were you expecting conveyance duty to grow by 11½ per cent in the 2014-15 calendar year?

The Hon. A. KOUTSANTONIS: Well, first and foremost—let's have first principles here—these assessments are made by independent officers within Department of the Premier and Cabinet and the Department of Treasury and Finance. The Department of Treasury and Finance and Department of the Premier and Cabinet have no interference with the government when they plug these figures into the budget.

Mr MARSHALL: Okay.

The Hon. A. KOUTSANTONIS: I do not ring up the Under Treasurer and say, 'Listen Brett, you had better make it as high as possible to make my budget look better.' They are what they are and if he says that they are lower, they are lower. If he says they are higher, they are higher. These are not assumptions that I make but if you look at the evidence that they are basing them on, it is sound. If you politically want to make an assertion that, no, the government cannot reach them, and if you want to set a trap for yourself and say that the government cannot possibly meet this metric, go ahead because I will not be the one who is embarrassed if we do not, because I am not the one saying that these figures are absolutely accurate. I am saying that these are done independently of me. You are the one making the assertion that they are unachievable.

Mr MARSHALL: No.

The Hon. A. KOUTSANTONIS: It is probably why as Leader of the Opposition you are so naïve and get yourself into trouble. You make these assertions and, if you get them wrong, you are the one with egg on your face, not me.

Mr MARSHALL: I am asking on what basis you expect the—

The Hon. A. KOUTSANTONIS: I have just said to you that they are not made by me, they are made by the department and if the department makes them, I stand by them.

Mr MARSHALL: On what basis? Do they have an economic modelling unit?

The Hon. A. KOUTSANTONIS: The Department of the Premier and Cabinet has. The government does, and it is a return to trend. If you think South Australia will not return to trend, then you will be right. If we are right, it will.

Mr MARSHALL: Who is doing the economic modelling—the Under Treasurer or the Premier's department?

The Hon. A. KOUTSANTONIS: First and foremost, government is a unit.

Mr MARSHALL: Is it?

The Hon. A. KOUTSANTONIS: It is. We speak with one voice.

Mr MARSHALL: I have had a few voices giving me calls late at night recently, but anyway, go on.

The Hon. A. KOUTSANTONIS: If you are hearing voices in your head, that is not my problem.

Mr MARSHALL: Don't you worry about that.

The Hon. A. KOUTSANTONIS: If you are getting leaks, what are they? Just tell us right now. Why haven't you surprised anyone with a leak?

Mr MARSHALL: Well—I'm—

The Hon. A. KOUTSANTONIS: Well, well—what? Where are they? Why weren't they on the front page of the paper this morning starting before estimates if you had leaks? Or are you that inept that you receive a leak and then you keep it and not drop it to the media?

Mr MARSHALL: Well—

The Hon. A. KOUTSANTONIS: Well, what is it? If you are getting late night phone calls from ministers—

Mr MARSHALL: Any chance you could answer the question?

The Hon. A. KOUTSANTONIS: Why don't you answer? You made the assertion in the parliament that you are getting late night phone calls. Back it up!

Mr MARSHALL: Any chance you can answer the question?

The Hon. A. KOUTSANTONIS: Back it up! This is why you keep on losing.

The CHAIR: Leader, I am afraid you did ask for that. Do you have another question?

Mr MARSHALL: I have asked the question.

The Hon. A. KOUTSANTONIS: And I have answered it, but you refuse to accept it. We were having such a nice time being polite to each other. It was like a new dawn, and all of a sudden you reverted to type and so did I.

Mr MARSHALL: Was credit rating agency Moody's correct when it stated on budget day that 'the potential for weaker than anticipated revenue growth remains a risk for the budget outcomes'.

The Hon. A. KOUTSANTONIS: I think Moody's are right to be worried about revenue, as am I. I will give credit to the Prime Minister and the Treasurer. When they were elected in September 2013, they embarked on what I thought was a very good round of returning the country to confidence after the last six years of uncertainty and, regardless of your political persuasion, I think it is not very good for the country to have that kind of uncertainty. I think you saw a return to confidence in the country. Retail spending was up; GST receipts were returning to strength; people were feeling confident.

At the very least there had been no dramatic changes to policies and settings other than the ones that were announced in the federal election. Come the commonwealth budget, I think that has been turned on its head and people are very anxious about this commonwealth government and about what they said they would do and what they actually are going to do, So, like Moody's, I am very concerned about revenues, especially GST, because of the way the commonwealth government is attacking the confidence of the country.

Mr MARSHALL: Referring to Budget Paper 3, page 50—Transport development levy: what are the criteria for GST to be added to the car park tax liability of car park owners?

The Hon. A. KOUTSANTONIS: If you are asking whether or not the TDL is subject to GST, the payments to us are not subject to GST, but if someone has a car park that they are selling as a service, that is subject to GST.

Mr MARSHALL: Right, because I was asking that for about a year. Does the government pay GST on the car park tax that is not reimbursed by the feds on its own car parks?

The Hon. A. KOUTSANTONIS: If it is for business purposes, we pay it and then we get an input tax credit back.

Mr MARSHALL: Will the government pay fringe benefits tax on the car park tax it provides its own employees and at what rate?

The Hon. A. KOUTSANTONIS: We will have to get back to you on the FBT costs for employees who are given their car parks.

Mr MARSHALL: Has the government done a calculation yet on what it will cost the government to pay its own car park tax and what the fringe benefits tax will be on top of that?

The Hon. A. KOUTSANTONIS: In terms of the fringe benefits tax I do not think we have done the calculations yet, but in terms of our own costs, we expect agencies to absorb the cost.

Mr MARSHALL: They will absorb the cost, but no calculation has been made?

The Hon. A. KOUTSANTONIS: No, not as yet.

Mr MARSHALL: Has any determination been made by Revenue SA as to what the incremental costs of administering this tax will be, so that we can determine what the net impact of this taxation revenue measure will be?

The Hon. A. KOUTSANTONIS: The capital expenditure for the implementation of the TDL is $1.8 million and the ongoing recurrent costs are about $420,000 to $430,000 a year.

Mr MARSHALL: Say that again, sorry?

The Hon. A. KOUTSANTONIS: So, $1.8 million in capital as a one-off and the first share of its implementation will cost us $418,000, going up to $428,000, then $439,000, and then $450,000.

Mr MARSHALL: That is the ongoing annual cost of administering it, but there was a $1.8 million cost upfront?

The Hon. A. KOUTSANTONIS: Yes.

Mr MARSHALL: Has that been expended?

The Hon. A. KOUTSANTONIS: Not all of it, no.

Mr MARSHALL: Was that in the budget for last financial year?

The Hon. A. KOUTSANTONIS: I will have to check and get back to you.

Mr MARSHALL: Can you also check how much of the $1.8 million has been spent—

The Hon. A. KOUTSANTONIS: Sure, I will get back to you about that.

Mr MARSHALL: —and is it essentially for computer and software upgrades?

The Hon. A. KOUTSANTONIS: I assume so, yes, but I will get you a fulsome answer so you have got all the details.

Mr MARSHALL: Thank you. One question I would like to note is in the draft legislation it talks about the government charging interest on unpaid car park tax of around 10.7 per cent per year. How do you reconcile that with the fact that you will only charge yourself 7.5 per cent interest on any unpaid bills that you have?

The Hon. A. KOUTSANTONIS: It is the standard rate that we charge for all taxes for late fees, a 10 per cent fee. The discrepancy between what we charge ourselves is a matter of government policy, but I see your point.

Mr MARSHALL: On Budget Paper 3, page 63, in the fourth paragraph it talks about the Gillman deal and, in particular, it says, 'Distributions from Renewal SA in 2014-15 are impacted by the sale of 150 hectares of land at Gillman.' Can you advise if there are any state-based tax subsidies or reductions as part of that deal?

The Hon. A. KOUTSANTONIS: Not that I am aware of, no, but I will double-check and get back to you.

Mr MARSHALL: You will be happy to check that?

The Hon. A. KOUTSANTONIS: Sure.

Mr MARSHALL: Budget Paper 6, page 80, in relation to public transport cost recovery, does the government have a list of which events will be hit by the new public transport tax?

The Hon. A. KOUTSANTONIS: I would refer you again to minister Mullighan on that, but I also will give you a brief overview of my thinking on this levy. There are a number of events in the CBD where public transport is not catered for and it is just assumed that there will be public transport there to pick up the pieces at the end of the day. This is a very good piece of public policy to ensure that we can have the safe movement of young people who attend these large festivals to and from there. Either way someone is going to pay; it is either the taxpayer or the people who attend the festivals. Now I know the opposition have called it a fun tax, but I actually think it is a very good model. It is a model that I think Victoria has done very, very well, and I think it is a very good piece of public policy that the opposition should embrace. That is my personal view.

Mr MARSHALL: What I am trying to work out is if that work has not been done, how did Treasury arrive at what the likely revenue is going to be if you hadn't worked out what it was going to apply to?

The Hon. A. KOUTSANTONIS: I think the largest chunk is the Adelaide Oval, but there are a whole number of festivals that go in and around the city and, basically, you would use a formula, predicting from past events, what we have had. However, you also make a decision on a case by case scenario. For example, if there is an event that does not need any augmenting of public transport services to get to and from it—that is, you use existing timetable routes that are already in place—you probably would not charge the levy, but if you had to have a footy express standing by and close King William Street to take people to and from the event, you would probably charge the levy. If you already have people coming in for a paid event that is over a period—like a convention, for example, that has over 5,000 people—you probably would not charge the levy because you do not need to augment any services.

Mr MARSHALL: You have to figure into your budget with increased revenue, and you are saying that you have not worked out who is and who is not going to be charged. I suppose my question is: how did you actually come up with the figure if you did not know? Or are you saying that there is a list that is unpublished yet, or that there was never a list done and you are just threw a dart?

The Hon. A. KOUTSANTONIS: The costings are given to us by the Department of Planning, Transport and Infrastructure, because they are the ones on the coalface of this, but the reality is that we want to have as much room to move on this as possible. But the main source of the income—

Mr MARSHALL: So there is no list?

The Hon. A. KOUTSANTONIS: Over 50 per cent of the revenue is in Adelaide Oval alone. Is there a list of all the major public events that happen that are eligible for this levy to be charged? There probably is. Have we made a decision about which ones are going to be charged and not charged? No, we have not. However, I will get you more information.

Mr MARSHALL: I have some questions on Budget Paper 5, page 43, on RISTEC. What is that all about? Goodness gracious, what has been going on there? It seems like a bit of a debacle really, doesn't it? Can you give us an overview of this project, because this originally appeared in your 2002-03 budget, and it was a $22.6 million system upgrade that was meant to be finished by June 2006. Correct me if I am wrong, but this year the budget says that it was not completed in 2006; in fact, it is not going to be finished this year, and the new completion date is the middle of next year. Is that correct?

The Hon. A. KOUTSANTONIS: That is all correct, yes.

Mr MARSHALL: What is the reason for the delay? It is the best part of a decade. I have heard of slippage, but a decade? I might use that with my daughter for her birthday party; 'I'll give you a party, but wait until your 21^st darling.'

The Hon. A. KOUTSANTONIS: The Under Treasurer quite proudly tells me he has not returned to government for a dollar of any cost overruns for the cost. The contract was not signed until 2008, so it is not fair to categorise it as a decade waiting for the contract to be implemented. But yes, we are also disappointed at the outcomes—

Mr MARSHALL: So the contract was 2008?

The Hon. A. KOUTSANTONIS: Yes; signed.

Mr MARSHALL: So there was no mention of the RISTEC upgrade in the 2002-03 budget?

The Hon. A. KOUTSANTONIS: I was not Treasurer then; I was just a humble backbencher.

Mr MARSHALL: Well I have it here; it is a beauty. It says here, on page 13 of the SA budget, Capital Works, from 2002-03, that you were going to implement a new taxation revenue system replacement for $22.6 million, commencement in July 2002 and due to be competed in 2006. It goes through quite a lot of detail, and it even names the project. It is called the RISTEC project.

The Hon. A. KOUTSANTONIS: Yes.

Mr MARSHALL: It is broken down into different stages. Stage 1 was $2½ million and was due to be completed in 2003. So now the Under Treasurer is advising you that you did not even let the contracts until 2008. What was it then?

The Hon. A. KOUTSANTONIS: It went to a public tender. The process was obviously the department trying to understand exactly what its needs were.

Mr MARSHALL: Was it a six-year public tender process for RISTEC?

The Hon. A. KOUTSANTONIS: No, it was not. Again, you can try to make a political point.

Mr MARSHALL: I am just asking a question.

The Hon. A. KOUTSANTONIS: Yes, I know, but the inflection in your voice and trying to mock Treasury is probably not helpful in trying to get an accurate answer. So, if you are really interested in what the impact has been, well, Treasury has not gone back to government asking for extra money.

Mr MARSHALL: Since 2002.

The Hon. A. KOUTSANTONIS: Since the contract was signed.

Mr MARSHALL: Can I just ask one question, no inflection—

The Hon. A. KOUTSANTONIS: Just let me finish and then you can ask.

Mr MARSHALL: Okay, go on then.

The Hon. A. KOUTSANTONIS: The department has not gone back to government with its hand out saying, ‘We need more money to implement this project.' They are attempting to resolve all the issues without being an extra burden on the taxpayer.

Mr MARSHALL: Is that true?

The Hon. A. KOUTSANTONIS: Well, they are doing their very best. I also hope that we do resolve it quickly, and Treasury is committed to resolving it.

Mr MARSHALL: Is it true to say that they have not gone back for any additional money when I have the original mention in the budget in 2002-03, where it says $22.6 million? It is not $22.6 million any more, is it?

The Hon. A. KOUTSANTONIS: To give a detailed history, first and foremost, after it was first announced in 2002, the costs were an estimate. The department then went and spoke to other jurisdictions around the country about what they were doing. When they realised that what other jurisdictions were doing was dramatically different to what we were envisaging, they stopped the project; they rescoped it. We went to cabinet in May 2008 and were allocated a $45.5 million budget for the project. They put it out to tender. The tender came back in at $43.3 million. That was in December 2008. An amount of $2.2 million was returned to government as a saving. There has been some policy scope, two new initiatives which have increased the costs of the project by $2.4 million.

The extra expenses that have been incurred, problems with delays in this project, have been absorbed by Treasury, so no extra allocation has been made. That is $8.4 million. So, Treasury have found those savings themselves rather than come back to government asking for the extra money—a model department. I hope other departments are reading the Hansard as we speak to realise what is government best practice.

Mr MARSHALL: First of all we need to clarify: there was no work done between 2002 and 2008.

The Hon. A. KOUTSANTONIS: No, there was work done.

Mr MARSHALL: It was envisaged in 2002 and then they went off and did the work, but no RISTEC work was done in that time, it was more investigative work. Then in 2008 the contract was actually let—that is quite an extraordinary time: six years to let a contract. Anyway, we will let that go. The budget then was not $22 million: it was $44 million or thereabouts.

The Hon. A. KOUTSANTONIS: It was $45.5 million.

Mr MARSHALL: That has increased significantly. I note that in last year’s budget it increased to $52.9 million. This year it is $54.1 million. But what you are saying is that, despite these time blowouts and cost blowouts, somehow Treasury has absorbed all of those cost increases in their own budget—

The Hon. A. KOUTSANTONIS: That is right.

Mr MARSHALL: —even though they blew out their own budget by $15 million this year. They did not absorb it that well really when you think about it, did they?

The Hon. A. KOUTSANTONIS: The $15 million was not a blowout, as you say.

Mr MARSHALL: Well, over and above the budget.

The Hon. A. KOUTSANTONIS: They are all carryovers. It is fair to say that I think that while DTF are disappointed themselves, they have acted very prudently to try to minimise the impact on the taxpayer.

The CHAIR: Can I just interrupt you, leader. We have been sitting here for three hours, the Treasurer and his officials have been sitting here for three hours, I think it is only fair that we have a break shortly before we go onto MAC at noon. Do you agree with that?

Mr MARSHALL: No; we still have—

The CHAIR: I think we should go to a break soon. So, you can go for five minutes, if you like. I think we need to give the Treasurer and his officials a break.

Mr MARSHALL: Can't we just add the time onto the end? I am happy to have a break now but come back for the last 10 minutes of this line and then continue on with the others after. You can have as long a break as you like.

The CHAIR: Do you want to make it noon?

The Hon. A. KOUTSANTONIS: The very best industrial relations practices from the opposition there: no break, add the time.

Mr MARSHALL: I was just getting warmed up.

The CHAIR: We have all been friends so far, I think we can go for a five-minute break.

Mr MARSHALL: And come back to this?

The CHAIR: No, come back to MAC at noon, as per the schedule.

Mr MARSHALL: I am still mid line.

The CHAIR: Mid line?

The Hon. A. KOUTSANTONIS: How much longer is it to another 10 minutes?

Mr MARSHALL: I disagree.

The CHAIR: There have been no government questions too, I think you should note.

Mr MARSHALL: Yes; well, there have not been that many government answers.

The CHAIR: The government has been very generous.

Mr MARSHALL: I think we need to come back to this though. There is no point in finishing off halfway through a line.

The CHAIR: We are wasting time now.

The Hon. A. KOUTSANTONIS: How about we go through to 12 noon and then we will have a five-minute bathroom break.

The CHAIR: Excellent.

Mr MARSHALL: That is what I like. Can you guarantee that there will be no further blowout in the cost to RISTEC?

The Hon. A. KOUTSANTONIS: I have complete faith in the Under Treasurer and the department to do their very best to minimise any impacts on the taxpayer.

Mr MARSHALL: So, when is the new revised time frame for the delivery of the RISTEC system?

The Hon. A. KOUTSANTONIS: July 2015.

Mr MARSHALL: So, it is not June 2015 now, it is July 2015. So, it is not the June quarter, it is now July.

The Hon. A. KOUTSANTONIS: The advice I have is the end of the June quarter 2015, so to be prudent, I do not want to mislead the parliament, we will say July.

Mr MARSHALL: It has been 12 years so far, let us not quibble about a month. How many staff are dedicated to RISTEC and who is responsible for the project?

The Hon. A. KOUTSANTONIS: The commissioner is heading up the work. There are a number of employees from Fujitsu who have been working on this and a number of DTF and RevenueSA staff. I will get you the exact numbers so that you have it.

Mr MARSHALL: That would be good because in 2013 it was reported that there were 35 full-time equivalent people working on the system.

The Hon. A. KOUTSANTONIS: They can walk and chew gum.

Mr MARSHALL: Sorry?

The Hon. A. KOUTSANTONIS: They can walk and chew gum. They are very good. They can do lots of things. They can multitask.

Mr MARSHALL: It would seem not, by the blowout.

The Hon. A. KOUTSANTONIS: Given the size of the budget, the work that they do, the tasks they have and the resources they are given they do an exceptional job, on behalf of all of us.

Mr MARSHALL: What taxes can RISTEC now manage?

The Hon. A. KOUTSANTONIS: I am advised payroll tax. Payroll tax went live in June 2012.

Mr MARSHALL: So, that is the only one at this stage?

The Hon. A. KOUTSANTONIS: That is what I am advised.

Mr MARSHALL: So, it cannot handle any other taxes at this stage?

The Hon. A. KOUTSANTONIS: No; it has not gone live yet on the others.

Mr MARSHALL: I am just saying that is the one that is live. Thank you. Are there any taxes that RISTEC will not be able to manage once completed?

The Hon. A. KOUTSANTONIS: I am advised that release 2 will be land tax and emergency services levy and that the department will be scrapping release 3, which is conveyance stamp duty, insurance stamp duty, motor vehicle stamp duty, first home owner grant and housing construction grant, we will do those internally.

Mr MARSHALL: So let's get this straight: you can do payroll tax now. It will be able to, by July 2015, do land tax and emergency services levy, but there is now revised scope that it will not be doing conveyance duties and a range of stamp duties?

The Hon. A. KOUTSANTONIS: Yes, and first home owner and housing construction grants.

Mr MARSHALL: And when did you decide to change the scope not to include those items?

The Hon. A. KOUTSANTONIS: I will find out the exact date and let you know.

Mr MARSHALL: Will there be another project now—RISTEC II, son of RISTEC; something like that—that will look at these items?

The Hon. A. KOUTSANTONIS: In house, exclusive of Fujitsu.

Mr MARSHALL: So there is no plan to develop RISTEC beyond this?

The Hon. A. KOUTSANTONIS: We have already advised Fujitsu that we will not be continuing with release 3. I will let you know the exact date we told them the good news.

Mr MARSHALL: Okay, thank you very much. Budget Paper 4, Volume 4, page 171, sub-program 7.1 in relation to Revenue SA and RevNet in particular. On 2 July the Australian Institute of Conveyancers advised members that RevNet was down and unable to provide ESL or land tax certificates for property transfers. What was the problem? For how long was RevNet down and are there ongoing problems with the RevNet system that need to be resolved?

The Hon. A. KOUTSANTONIS: I am advised that it was down for less than a day, half a day. I am advised that there was overwhelming consultation with industry about it and I am also advised that the industry think it is a very well-performing program that does exceptional work.

Mr MARSHALL: Alright, do not worry about how long it was down, but do you envisage ongoing problems with this RevNet system as well? Do you know what caused it?

The Hon. A. KOUTSANTONIS: Web portals do go down. It has been in operation since 2003. It has been a very reliable system and went down intermittently for half a day. In comparison, if you hold it up against the major four banks—

Mr MARSHALL: It was just maintenance or something like that? It was not a systemic problem?

The Hon. A. KOUTSANTONIS: No, it is nothing systemic. It was things outside our control. We are not envisaging any other problems with it.

Mr MARSHALL: Budget Paper 3, page 18, the last sentence in the second to last paragraph talks about gaming machine regulations that are envisaged to be changed that will increase revenue. Can you tell me what they might be?

The Hon. A. KOUTSANTONIS: No, I would refer you to the appropriate minister in terms of the regulations. I assume (I am guessing and do not want to mislead you) that it is the high roller provisions within the Adelaide Casino, but I will double-check and get you a more accurate answer. I think minister Gago is the appropriate minister.

Mr MARSHALL: My final question before your convenience break, because that is the sort of guy I am—

The Hon. A. KOUTSANTONIS: Thank you for your concern.

Mr MARSHALL: —is from Budget Paper 4, Volume 4, page 171. At the bottom of the page. I think I have is stumbled onto something huge here, Treasurer.

The CHAIR: You have one minute, and that is all.

Mr MARSHALL: I have one minute and that is all I need. I think I have uncovered a doozy! It says:

Development of legislation and a collection framework for the Transport Department Levy.

I did not know that we were going to introduce a transport department levy. Could you please outline to the committee what that huge tax is all about?

The Hon. A. KOUTSANTONIS: I congratulate the work experience boy in your office who found this. Well done!

Mr MARSHALL: Don't you worry about that!

Sitting suspended from 12:00 to 12:10.

Membership:

Mr Wingard substituted for Mr Knoll.

Departmental Advisers:

Mr B. Rowse, Under Treasurer, Department of Treasury and Finance.

Mr F. Bartlett, Acting Chief Executive, Motor Accident Commission.

Mr D. Mazzone, Director, Project Office, Motor Accident Commission.

Mr G. Goddard, Deputy Under Treasurer, Department of Treasury and Finance.

The Hon. A. KOUTSANTONIS: I wish to make a brief opening statement, if I may, and the government will have no questions. I am pleased to advise the committee that the Motor Accident Commission is in a sound financial position. Whilst the financial results for 2013-14 are still in the process of being finalised, as of 31 May MAC had net assets of $1.2 billion. In 2012-13, the Motor Accident Commission reported a profit of $371 million.

Since 2007, MAC has had responsibility for the state government's road safety communications program in support of South Australia's road safety priorities. These programs and campaigns focus on an increase in community awareness and changing the attitudes and behaviours of road users to reduce the incidence of road trauma. MAC has an important role in educating the public about road safety and encouraging better driving behaviour, which helped contribute to our annual road toll reducing from 154 in 2002 to 98 last year.

As part of the 2014-15 state budget, the government announced proposed changes to the provision of compulsory third-party insurance. These changes will open the provisions of CTP insurance to the private sector in a more efficient structure. Despite this change, the government intends for MAC's road safety focus to continue as normal. I invite questions.

Mr MARSHALL: My questions will relate to Budget Paper 3, page 8, in particular, regarding the motor accident insurance decisions announced in this budget. What is the expected level of retained earnings as of 30 June 2014? Was that the figure of $1.2 billion you just read out?

The Hon. A. KOUTSANTONIS: We only have unaudited figures so I am reluctant to hand those out until we know what the audited figure is.

Mr MARSHALL: They were provided last year in estimates.

The Hon. A. KOUTSANTONIS: Were they? I am not trying to be difficult. I just do not want to mislead anyone.

Mr MARSHALL: Neither am I, but in estimates last year you gave the figure.

The Hon. A. KOUTSANTONIS: The unaudited figures?

Mr MARSHALL: Yes.

The Hon. A. KOUTSANTONIS: I am happy to provide them to you. I am advised it is approximately $440 million.

Mr MARSHALL: Was the $1.2 billion figure that you referred to an overprovision, surplus funds on the balance sheet?

The Hon. A. KOUTSANTONIS: I am advised it is surplus assets as of 31 May 2014.

Mr MARSHALL: That is the term that is used. So you get to 100 per cent provision for the future identified liabilities and anything over and above that is referred to as the surplus assets?

The Hon. A. KOUTSANTONIS: The solvency formula is a different concept. The net assets is simply assets less liabilities, which is $1.2 billion. The solvency ratio is a different equation altogether.

Mr MARSHALL: Can you take me through where we sit on both of those?

The Hon. A. KOUTSANTONIS: Again, unaudited. Our solvency rate is at 129 per cent.

Mr MARSHALL: Last year, I think it was at 113 per cent.

The Hon. A. KOUTSANTONIS: I do not know for last year but I can go back and check.

Mr MARSHALL: Solvency is 129 per cent. How would we calculate what that 29 per cent is over and above the liabilities? What would that sit at?

The Hon. A. KOUTSANTONIS: I will ask Freddy to answer that question for you.

Mr BARTLETT: The 129 per cent is based on an old APRA formula. It would equate to approximately—let me just check that. I might have to take that on notice to do the actual calculation.

Mr MARSHALL: Are there any policies within MAC as to what that should sit at? It has been much lower than 129 per cent in all of my recent readings.

The Hon. A. KOUTSANTONIS: The basic principles are that it should sit at 100 per cent.

Mr MARSHALL: That would tend to fluctuate a little bit higher and lower.

The Hon. A. KOUTSANTONIS: As a minimum of 100 per cent. They obviously aim for higher than that to achieve it.

Mr MARSHALL: Sure. Have you made decisions in the past to send surplus money above the 100 per cent to the Treasury? Obviously there was the $100 million dividend last year.

The Hon. A. KOUTSANTONIS: No, we have not taken money as dividends, and the $100 million that the Motor Accident Commission assigned to the budget last year was not put into general revenue or the Consolidated Account. It was tied to actual works.

Mr MARSHALL: So that was the first time ever?

The Hon. A. KOUTSANTONIS: That I know of, but I will double-check.

Mr MARSHALL: Is it your policy to take in surplus above 100 per cent, or is it just going to be taken on a—

The Hon. A. KOUTSANTONIS: It is a matter for the board, if they wish to pay us money for certain works, but we announced in the budget that we would be ceasing the issuing of compulsory third-party premiums and would make a decision about whether we sold a tail, we ran down a tail, how we would liquidate those assets to the Highways Fund.

Mr MARSHALL: When we go back in time, was the decision to send $100 million to the tied road projects a decision of the MAC board, or was it a request of the government looking at these surplus funds?

The Hon. A. KOUTSANTONIS: I am advised that it was a decision of the MAC board.

Mr MARSHALL: I think they made that announcement in the 2012-13 year, but for some reason it was not received until the 2013-14 year. Subsequent to that, you have had some fairly large performances. Retained earnings have increased significantly in those two subsequent years and now the government has made a decision to cease operating on 30 June 2016.

The Hon. A. KOUTSANTONIS: Or sooner.

Mr MARSHALL: Or sooner? How much sooner could it be?

The Hon. A. KOUTSANTONIS: I will take advice on it. The Under Treasurer will lead a group that will look at the performance of the Motor Accident Commission. We are obviously looking for people now to help advise us on how best to end the practice that we have been involved in and how best to return the maximum return to government possible. They will look at that and come back to us with recommendations. I put that in just in case they come back and say, 'There is a relatively simple way of doing this. We can do it quickly and efficiently. We can bring it forward to 1 July 2015,' but to give me plenty of room, we have set the date of 1 July 2016.

Mr MARSHALL: The $100 million that was paid in last financial year was not paid into the Highways Fund? It just went into general revenue and then was expensed out against transport projects?

The Hon. A. KOUTSANTONIS: I cannot tell you which fund it went into, but it was hypothecated to a series of works. I will get those details for you.

Mr MARSHALL: But it was not into the Highways Fund?

The Hon. A. KOUTSANTONIS: It was paid into consolidated revenue, as a grant I assume, and that grant then was sent out to DPTI and was paid out in projects.

Mr MARSHALL: But what you are proposing now is quite different?

The Hon. A. KOUTSANTONIS: Yes.

Mr MARSHALL: You cease operating at a date—maybe 30 June 2016, maybe before—and that money currently in the budget at $500 million (but we have already ascertained that that could move)—

The Hon. A. KOUTSANTONIS: Could be more.

Mr MARSHALL: That would be paid into the Highways Fund. Is that a balance sheet transaction only?

The Hon. A. KOUTSANTONIS: What I am attempting to do is to reduce my borrowings for infrastructure programs by putting that money into the Highways Fund and spending that money on roads that we are borrowing money for right now.

Mr MARSHALL: There are two different treatments for the distributions. The $100 million went into consolidated revenue, so it came in as income. It went out as an expense, but it diminished the deficit for the year that it was received in by $100 million, albeit that you then spent money on it. If this comes into the balance sheet, it will not have that effect of lowering the deficit by $500 million, or will it?

The Hon. A. KOUTSANTONIS: We have not factored it into the net operating balance. When we do eventually get the money (as I said we have been very conservative about it) the Auditor-General may have a view about how we record it in the fiscal outlook, in the net operating balance, and we will act accordingly.

Mr MARSHALL: But at this stage, subject to any advice from the Auditor-General, it will be a straight balance sheet transaction and it will not affect the net operating balance—

The Hon. A. KOUTSANTONIS: Yes.

Mr MARSHALL: —and it will not be flushed through because quite often federal government grant moneys come through the consolidated income—

The Hon. A. KOUTSANTONIS: Yes, that is the advice I have received.

Mr MARSHALL: Good. How much is in the Highways Fund as of 30 June 2014?

The Hon. A. KOUTSANTONIS: I refer you to the Minister for Transport but I will endeavour to find out for you and get a figure for you, and let you know.

Mr MARSHALL: I will not hold you to it, but is it a significant fund? I have never heard of it, that is all.

The Hon. A. KOUTSANTONIS: I do not know.

Mr MARSHALL: Have you heard of it before?

The Hon. A. KOUTSANTONIS: Yes, I used to be transport minister.

Mr MARSHALL: That is right, you were the transport minister. What was it when you were last in charge?

The Hon. A. KOUTSANTONIS: I cannot remember. I was too busy winning an election.

Mr MARSHALL: Exactly. Not doing your job as the minister.

The Hon. A. KOUTSANTONIS: No, I did my job beautifully, actually.

Mr MARSHALL: Did you?

The Hon. A. KOUTSANTONIS: I did.

Mr MARSHALL: People commented on it. When you made the decision to go ahead with the liquidation, essentially, of the MAC, who provided that advice to you?

The Hon. A. KOUTSANTONIS: The cabinet itself made the deliberations. After we were successful in the election campaign, we did an assessment of how best to implement our budget. Along came the commonwealth budget and we had to start thinking outside the square about the best ways to build capacity within our budget and I think it is fair to say that the Motor Accident Commission stood out. It is not an essential utility, it is not an essential service, and we felt that it did not compromise our election commitments and we proceeded. I have to say I have not avoided using the word 'privatisation'.

Mr MARSHALL: No, fair enough.

The Hon. A. KOUTSANTONIS: It is a privatisation.

Mr MARSHALL: It is a privatisation.

The Hon. A. KOUTSANTONIS: But it is not the privatisation of an essential service which we committed not to do.

Mr MARSHALL: Just on that, though, on 14 November last year the Premier said:

We've ruled out privatisation of further significant assets...

He did not talk about, as you have clarified it now, essential services. He made it very clear.

We've ruled out privatisation of further significant assets…

Isn't the Motor Accident Commission a significant asset?

The Hon. A. KOUTSANTONIS: No, it is an insurance agency.

Mr MARSHALL: It is not an asset?

The Hon. A. KOUTSANTONIS: No.

Mr MARSHALL: Really?

The Hon. A. KOUTSANTONIS: What they buy is assets. What they invest in is assets. I consider SA Water, the desal plant, our sewerage treatment plants and our pipes significant assets. If I had been asked before the election, would we consider outsourcing compulsory third-party premiums, I probably would have said, 'Yes, maybe.'

Mr MARSHALL: This is not really outsourcing is it?

The Hon. A. KOUTSANTONIS: It is. It is privatisation. Again, I am not trying to walk away from calling it privatisation but I do not think it is an essential service and I do not think it is an essential asset.

Mr MARSHALL: I know it is not an essential service. You have made that point on the record before but I think this is the first time you have put on the record that you do not think it is a significant asset.

The Hon. A. KOUTSANTONIS: Well, it does not deliver to the state a service that a significant asset like the desal plant does. No one else can provide us desalinated water, only the desal plant can.

Mr MARSHALL: So you think that the liquidation or privatisation is completely in context with what the Premier said on 14 November?

The Hon. A. KOUTSANTONIS: Absolutely.

Mr MARSHALL: Good. I just need to understand. You have just said that government formed this view, but there was no study done. You just formed the view that this was an opportunity for—

The Hon. A. KOUTSANTONIS: I do not know if studies were done previous to the election. There may have been. I will take advice on that, but the decision that informed me was very much the commonwealth budget.

Mr MARSHALL: So, the commonwealth budget comes along, and then you say, 'Well, look, we've got to find some money, so let's just liquidate the Motor Accident Commission. There are some surplus funds on their balance sheet and we can liquidate those.' Surely there were another couple of options for you. One was to continue to run it as an ongoing entity. It has made a $440 million surplus last year alone. There's—

The Hon. A. KOUTSANTONIS: Yes, there are other options. We could just start taking dividends from them.

Mr MARSHALL: Dividends is one option, sale is another option or liquidation is the third. What due diligence did the government do to determine the best of those three options? Prima facie, I would have to say that that probably looks like the worst of the three options because although you might say, 'We are just being prudent,' if you factor in $500 million, there are significantly greater surplus assets than that now. You would be discounting your significant surplus assets to get down to $500 million, wouldn't you?

The Hon. A. KOUTSANTONIS: No. Again, it is like, if I float, I am a witch; if I drown, I am innocent. We are being very conservative in our estimates. I am not going to risk the state by taking dividends or asking the Motor Accident Commission to change its solvency ratios to try to benefit the government as they have done in Victoria where they are now running liabilities. They are running deficits in their TAC—I think that is right.

Mr MARSHALL: I do not know about that.

The Hon. A. KOUTSANTONIS: I will check. Anyway, I do not want to expose the state to that kind of risk where we have an unfunded liability, ultimately, in the Motor Accident Commission, so the most prudent way of doing this is the way we have decided to go, which is either selling the tail or running down the tail ourselves, and we will make a decision after we do a body of work.

Mr MARSHALL: You have said there is too much risk in terms of running it. Even though we have run it for an extended period of time, there is too much risk involved with running it going forward. Was any thought given to selling it? Presumably, at the point of sale, you could actually remove the surplus assets, so you would have had the same distribution, but you would have actually got something for selling it as a business.

The Hon. A. KOUTSANTONIS: The question comes now: do we sell it as an entity to another provider and have another regulated monopoly (but owned privately) operating in South Australia, much the way SA Power Networks or any other private regulated monopoly does? Or do we want to inject some competition into the system and have two or three or four providers offering CTP? We will do a body of work to work out what we think is the best option that gives the best outcome to the taxpayer and to motorists, ongoing.

Mr MARSHALL: So you may sell it is an ongoing concern?

The Hon. A. KOUTSANTONIS: We may, but I do not think that is the path we will go down. We will decide after we do this body of work.

Mr MARSHALL: That is quite a variation on what you said. Previously you said it will essentially be liquidated.

The Hon. A. KOUTSANTONIS: I am keeping my options open. It is the prudent thing to do—whatever gives us the biggest return.

Mr MARSHALL: I am certainly not having a go at you over that. I think that is a good idea, but I make the point that the two things we found out this morning are, firstly, that it does not necessarily cease on 30 June 2016. It could be before.

The Hon. A. KOUTSANTONIS: You will find that on budget day I said that.

Mr MARSHALL: And, secondly, that you may look at it as a trade sale.

The Hon. A. KOUTSANTONIS: No, that is not right, because on budget day, when I did my presentation to the media, I said both those things. In fact, I said—

Mr MARSHALL: Well, I was not at your presentation to the media.

The Hon. A. KOUTSANTONIS: I know. I am not criticising you.

Mr MARSHALL: I like you, but I do not want to follow you around. People will think that I am stalking you.

The Hon. A. KOUTSANTONIS: You are slightly obsessed, but that is okay.

Mr MARSHALL: What can I say?

The Hon. A. KOUTSANTONIS: I did make it quite clear to the media on the day, and to any commentator who I spoke to, that there are a series of options available for us on the Motor Accident Commission. I have made it very clear to the media that we could be doing it sooner, so it is not a revelation I have made today. In fact, I think I even said that, all things being equal, we would have done this anyway because it just makes so much sense.

There is no reason for the government to be running a monopoly that is providing such massive surpluses that is not an essential service. One, we should return that money to the taxpayer as quickly as possible and two, we should open it up to more competition, maybe, to get a better outcome for motorists. Or, if that will not give us a better outcome, we can have another monopoly provider buy the entity as it is and offer the service. These are things that we will discover as we go through the process and, ultimately, the parliament will have a say, too, I imagine.

Mr MARSHALL: So, you could be selling this as a monopoly?

The Hon. A. KOUTSANTONIS: Yes, absolutely.

Mr MARSHALL: Has that been made public before?

The Hon. A. KOUTSANTONIS: Yes, on budget day.

Mr MARSHALL: On budget day you said that we might just sell this as an ongoing monopoly?

The Hon. A. KOUTSANTONIS: Yes, I said on budget day that we may sell this, we may just open it up to competition and run down the tail ourselves or we may sell the tail as an asset to someone rather than us trying to run it down given the variances that happen in the property market, so these are all things I have said before. If I have not said them before I apologise, but I am pretty sure that I have. I have been as open as possible about this.

Mr MARSHALL: What do you think would be the impact upon motorists of opening it up to competition and I only ask this question because normally—and I am ready for the speech and I will enjoy it—we are very pro market competition, but APRA does impose some very significant restrictions and therefore costs on private insurance providers that are just not provided to governments when they are underwriting their insurance with a government guarantee? Are you sure that consumers will end up with a lower cost? People are telling me that it is quite possible there will be an increased cost through competition.

The Hon. A. KOUTSANTONIS: First and foremost we mirror almost all of the APRA requirements that are put upon private providers, but the most important distinction between government operations and private providers is that there is a lot more of an incentive to screw down costs for competitive advantage than there is in government. I am not saying that the Motor Accident Commission has not done a good job; I think they have, but the reality is a private company—and I should not have to be telling you this—will do all it can to keep its expenditure low and its costs of delivering service low to be as competitive as it possibly can in the marketplace.

What I want to see is our motorists being able to take full advantage of that new competitive tension, whether that be through a bidding process to buy the Motor Accident Commission or whether it be through a bidding process to become one of the providers who can issue CTP. There is a whole series of mechanisms we can have in place to give the taxpayer benefit, but the reality is that even while it is in government hands I cannot guarantee CTP prices will not go up, as anything can happen.

Mr MARSHALL: Have you had a look at other jurisdictions where they have outsourced CTP to the private sector, whether they have gone up or down?

The Hon. A. KOUTSANTONIS: I think New South Wales has gone down, but I will get the full details for you. I do not have all the answers here in front of me.

Mr MARSHALL: Will this sale be appropriate to receive the 15 per cent asset recycling grant money from the federal government?

The Hon. A. KOUTSANTONIS: That is a matter for the commonwealth.

Mr MARSHALL: Can you confirm that you are now trying to access that 15 per cent asset recycling grant money?

The Hon. A. KOUTSANTONIS: I made it very clear at the treasurers' conference that I would not stand in the way of the 15 per cent asset recycling mechanism that is being put in place. I understand it was withdrawn from the Senate because the Senate was going to move amendments to make it have an application for HFE, which it currently does not, so it was going to be operated by the Grants Commission. The Treasurer will now try and establish another protocol outside the auspices of the parliament just using general revenue in grants to try and make it work, so we will wait and see what that looks like, but if we do decide to spend some money from the Motor Accident Commission on something other than something that is already announced and we are eligible, why would we not apply?

Mr MARSHALL: Only that you have been quite critical of it publicly in the past.

The Hon. A. KOUTSANTONIS: I will tell you why. Traditionally the arrangements have been for infrastructure outside metropolitan cities that the funding split be 80:20 and that is 80 per cent commonwealth money, 20 per cent state money. What Treasurer Hockey is saying is if we want to take this money and spend it on a port, for example, he will only give me 15 per cent and he will approve the port and he will decide what we spend it on, so it is a fundamental shift from what we have had traditionally and I am not sure it benefits us. What I think has happened, by way of anecdote, is I think that Mike Baird and Joe Hockey are very close and Mike Baird wants to sell his electricity assets and Joe Hockey has reverse-engineered a program that is going to make the sale of New South Wales electricity assets look more appealing to New South Wales voters.

Mr MARSHALL: Have you factored any potential 15 per cent federal bonus into your contingencies in your budget?

The Hon. A. KOUTSANTONIS: No.

Mr MARSHALL: If you do receive it, would the MAC proceeds need to be spent entirely—not just the $500 million you have already earmarked, but entirely—on infrastructure?

The Hon. A. KOUTSANTONIS: No; what they would say is whatever you spend on it, whatever proportion you allocate to infrastructure. I think the guidelines are pretty simple: if you want to build infrastructure it cannot be already announced, it must be new infrastructure; the commonwealth needs to approve it, they need to say that it is a good deal, so I assume it will not be roads unless they are tolled; and it will not be anything that cannot be sold for further recycling. So whatever money you allocate they will give you 15 per cent of it.

For example, if we get a billion dollars for the Motor Accident Commission and we spend $300 million on a piece of infrastructure, they will not give us 15 per cent on a billion dollars. They will give us 15 per cent on $300 million, on what we spend on the infrastructure. But we do not know the size of the fund that the Treasurer has, and I do not know how much of that has already been allocated.

Mr MARSHALL: When will you receive confirmation or otherwise that you will receive the 15 per cent asset recycling bonus?

The Hon. A. KOUTSANTONIS: It is on application.

Mr MARSHALL: So you have put the application in—

The Hon. A. KOUTSANTONIS: No; we have put no such application in.

Mr MARSHALL: So you have just had a chat at this stage?

The Hon. A. KOUTSANTONIS: No; it has not even passed. We do not know what it looks like yet. As part of the budget he sent it to the Senate; I understand there were amendments flagged to the process, and I am advised that the Treasurer then withdrew it from the Senate. I am also advised that he is now formulating a new process. What that is going to look like, I don't know.

Mr MARSHALL: What I would like to know at this stage, though, is: what are the surplus assets that are within the MAC?

The Hon. A. KOUTSANTONIS: I would imagine that they would be different at any one time, but I will have to check and get back to you.

Mr MARSHALL: Don't we know that as of 30 June 2013 they were sitting at $767 million? We know that they have had a sort of bumper time since then. You mentioned a figure of 1.2 in your opening statement, but I didn't quite catch what that was. Is that what the surplus money is at the moment?

The Hon. A. KOUTSANTONIS: That is the unaudited surplus MAC net assets of $1.2 billion.

Mr MARSHALL: Doesn't it strike you as curious, then, that if it is already at 1.2, and you are going to be trading for another two years, the markets are improving, you've got your costs down—

The Hon. A. KOUTSANTONIS: That is not what you said earlier. You were saying that there won't be any great uplift in property prices and conveyance duties because the market is not improving; now you are saying the market—

Mr MARSHALL: I do not think the MAC is investing in South Australia. I think that is the point: I do not think they are investing in South Australia—

The Hon. A. KOUTSANTONIS: I think a lot of them are.

Mr MARSHALL: —and that is a good question.

The Hon. A. KOUTSANTONIS: I think a lot of them are, and I think you have just been hung by your own words.

Mr MARSHALL: Can you provide the committee with the percentage of investments of the Motor Accident Commission that are invested in South Australian investments (and thanks for reminding me)? Can you provide the committee with the split of MAC investments by state and internationally?

The Hon. A. KOUTSANTONIS: Sure; I think it would be possible.

Mr MARSHALL: Thank you. If we do have surplus assets at the moment of 1.2 and it could significantly increase, why would we be providing for only $500 million? Surely that is beyond the realms of being prudent.

The Hon. A. KOUTSANTONIS: Because it is so volatile. As the Under Treasurer advised me recently, this business is so volatile that in the last two years it has been moving in our direction (which is good) but, conversely, it can move in the other direction. So we are being prudent. I suppose, to use the words of the Prime Minister, we want to underpromise and overachieve.

Mr MARSHALL: Hear, hear. Will this final format require any legislation?

The Hon. A. KOUTSANTONIS: It may or may not, depending on what model we take. But I will give you full briefings, because if it does require legislative approval we will obviously need your support.

Mr MARSHALL: I would like to ask some questions on the SA government insurance and fleet, if that is possible.

The Hon. A. KOUTSANTONIS: Sure. Can we get Kevin Cantley back.

Departmental Adviser:

Mr K. Cantley, General Manager, South Australian Government Financing Authority.

Mr MARSHALL: I refer to Budget Paper 4, Volume 4. In particular, I am interested in an update on what is happening with the building indemnity insurance. We know that minister O’Brien back in April 2013 said that the government was 'currently in discussions with QBE insurance, which has indicated that it is willing to act as an agent for the government from 1 July 2013 to 30 June 2014'. Did that happen and have we extended that contract beyond 30 June and when are we now planning to exit from our liability in this area?

The Hon. A. KOUTSANTONIS: Before I hand over to Mr Cantley to give you a more fulsome update, I completely support the actions of minister O’Brien to do everything we can to step into this space, because if we had not, it could have been disastrous.

Mr MARSHALL: Agreed.

The Hon. A. KOUTSANTONIS: Good, I am glad. But at the same point, I share your willingness to find an exit point. All good endeavours require an exit, and I am looking forward to the day when we can exit and reduce our risks. I will hand over to Mr Cantley.

Mr CANTLEY: Thanks, Treasurer. Just to clarify: yes, we took over the cover from 1 July 2013, providing insurance for the building indemnity insurance market. The intention was to shut it down or transfer it back to the private sector by 30 June 2014. We have extended that to 30 June 2015. The process we have been going through is that we engaged an external expert to help us, looking at both the type of cover that is provided and the protections in the legislation, as well as what might attract the insurers back into the market.

Other states like New South Wales, Victoria and WA face the same issues, so we are all going through trying to identify how best to move forward. We also consulted with interested parties back in about November or December last year, around that period, and we are yet to bring back our recommendation to cabinet for consideration. We would expect to do that over the next few months and then it will be up to the government to decide, based on the consultation and the options, as to how we go forward.

Mr MARSHALL: Thank you. I will read the omnibus questions into Hansard.

1. Will the minister provide a detailed breakdown of expenditure on consultants and contractors above $10,000 in 2013-14 for all departments and agencies reporting to the minister listing the name of the consultant, contractor or service supplier, cost, work undertaken and method of appointment?

2. For each department or agency reporting to the minister in 2013-14, please provide the number of public servants broken down into heads and FTEs that are (1) tenured and (2) on contract and, for each category, provide a breakdown of the number of (1) executives and (2) non-executives.

3. In the financial year 2013-14, for all departments and agencies reporting to the minister, what underspending on projects and programs (1) was and (2) was not approved by cabinet for carryover expenditure in 2014-15?

4. Between 30 June 2013 and 30 June 2014, will the minister list the job title and total employment cost of each position with a total estimated cost of $100,000 or more—(a) which has been abolished and (b) which has been created?

5. For each year of the forward estimates, provide the name and budget of all grant programs administered by all departments and agencies reporting to the minister and, for 2013-14, provide a breakdown of expenditure on all grants administered by all departments and agencies reporting to the minister listing the name of the grant recipient, the amount of the grant and the purpose of the grants and whether the grant was subject to a grant agreement as required by Treasurer's Instruction 15.

6. For each department or agency reporting to the minister, what is the budget for targeted voluntary separation packages for the financial years 2014-15, 2015-16, 2016-17 and 2017-18?

7. What is the title and total employment cost of each individual staff member in the minister's office as at 30 June 2014, including all departmental employees seconded to ministerial offices and ministerial liaison officers?

I have a further question on strategic procurement.

The CHAIR: You have one minute.

Mr MARSHALL: I had better make it a good one then. Previously, the government has told the parliament that of all of the state government procurement 60 per cent is spent outside of South Australia. In fact, a previous minister said that this was up from 40 per cent before the government came to power. So, 40 per cent of state government procurement happened interstate before Labor came to power. As of about a year ago, it increased to 60 per cent. Can you provide an update to the committee on how much is spent on procurement out of this state, by state and international?

The Hon. A. KOUTSANTONIS: That information will not be available until the State Procurement Board tables its annual report. It has to collect all the information from agencies so that we know exactly where we are at. I think it is fair to say that the government is pretty committed to trying to get that number down as low as possible, that is why we have the industry participation advocate, and I noticed the opposition announced it would be abolishing that position had it been successful at the election. So, I think he can do a fair bit more to try to help.

Obviously, as procurement grows we want to see as much of it grabbed but sometimes when procurement grows it grows at a rate that is a lot faster than the capabilities of the state to meet that procurement. We will do all we can to try to make sure that we procure as much as we can in South Australia, especially in growing industry, but I will get that answer for you.

The CHAIR: There being no further questions, I declare the examination of the proposed payments of the Department of Treasury and Finance and administered items for the Department of Treasury and Finance adjourned to Committee A. The committee stands suspended until 1.45 pm.

Sitting suspended from 12:47 to 13:45.