Estimates Vote

Department of Treasury and Finance, $265,951,000

Administered Items for the Department of Treasury and Finance, $4,403,410,000

Minister:

Hon. S.C. Mullighan, Treasurer, Minister for Defence and Space Industries, Minister for Police.

Departmental Advisers:

Ms T. Pribanic, Under Treasurer, Department of Treasury and Finance.

Mr S. Burness, Executive Director, Budget and Performance, Department of Treasury and Finance.

Mr G. Raymond, Executive Director, Revenue and Economics, Department of Treasury and Finance.

Ms P. Chau, Chief Operating Officer, Department of Treasury and Finance.

Mr S. Bayliss, Chief Services Officer, Department of Treasury and Finance.

Mr M. Hardy, Chief Commercial Officer, Department of Treasury and Finance.

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

Mr B. Gay, Executive Director, Special Projects, Department of Treasury and Finance.

Mr W. Luker, Government Chief Information Officer, Department of Treasury and Finance.

The CHAIR: As the duly elected Chairman of Estimates Committee B, welcome to today's hearing for Estimates Committee B. I respectfully acknowledge Aboriginal and Torres Strait Islander peoples as the traditional owners of this country throughout Australia and their connection to land and community. We pay our respects to them and their cultures and to elders both past and present.

The estimates are a relatively informal procedure and, as such, there is no need to stand to ask or answer questions. I understand the minister and the lead speaker for the opposition have agreed an approximate time for the consideration of proposed payments, which will facilitate a change of departmental advisers. Can the minister and lead speaker for the opposition confirm that the timetable for today's proceedings, previously distributed, is accurate?

Mr TELFER: I can confirm the timetable.

The CHAIR: Changes to committee membership will be notified as they occur. Members should ensure the Chair is provided with a completed request to be discharged form. If the minister undertakes to supply information at a later date, it must be submitted to the Clerk Assistant via the Answer to Questions mailbox no later than Friday 5 September 2025.

I propose to allow both the minister and the lead speaker for the opposition to make opening statements of about 10 minutes each, if they so wish. There will be a flexible approach to giving the call for asking questions. A member who is not on the committee may ask a question at the discretion of the Chair.

All questions are to be directed to the minister, not the minister's advisers. The minister may refer questions to advisers for a response. 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 assembly Notice Paper.

I remind members that the rules of debate in the house apply in the committee. Consistent with the rules of the house, photography by members from the chamber floor is not permitted while the committee is sitting. Ministers and members may not table documents before the committee; however, documents can be supplied to the Chair for distribution.

The incorporation of material in Hansard is permitted on the same basis as applies in the house; that is, that it is purely statistical and limited to one page in length. The committee's examinations will be broadcast in the same manner as sittings of the house, through the IPTV system within Parliament House and online via the parliament's website. I declare the proposed payments open for examination. I call on the minister to make a statement, if the minister wishes, and to introduce his advisers.

The Hon. S.C. MULLIGHAN: I do not have a statement, but I will introduce Tammie Pribanic, the Under Treasurer; Sandy Burness, who is the Executive Director, Budget and Performance, in the Department of Treasury and Finance; and Greg Raymond, the Executive Director of Revenue and Economics. The only other thing I would say is if the shadow minister has any omnibus questions he should feel free to enter those into the record at any point between now and I think when we finish at 1.15pm.

The CHAIR: Do you have an opening statement?

Mr TELFER: None, apart from: I reflect on the comments that the Treasurer often makes—Treasury, with an oversight over most departments, is always fascinating to try to unpack. With that, I am happy to begin.

The CHAIR: Yes; I call on you to ask questions.

Mr TELFER: I will start with Budget Paper 4, Volume 4, Agency Statements, from page 171. Treasurer, this is the Administered Items for the Department of Treasury and Finance statement of comprehensive income. There is a line there that says 'Fees, fines and penalties'. Is there scope to provide a breakdown between what income is derived from fees, what is from fines, and what is from penalties?

The Hon. S.C. MULLIGHAN: There certainly is some scope to provide some further detail. My initial advice is that this largely refers to all sorts of fines and fees which come into government, principally those from court fees and fines, and road traffic related fines, but we have some detail provided further, in Budget Paper 3, Chapter 3, page 51, which provides some detail. If there are further or specific details the member wants, then we can undertake to provide those.

Mr TELFER: Obviously, the changes are reasonably steep, going from the 2023-24 actual through the 2024-25 budget, 2024-25 estimated and up to the 2025-26 budget of $288 million. Can you give an explanation as to what that steep increase is mainly built around?

The Hon. S.C. MULLIGHAN: There are a couple of elements to this. One is that the 2023-24 actual figure of $199.1 million, which is in the right-hand most column of that table, is significantly lower than what the 2023-24 budgeted figure initially was. It reflects that there was lower revenue collected because of the delay in rollout of a number of initiatives, including some of the road safety cameras which had been budgeted to be rolled out in the 2023-34 financial year in earlier budgets.

That was then forecast to be made up in the 2024-25 financial year in the budget, which is why there is such a significant jump for that budgeted figure in the second to the right column, to $264 million. But if you look at the estimated result of $242 million, you see that has come in at approximately $22.4 million lower than was initially budgeted for. Then 2025-26 reflects a further catch-up effect of the lower than forecast revenue in the previous financial years, as well as additional initiatives being rolled out, including cameras. I am happy to provide a further breakdown of that if that is helpful.

Mr TELFER: If we did not achieve the budgeted amount in 2023-24 or 2024-25, do you have much confidence it will do it in 2025-26?

The Hon. S.C. MULLIGHAN: I hope so. One of the conversations I have had with the police commissioner since taking on the police portfolio, as well as the road safety responsibilities with the Department for Infrastructure and Transport, is that there are two parts to the rollout of cameras, as I am advised. There is the procurement of the camera units themselves, which is done by SA Police, but there is the installation and provision of the services to allow them to be installed on the roads, which involves the Department for Infrastructure and Transport. My advice is that there have been delays in both of those elements, so I have made those inquiries as to why the delays have occurred. Sometimes it has been the time taken to identify the correct locations and then work out how the cameras are to be installed at those particular locations.

The first mobile phone detection cameras for example, I am advised, were rolled out where there were existing gantry structures already in place that DIT had put in for other road messaging, whether it is speed signs or something like that. In other locations where there has not already been existing infrastructure, that has quite often been a cause of delays. I am happy to see what further information I can provide you.

Mr TELFER: You are focusing on the fines and penalties aspects, especially the road transport part, so you are indicating, through that, that that is where the majority of the increase will be driven from?

The Hon. S.C. MULLIGHAN: That is my understanding, but I am happy to see whether there is any further significant contributor, because this line, I am advised, does not just reflect what is raised through traffic expiations—it also includes other fees, penalties and other parts of government, including court fees. I will see what further information I can provide.

I should also point out that over a successive number of budgets the rollout of those cameras and the assumptions about detection rates and revenues raised have informed expenditure decisions about how that money can be used to improve roads or other road safety initiatives as well, so I guess there is a further interesting element as to what extent the delay in rollouts, the delay in achieving a budgeted level of fines and penalties, interacts with the expenditure profile. I am happy to come back with further detail.

Mr TELFER: Continuing on page 172, the line 'Cash and cash equivalents'. At the end of the period they are estimated to be lower for 2024-25 than budgeted; what drove this decline?

The Hon. S.C. MULLIGHAN: I cannot give you a detailed breakdown immediately, but again I am happy to provide subsequent information, if that is of interest. But you will see here that we are talking about very significant sums across these financial years: figures of $11 billion or $12 billion. This reflects the actual cash movements coming into government and going out of government. It often reflects the timing of the receipt of revenues, whether it is state taxation revenues or other revenues, versus the cash outflows of when expenditures need to be made by government for specific purposes out of the administered items in Treasury.

So it is quite likely that there are many, many contributing factors, but overall it is the significant changes in terms of what we had assumed would be the case for those cash movements in the financial year versus what was actually required or actually realised in the changes of timings of those revenues and expenditures.

Mr TELFER: Would a predominant contributor to that be just the timing around GST payments coming in from the federal government? Is that what you are saying as far as cashflow goes?

The Hon. S.C. MULLIGHAN: It could be all of that. It could be GST; it could be the grants that come in from the commonwealth for other purposes, whether it is road grants or grants towards health, education, skills and so on; but it could also be the changes in the cash receipts that we have for our own revenues as well, versus the expenditures that we might need to make, either as a requirement of receiving those grants from the commonwealth or for initiatives that the government has agreed to undertake during the course of the year.

Mr TELFER: Just a bit further down there is a line—plant and equipment—that is estimated to be significantly short of the budgeted amount for 2024-25. Can you give me a bit of an explanation around the significant changes there, in the 2024-25 budget, down to the estimated result, which is only $390,000, up to nearly $32 million?

The Hon. S.C. MULLIGHAN: I will have to come back to you with an accurate answer, but it is likely that this represents particularly the $31,894 million. It is likely that this recognises the realisation of an asset in that financial year. It might be that that asset is either under construction and will be completed in that financial year or that asset is acquired during the course of the 2025-26 financial year, given that we are talking about—comparatively to what we have just been talking about—a much smaller number: an asset or a small number of assets with a cumulative value of nearly $32 million. I am just having a look in the previous statements to see if there is something that indicates what that might be. But I am very happy to take that on notice and come back to you.

Mr TELFER: Continuing on the next page, page 173, I refer to the line under Consolidated Account items around commonwealth specific grants. Can you please break down the specific activity that attracted that funding, halfway down page 173?

The Hon. S.C. MULLIGHAN: Specific purpose grants?

Mr TELFER: Yes.

The Hon. S.C. MULLIGHAN: As we get some further advice, on first blush we think it is likely to be related to some of the specific funding or tied funding we receive for things like skills or education or health programs. I am just checking to see what those particular receipts are for.

Mr TELFER: They are obviously reasonably static to slowly growing numbers. I am interested in what the breakdown of those specifics are.

The Hon. S.C. MULLIGHAN: I am advised that on page 45 of Budget Paper 3 there is a reconciliation of all of the grants which are made to the state from the commonwealth. Most of those, I am advised, go direct to agencies rather than come through the Consolidated Account, but the line that you have identified in the financial statements, which refer to the Consolidated Account, indicates that there is a number of those that do come through the Consolidated Account. I might just need to identify which ones they are. As you said, it is a relatively static amount of funding, so it is likely to indicate an ongoing program or a longstanding program. We will see what we can find out further for you.

Mr TELFER: I appreciate that.

The Hon. S.C. MULLIGHAN: So we are not taking up too much of your time, we will perhaps come back to you on that.

Mr TELFER: Continuing on page 174, SA Water Corp has an estimated dividend of $138 million for 2024-25, above the budgeted $73 million. Why was this dividend amount nearly double the budgeted value?

The Hon. S.C. MULLIGHAN: That line that you have identified on page 174 is also incorporated in a table that is on page 74 of Budget Paper 3, which talks about the payments from SA Water to the government and then the payments from the government to SA Water. The line that you identified in Budget Paper 4 reflects the dividend amount from SA Water and then below that, of course, you see the income tax equivalent. What is included in Budget Paper 3 is what is then paid from the government back to SA Water, in particular its community service obligation payment.

You will see that the overall contribution to government is almost net zero. In the last financial year we budgeted for a net contribution from government to SA Water of $5 million. The outcome is actually a positive benefit to the budget of $8 million and I think one of the things that both the Premier and Minister Champion, who is responsible for SA Water, have said is that the dry conditions in South Australia have meant that many households in particular have been using more water, presumably including trying to keep their gardens going over the last six to nine months and so on. So it may well be that higher water sales have changed that budget amount of minus $5 million to positive $8 million.

Mr TELFER: Continuing on from that, in the days after last estimates I think the announcement was made about the increase of the SA Water cost by 3.5 per cent above inflation—that policy decision. Do we know how much additional cash has come in that that 3.5 per cent above can be accounted for—the actual dollar figure?

The Hon. S.C. MULLIGHAN: I am not sure I have that figure in front of me, but I am confident we would be able to take it on notice and find it out for you. The 3.5 per cent commences in 2025-26, and then that is an amount of additional revenue to SA Water, which is a partial contribution towards the increase in spending on water infrastructure to connect up new allotments and so on. But you will see from Budget Paper 3 across the forward estimates it is a very static range of figures out across the water price determination period where basically any income tax equivalents or dividends from government are pretty much almost completely offset by the grant subsidies and community service obligation payments that the government makes back to SA Water.

Mr TELFER: On page 175, these are little dollar figures compared, but it just caught my eye that even the minister's salary, electorate and expense allowance was over budget. You were not even able to keep your own salary expense and electorate spending to budget. I was surprised.

The Hon. S.C. MULLIGHAN: To provide comfort to South Australians, none of us are in control of what we are paid or what we are remunerated. Instead, the legislation ties it to the remuneration provided to federal MPs, which then flows its way down to mere mortals like you and me and the others in here today. So I think that reflects that the commonwealth Remuneration Tribunal increased the salaries for federal parliament backbenchers, which then is one influence of the calculation of our salaries regardless of the offices that we hold as parliamentarians.

Mr TELFER: On page 175, a bit bigger fish than that budget line is the total payments funded by borrowings, budgeted for $5.5 billion at 2025-26. At what value does this start to pose a material risk to the state's credit rating? What advice do you have on that aspect?

The Hon. S.C. MULLIGHAN: That line reflects how much is being contributed to the Consolidated Account from the borrowings that SAFA is undertaking to finance the operations of government. That continues, or has continued, to increase over recent years and continues to increase across the forward estimates, principally because the government is borrowing more money to build the infrastructure in the capital program and that is headlined by the South Road tunnels project and the new Women's and Children's Hospital project.

So what we have made clear is that, in line with the projections of the previous government, borrowings will increase as we get to the point where the major construction efforts on both of those two projects start to reduce and our capital program or our annual spend on infrastructure gets back to a more modest level, more in line of what it was before we started constructing these two projects.

I think your question went to the credit rating. What we have tried to demonstrate to the ratings agencies is that we know what we are up for from the outset when we embark on these projects. We do the necessary work to make sure that we have reasonable cost estimates and assumptions before we embark on building the projects. You might have heard me say previously that on coming to government we reviewed both of those projects and their budgets and their timeframes and the allowances in the budgets for things like cost escalation from one financial year to the next and contingencies within the project budgets for unforeseen issues that might arise during construction. We have done all that, so we feel we have reasonable cost estimates.

The job then is to try to make sure that we demonstrate robust financial management in the meantime and a big part of that for us is making sure we are continuing to forecast and then deliver operating surpluses, as well as demonstrate to the ratings agencies that we have capacity within our budget settings to meet any unforeseen expenditure demands or challenges that come up.

One of the ways in which we have done that, for example, is where we have stepped into funding a massive additional financial commitment from the state budget for the Whyalla Steelworks, saying we are not just going to spend all of that additional money by having to get SAFA to raise more money and push the budget into deficit, we will use the opportunity to offset other expenditure that is not quite so urgent. That is why the Hydrogen Jobs Plan, for example, has been deferred, which had been budgeted at $593 million. You defer $593 million of expenditure and incur $650 million over five years for the government's contribution.

The idea of that is not just to lessen the impact on the state's finances but to demonstrate to the ratings agencies that we know that when big things come out of the blue we have to make extra room in the state's finances so we have the capacity to absorb it, rather than just continually add more and more spending.

Mr TELFER: What advice do you have around how much of a variation from that amount would start to put the credit rating at risk? You talk about the work that you have done, but obviously there are a lot of things that are fairly variable and there are contingencies you may not have foreseen. What is the threshold? How much of a variation does start to put that credit rating at risk?

The Hon. S.C. MULLIGHAN: I am not sure there is a specific objective answer or figure I can give you because it is not necessarily how they characterise their advice to us about this. They have a whole range of considerations when they are looking at state and territory budgets and allocating a credit rating and then a credit rating outlook. Part of it is on the figures, of course. That is obviously taken into consideration, but then the other part of it is that they are trying to assess a demonstration of, in their subjective view, how the state's finances are being managed.

That example I gave you before about Whyalla was a deliberate one from me. It was an important one, I hope, for you, but more particularly for them, saying that, when we are choosing to incur really substantial additional unbudgeted expenditure, we are trying to do the right thing by making room for it within the budget figures by choosing to defer other budgeted expenditures so we are not continuing to damage the overall budget metrics.

It is those types of efforts that try to demonstrate to the ratings agencies that we are trying to deliver what we have budgeted for, what we have previously announced in the 2024-25 budget, and if something else comes up, particularly something substantial like Whyalla, we make room for it in our existing expenditure plans, rather than just add it on top and blow out our figures.

If we did not make that room in the Whyalla case, if we kept on with the Hydrogen Jobs Plan that would have been a further $600-odd million impact to the state's finances, as the Hydrogen Jobs Plan, as it was budgeted, was rolled out. They would, presumably, have then looked at that and thought, 'Well, it looks like you're trying to have your cake and eat it too. You've got a pressing issue in Whyalla and then you have another effort in the Whyalla region which you are choosing to get on with rather than using that financial capacity to sort out the steelworks.'

Mr TELFER: You talk about that $600 million amount, but last year's budget departmental overspend was two and a half times that, $1.6 billion. When you talk about what you have said in the budget, whether it is health, child protection, environment over $100 million up, human services, how do the credit agencies take that into account? Obviously that is a much more significant impact than a change of direction on a Whyalla spend, for instance.

The Hon. S.C. MULLIGHAN: I do not think it is unreasonable for you to raise that. That is a slightly different consideration in that we know, during the course of year—

Mr TELFER: I get the capital versus operating, but this is this ongoing—

The Hon. S.C. MULLIGHAN: No, sure. We know, during the course of a year, how our government revenues are tracking, particularly with our own source revenue receipts and the periodic updates we get from the commonwealth on what the national pool receipts are in the GST, and hence what our share of those are going to be. What that has enabled us to do—not just in the recent financial year but in previous financial years—as the economy has been performing strongly, either in the state or nationally, as our revenues have been higher than forecast or the GST revenues have been higher than forecast, that has given us capacity to provide more funding for child protection, for health, for human services and so on.

Environment, I think, is slightly different because that is usually indicating a receipt of commonwealth grants for commonwealth-funded specific projects. For mere mortals like you and I, we probably would have raised an eyebrow seeing more than $100 million of initiatives in the environment portfolio, but that almost completely reflects that they were specific grants from the commonwealth to go and spend on environment issues that they are funding exclusively. We have just got to handle the money and get the work done for them.

But the point you make in the other agencies like health and child protection, we make those decisions on the basis that our revenues are strong enough in order for us to—

Mr TELFER: It is still a policy decision. You are saying we are seeing money coming in, so we realise we have the scope to be able to spend it, but also you are making the conscious decision to spend and overspend on a budget rather than maybe, when we are talking about this debt line, not delving into that as much. Spending the money as it comes in is all well and good, but if you are borrowing as well at the same time—this is where I am especially interested in the credit rating aspect. As a mere mortal, if I was looking at that I would be thinking, 'Oh okay, they are seeing money coming in and are happy to spend it, but are not taking into consideration the aspects of debt that may be an ongoing challenge.'

The Hon. S.C. MULLIGHAN: There are a couple of elements to that. One is that when we have had strong revenues, sure, the government could have made different decisions; chosen not to increase spending to those areas of high priority for the community, health, or meeting the additional costs of looking after kids in care in our child protection system, or the skyrocketing costs of looking after people with disabilities, that relatively small cohort that the government is still responsible for that did not transition over to the NDIS.

We could absolutely have banked those revenues and not spent them to improve our budget outcomes, but of course that comes with a cost and a risk. One is the cost, where there are people who are trying to get urgent medical treatment in our hospitals who would not be able to get that treatment, either at all or to the same extent. You can play that out across the child protection and the disability care sectors, to use the examples that you have raised.

Of course, it would have really substantially boosted our net operating balance surpluses and reduced our debt as well, but what would you then anticipate the calls—

Mr TELFER: I have asked about—not the actual outgoings themselves, it is what the credit agencies are looking at. This is big picture stuff. I am not looking at the questions we will be asking further on, but this is what they would be taking into consideration. They would not be saying, 'At least it's on child protection or health' or whatever. They will be looking at additional expenditure over the top of budgeted lines, as opposed to the considerations around it.

The Hon. S.C. MULLIGHAN: I think 'a consideration' not 'the consideration', but one of their considerations will be, if you are going to dial up your operating expenditure, do you have the revenues coming into the state budget to support that? Can you still record a net operating balance surplus, for example? I think that is why I have reinforced publicly that one of the disciplines for government is trying to make sure that we are recording these net operating balance surpluses because it demonstrates that if we are increasing operating expenditure, then enough revenues are coming into the state to be able to record that net operating balance surplus.

If we were not receiving those revenues and we were just dialling up expenditures, then I think that would underline the concern I think you are getting to in your questioning: that the state finances are not being as rigorously managed or attended to, and that we are seeing behaviour that we have seen in some of the other states in recent years where revenues have been soft and they have just continued to dial up huge increases in expenditure anyway.

There are no definite objective thresholds or tests to them. Often it is a sort of subjective balancing act trying to make sure that you are doing as much as you can within the confines of the revenues and the state finance outcomes that you want to deliver and trying to make sure that they—when I say 'they' I mean the ratings agencies—feel that we are doing enough to manage the state's finances reasonably well.

Mr TELFER: Overall, you are confident that the measures that you are putting in place and putting in this budget will give them that assurance of our credit rating—you have that confidence?

The Hon. S.C. MULLIGHAN: I cannot be confident or fearful about these things because it is completely out of my control but—

Mr TELFER: You set the numbers; it is not completely out of your control.

The Hon. S.C. MULLIGHAN: No, but they are looking at what we are doing directly. They are also looking at the context in which we are operating as well. Let's say all of this stuff that is going on in the Middle East really flares up and we are suddenly in the middle of a global recession and our revenues start collapsing, they are going to ask questions about whether our levels of expenditure are sustainable given that revenues might not be as strong as we have budgeted for in this budget.

There are all those sorts of considerations too. All I can try to do is, within the demands of the spending that are put upon me by the government agencies and by ministers, balance those against how we can try to support them within the confines of the state finances, but also try to demonstrate that when we are doing things that are big and not initially anticipated—like Whyalla where we are trying to make room for them elsewhere—and demonstrate some sort of discipline or robust financial management that sometimes you have not seen in other states around the nation in recent years.

Mr TELFER: I am sure we could talk about credit ratings all day. At page 177 there is a line that says contingency provisions, supplies and services, and there is $943 million in that line. It is obviously one that varies quite a lot. Can you detail the major expenses for 2024-25 which comprise the contingency amount?

The Hon. S.C. MULLIGHAN: We do not usually specify particularly what those allocations are for. You will see in the three contingency provision lines that we provide notional breakdowns between employee entitlements and investing contingencies. If there are any changes to our capital spending or infrastructure investment we usually try to account for it in that line, as well as supplies and services.

I have made it clear to the committee previously that there tends to be some blurring of the edges between the three of them, particularly when we are in an environment where in a 12-month period we have 73 per cent of the public sector up for enterprise bargaining negotiations, because we do not want them looking at a particular line saying, 'That's how much we know the government's got squirrelled away to meet our wage concerns, so that's what we are going to bargain up to.'

Mr TELFER: The supplies and services line in particular is up by nearly 10 times what the 2023-24 actual is. Is this project related? You spoke about your capital projects. It is a massive increase from the near $90 million up to over $900 million in only a couple of years' time.

The Hon. S.C. MULLIGHAN: One that I could identify in there which is probably the largest single item, and I am happy to put this on the record because I have talked about it publicly previously, is that we have made it clear on releasing the budget that, even though we have not identified it as a specific line or item in the budget papers, the budget figures do provide for a further six months of administration funding costs for Whyalla, should we need it. So when we are anticipating spending in the first six months on the Whyalla administration something in the order of $380-odd million on that endeavour, then that further six months, plus the original expenditure that is Whyalla related, I am advised, is also included in that supplies and services. That is sort of comfortably $400 million of it.

You will see at the 2024-25 budget, the second to right column in that table there, we initially budgeted for $350 million, nearly $400 million at $368 million, and it turned out to be less. We find it prudent to have money held back in contingencies at the very commencement of a financial year for things that might come along. Beyond that, we do not disclose line by line what is in it, because that might encourage either agencies or external parties with which we are contractually engaged in what those amounts are and then sort of incentivise them to try to ask for them, rather than meet their costs.

Mr TELFER: On the Whyalla aspect, you talked about the $380 million, so that is the second lot of costs of administration.

The Hon. S.C. MULLIGHAN: Yes, plus what we had already budgeted for prior to that in that initial $650 million package for that financial year.

Mr TELFER: So of the $380 million additional, it is fifty-fifty, federal and state. There is basically—

The Hon. S.C. MULLIGHAN: But this is all of the $380 million, because that part of the table is the cash outflow for what the government will be paying. So we may receive a cash inflow from the commonwealth on a fifty-fifty basis, but that more than $380 million will be identified in that line as a cash outflow. It may not be realised, of course, because we might not need that extra six months, but it is accounted for in that line.

Mr TELFER: It is looking likely.

The Hon. S.C. MULLIGHAN: We may need some extra time. It is just a question of whether we need all of that extra time of administration.

Mr TELFER: So the $380 million could potentially come out of that $943 million, so we are down to $550 million—

The Hon. S.C. MULLIGHAN: Yes.

Mr TELFER: —of contingency. Still, $550 million is a reasonable way above $350 million in round numbers. I know major capital projects have always got contingencies built into them, if we are looking at the Torrens to Darlington or major capital investment projects. This really is around supplies and services for those non-capital or minor projects as well as—

The Hon. S.C. MULLIGHAN: If you just turn the page to page 178, down the bottom of that table, about five lines up from the bottom, you will see a line that says 'Administration Costs' of $300.5 million. That indicates that of the first six months, which we budget at about $384 million, financial year by financial year, only $300 million gets paid in the 2024-25 year, and $80 million of that is likely to be paid in the 2025-26 financial year.

So that $943 million would include that balance of the first $384 million or the $83.5 million plus the additional $384 million, so that further diminishes, I guess, the balance that you are trying to identify and what that goes towards and gets it that further $80 million closer to what we had originally budgeted at 2024-25.

It is likely to include provisions of funding for government-approved initiatives across a range of portfolios. For example, if we are buying plant and equipment or we are buying land to provide a new piece of infrastructure, whether it is, I do not know, education related or police related or some other government agency related, it is likely to be held up in there and deliberately not disclosed because we do not want to identify a particular line for land acquisition costs and inform the vendor what we have capacity for.

We would say that the vast chunk of it, or at least the largest proportion of it, is Whyalla related, and then once you reduce all of those costs out—the $384 million plus $83½ million are getting us to $460-odd million, which is getting us back down towards a not too dissimilar figure to that 2024-25 budget figure.

Mr TELFER: Is this also where you can squirrel away pre-election cash that you can spend on the lead-up? Is this what the contingency is there for?

The Hon. S.C. MULLIGHAN: I have never been aware of that sort of practice. That is news to me.

Mr TELFER: I will take that as a 'potentially'. For clarification on the Whyalla numbers, the first swathe of administration is $380 million, half of which is from each level of government. The next swathe is another $380 million, half of which is anticipated to come from each level of government, and the $80 million you are saying is what has been allocated for the first aspect of it or is this—

The Hon. S.C. MULLIGHAN: Sorry, this part of the table is talking about just the cash outflow from the state government to outside of government. It includes both what we have provided but what the commonwealth has provided to us, and then we are spending both paths out. What I was trying to show you before over the page with that $300.5 million on page 178 is that there is that timing difference from one financial year to the next. The first six months of administration do not neatly fall within the 2024-25 financial year. Nearly $84 million of it will actually be spent in 2025-26, so that will be part of that $943 million figure that you have highlighted.

Mr TELFER: And that is from the first tranche of $380 million?

The Hon. S.C. MULLIGHAN: Yes, that is right.

Mr TELFER: So that there is nothing in here for the second potential $380 million?

The Hon. S.C. MULLIGHAN: No, all of the second $384 million—

Mr TELFER: Is within the contingency.

The Hon. S.C. MULLIGHAN: —is within that $943 million as well, so together we are talking more than $460 million of that $943 million. Regarding the question you raised about sort of squirrelling money away for rainy days or other days in March, I guess my counterpoint to that is: once you remove all of that Whyalla funding and once you remove things that are held in there for discharging or providing money for approved initiatives of government, you are kind of getting back down towards the same sort of figure that we had budgeted in 2024-25, which of course is not an election year. I will reinforce that those three contingency provision lines give us the capacity, I hope, to be able to respond to the calls for additional expenditure when we are settling things like wage claims or—

Mr TELFER: I will cover wage claims stuff later on. Obviously, $1.3 billion of contingencies across that line gives you that scope, but a significant swathe of that, as you point out, is the Whyalla stuff. Obviously, this is something that gets public attention, gets opposition attention, but would be on your mind as well: the interest on borrowings increase. It is coming in at just over $1.3 billion there on page 177, which equates to $3.66 million a day. We could fund a lot of teachers, doctors or nurses with $3.66 million a day. Once again, is there a threshold of concern for you as the Treasurer that we may reach for the interest on borrowings, the projections for the debt to revenue, which I will touch on in another 10 or 15 minutes? That will also be an issue to consider, I guess.

The Hon. S.C. MULLIGHAN: I will not try to provide a reconciliation of why there is a difference between the interest going out of Consolidated Account versus our overall budgeted interest costs from the general government sector, which are identified in the operating statement in Budget Paper 3. I think the point of your question is that, when interest costs are going up, that provides less capacity to fund other operating expenses. You are right: it is a significant demand on the budget and, in particular, on the operating account.

How do we become comfortable with it? Again, making sure that you are demonstrating a net operating balance surplus is part of it, to show that, even though you have these much higher interest costs, you have the budget recording a net operating balance surplus. I have been the first to admit, in my first estimates in this session of parliament, that when we were pointing to the previous government and they were forecasting increasing debt across the forward estimates as they anticipated spending money on infrastructure similar to us, whether this was reasonable because, again, the budget was in deficit at that point in time and interest rates were a lot lower than they are now.

The challenge for us has been understanding whether we have the costs right for the projects, being able to forecast them, understanding what that does to our debt position across the forward estimates, and having a more up-to-date forecast of those interest costs. I think the figure that my predecessor gave me when I was sitting in your seat was that the average borrowing costs were something in the order of 1.7 per cent and we are now more than double that. So our interest costs have not just increased at the same rate that borrowings have gone up, commensurate to that, but they have increased far in advance of that because of higher interest rates being charged, or higher bond yields.

We try to make sure that we only incur the debt that we need to and to make sure that we can accommodate those interest costs in the operating statement by recording a surplus. But, it is a big cost. We are talking in the order of a couple of billion dollars a year by the end of the forward estimates. Even though the budget is forecasting a surplus, as you say, if you did not have those interest costs then potentially you would have more money to spend out of the operating account on those regular day-to-day operating expenses of government, or you would have the capacity to not incur so much debt or to pay down debt more quickly. So those are the choices we make.

The only point I would make is that part of the benefit of some of those higher than originally forecasted revenues that we have experienced over the last three years has meant that, as of 30 June this year, debt levels will be more than $2 billion lower in the same financial year than what the previous government forecast. So we have managed to improve the debt position at this point in time compared to where the state had previously been budgeted to go. I do recognise that, when we are increasing debt substantially beyond that to build projects and we are incurring those interest costs, it does to an extent restrict the choices of government going forward.

Mr TELFER: Continuing on page 177, there is the line about the Business Growth Fund. Can you give me an explanation as to what is aimed to be achieved? There is obviously a $25 million increase in that line. What initiatives is this Business Growth Fund going to be targeted towards? We have differing perspectives when it comes to business sentiment and outlook in South Australia. I have real concerns, as a business person myself, about some of the headwinds and the challenges being faced by business. You as my counterpart would talk about how great it is for business at the moment. If things are great for business, is the massive increase in the Business Growth Fund something that is necessary? What sorts of initiatives are being funded through this fund?

The Hon. S.C. MULLIGHAN: This is the former Economic Recovery Fund. The Economic Recovery Fund was established by the government in 2022 in our first budget. The idea was that we thought that, coming out of COVID, there were still quite a few industries and sectors of the economy that were trying to get back on their feet after the impacts of COVID and COVID restrictions and the changes in economic and trading conditions during those COVID years.

We have delivered a number of different programs that were funded by the Economic Recovery Fund in our first budgets. That has included energy efficiency grants; it has included some—I forget now what the program is called, but I think in our first budget we had the first round of the ERF, which was aimed at helping businesses expand and accelerate their growth. Part of those costs will be accommodated within both the 2024-25 estimated result and the 2025-26 budget as those businesses hit milestones that trigger those grant payments to them.

But the bulk of the 2025-26 budget is for what we have announced in this budget, which is the $20 million for the Powering Business Grants. You guys quote Business SA or the SA Chamber—

Mr Telfer interjecting:

The Hon. S.C. MULLIGHAN: Well, the NAB one is actually quite positive for South Australia, but I do recognise that there are different perspectives on this. I am the last person to say that everything is rosy for all businesses in South Australia, because there are businesses doing it really tough. We have just had more than two years of the highest rates of inflation that people of our age would be able to remember.

Mr TELFER: Your age or my age?

The Hon. S.C. MULLIGHAN: Well, I do not know how old you are.

Mr Telfer interjecting:

The Hon. S.C. MULLIGHAN: Yes, that is right.

Mr PEDERICK: My age.

The Hon. S.C. MULLIGHAN: Not the member for Hammond's age; let's put it like that. That inflation comes with a lasting consequence because, even though inflation is back within the target band, all that means is that prices are continuing to go up but at a much lower rate than they were going up in the previous two years, for example. I do appreciate that there are significant challenges that a lot of businesses see, but, having said that, we still see the number of new businesses starting in South Australia eclipsing the number of businesses that are closing, according to the ABS data.

While we have the Australian Tax Office aggressively catching up on business payments that are outstanding to them, and while the temporary provisions that were put in place by the former federal Treasurer Josh Frydenberg to allow businesses to avoid becoming insolvent or going into administration have ended, it is challenging. The purpose of those grants is to partner with them so that they can invest and make their businesses more energy efficient, not just so their power bills come down for a limited period of time but so that they come down on a long-term basis.

Mr TELFER: I am still on page 177. We have touched on the contingency stuff a little bit. This could be a short answer. There is a significant increase in the employee entitlements. You talked about the potential of some of this contingency being around some of the negotiations. Is this existing employee entitlements? Is there a glut that you are expecting to pay out, or is this a contingency that you are setting aside for potential future liabilities?

The Hon. S.C. MULLIGHAN: One of the other roles of these contingency provisions is that Treasury funds and forecasts funding across the forward estimates employee expenses for particular agencies based on what is in their relevant enterprise agreements. That is reflected in each of the agency budgets that you will see across the portfolio statements and also in the summary figures in Budget Paper 3. What we hold in these contingencies is an allocation that we might need to top up those agency budgets once enterprise bargaining negotiations are resolved.

Mr TELFER: So it is a contingency over and above what has already been sort of baked in to give that additional flexibility of negotiations?

The Hon. S.C. MULLIGHAN: That is right. For example, my predecessor reached an agreement with the Public Service Association for wage increases of 1.5 per cent—I think it was over a four-year period—in December 2021. Obviously, the PSA thought that was a good deal for their members and so they reached that agreement voluntarily with the former Treasurer and signed up to that. That was their choice: even though inflation was running much higher at the time, they chose to voluntarily sign up to that deal. I do recognise that it is unlikely that we are going to reach an enterprise outcome of 1.5 per cent.

Mr TELFER: Not as good at negotiating?

The Hon. S.C. MULLIGHAN: The PSA or me?

Mr TELFER: No, you.

The Hon. S.C. MULLIGHAN: As I said, even though inflation was running much higher than 1.5 per cent, the PSA thought, 'This is a deal that we can recommend to our members,' and they signed up to that enterprise agreement accordingly with Rob Lucas. But of course what we have seen is that the inflation rate, which was already running higher than 1.5 per cent, continued to increase far beyond that during the course of their enterprise agreement and so now they have been coming to government saying, 'You need to backpay us, because we signed up to a deal that in retrospect we shouldn't have.'

I respect their ambition in making the argument, of course, but what we are focused on is a fair and reasonable wage outcome for the future period, with reference to the work that they do and also taking into account where inflation is at right now. I do not think taxpayers should always be on the hook to compensate people for decisions that other people have voluntarily entered into in the past. We will negotiate a fair and reasonable outcome, and we have some limited capacity in these contingency provisions to be able to reach that agreement.

Mr TELFER: I might, keeping an eye on the clock, jump to Budget Paper 3, Budget Statement, Chapter 4. We will start in and around pages 62 to 63, around debt management. We have touched on the net debt to revenue of the non-financial public sector a little bit already. It is at 99.999 per cent currently and pushes out to 136.7 per cent in financial year 2028-29. What are the primary factors for the movement?

The Hon. S.C. MULLIGHAN: This is for the non-financial public sector, which includes the general government sector but it also includes the government trading enterprises, in particular SA Water and Renewal SA. Just to demonstrate, if you look at that figure of 2025, which is the end of the current financial year, 30 June this year, that $31.3 billion includes the $22 billion of the general government sector debt as well as roughly $9 billion of debt held by the trading enterprises, like SA Water and Renewal SA.

So the increase across the forward estimates is largely driven by the increase in general government sector debt as money is being spent on those two very large infrastructure projects as well as all of the other infrastructure commitments across all of the other agencies, which continue on across the forwards, which are set out elsewhere in the budget papers.

But I made a comment a little earlier about what the 2025 figures show. That financial year, or this financial year, was actually the last year of the forward estimates of the previous government's last budget. What they were predicting for 2024-25 is that net debt figure would be $33.6 billion, and we are estimating the outcome to be $31.3 billion. So it is $2.2 billion or $2.3 billion lower, and that net debt to revenue figure of 99.9 per cent was forecast to be 129.6 per cent in that same financial year. So when you are assessing a debt figure which is a bit lower, but your net debt to revenue figure is massively lower, it demonstrates that the capacity of the budget, the size of the budget, is much larger now that—

Mr TELFER: But you are getting more money in your pocket from stamp duty and land tax and all that sort of stuff.

The Hon. S.C. MULLIGHAN: And improved economic activity.

Mr TELFER: GST.

The Hon. S.C. MULLIGHAN: It provides the capacity not just to increase expenditures to those areas which you highlighted before but also to invest in infrastructure and do it in a way so that those key budget metrics can be kept much improved from where they have previously been forecast. You will see that where they had said that debt of $33.6 billion would see a net debt to revenue ratio at 129.6 per cent, it is not until you get out to 2028 where that net debt to revenue ratio is at 125.9 per cent, still lower, but the forecast debt figure is $44.2 billion and it is only once we get to the very end of the forward estimates of 136.7 per cent where we go past that forecast net debt to revenue ratio.

So the capacity of the budget to take on debt has substantially improved, which means some of these debt metrics have been improved as well and that provides, I guess, a greater degree of comfort that the state finances can take on these demands and perhaps why you see that, given how some of those metrics have improved so much, and that debt in this financial year is lower than what was previously forecast, that has also allowed previously the ratings agencies to take us off negative watch and return us to a stable outlook.

Mr TELFER: In regard to the public non-financial corporations net debt, there are some specifications around what borrowings are required—those that are named by SA Water in particular. Are there any others besides those—SA Water projects or others—that are required that you can specify?

The Hon. S.C. MULLIGHAN: The two that spring to mind are Renewal SA and the South Australian Housing Trust. A lot of the projects which have been announced during the course of the government across both Renewal SA and Housing Trust sites and assets would also be contributing to that. But as I said, there was roughly that $9 billion difference in the current financial year between the general government sector debt and the non-financial public sector debt.

By the time you get to the end of the forward estimates, those two figures are the 48.5 and 37. So you will see that that disparity grows to about 11½ or an extra 2½ billion. Part of that reflects the higher spend by SA Water on pipes and so on and other assets and part of it also reflects those additional expenditures in the other agencies, principally Renewal SA and the Housing Trust.

Mr TELFER: Has there been any work done to project the public non-financial corporations' net debt past the forward estimates? You talk about that gap. Do you expect that to continue to grow out or reach a point where it is somewhat parallel when you are looking at that sort of infrastructure?

The Hon. S.C. MULLIGHAN: Not really because the end of the forward estimates goes beyond the four-year pricing determination period for SA Water. Even in that 2029 year, I think I am right in saying, that is not even in the new four-year pricing determination period, so we do not really know what is happening in 2029 as far as SA Water goes because of all that.

Mr TELFER: We do know, though, that there are going to be—and that the government has already announced—land releases that are going to require infrastructure investment. This is why I think if the work has not been done, the scope of work could be done, or maybe SA Water are doing that work separately, because there is still an awareness of the amount of investment that may potentially be necessary, despite it being outside that price determination band because this is the work that they will be doing in preparation for their application to ESCOSA for consideration for the next.

The Hon. S.C. MULLIGHAN: I guess there are a couple of different elements to it. I will use your example of SA Water before I come back to Renewal and Housing. SA Water will start forming a view over the next presumably 18 months or two years about what 2029 onwards looks like and they will weigh all that up, including the consideration that you have made about new connections and so on. But then there has to be the discussion with the industry about who is paying for it as well. We have already engaged with industry as part of the Housing Roadmap and introduced for the first time a minimum contribution per allotment for development.

But at the same time we are also aware that SA Water is reaching agreement with developers of estates that the developers will take on responsibility beyond just that allotment cost for providing and managing water infrastructure as well. So, for all of those reasons, we cannot provide any sort of forecast about what that means for the SA Water capital program, their debt levels, let alone what it means for any other SA Water settings.

In terms of Renewal SA, I think they are doing an increasingly better job of trying to get into the effort of developing sites and then getting them off the balance sheet (i.e. selling them) and then providing themselves some financial capacity to invest in the next one. That may well continue, but we are casting well into the future here. Some of the things that we have done before the Housing Trust, some of the things that we have done in Renewal, for example, is sell a lot of Renewal SA land to the Department of Defence federally on the Lefevre Peninsula so they can expand the shipyard, which has reduced their land holdings and borrowings commensurately.

Mr TELFER: Obviously, I have working knowledge and experience with local government where they have to do a 10-year, long-term financial plan, assess their asset base and work out the depreciation and the replacement schedules and that sort of thing. Is that sort of work being done and does that help inform not just with SA Water? Housing is a classic example of it. There should be an understanding of the ageing of that infrastructure and what is going to be required as far as replacement goes.

I get it comes down to a policy decision in the end for whatever government is in power, just like it would at a local government level. Do you replace that asset? Do you upgrade that asset?

I guess this is the sort of work that I expect to be used to punch into try to ascertain these net debt to revenue ratios and the like when it comes to the public nonfinancial corporations net debt line.

The Hon. S.C. MULLIGHAN: I think you are absolutely right to be identifying those as being important considerations. Each of those agencies produce their own financial statements, which are usually interrogated and reported on by the Auditor-General when he releases his report. That usually comes towards the end of September about what is their capital program, what are their debt levels, what is their depreciation, and so on.

We do it in this budget, of course, for the general government sector as a whole, and you will see that on page 30 of Budget Paper 3, where you see the chart of how much our capital spending is versus our infrastructure spending. That is taken, obviously, globally across the general government sector agencies, including health and transport and education, and all of the others.

If you really cast your mind back historically over the last 20 or so years, you will see that back in 2002 infrastructure spending was barely keeping pace with depreciation; indeed, at 2014 it sort of dropped down again to be line ball. But, of course, you see over the last 10 years that capital spending is well above and beyond depreciation levels. However, those particular government businesses—SA Water, Renewal SA and the Housing Trust—record all of that in their financial statements.

Mr TELFER: Just regarding the sort of debt management, we spoke a little bit about the credit rating impacts of what is happening globally at the moment. Are there any strategies being considered or implemented to mitigate the impact of the global tariffs from the US? Is this the sort of work that is being done?

The Hon. S.C. MULLIGHAN: I am not sure that I would say it is tariff specific, but certainly there is work being done trying to understand and take into consideration the broader global environment. We are increasing our borrowings, as we have discussed during the course of this morning, for building infrastructure and so on. Other states and territories are doing the same thing, and some are doing it vastly more aggressively than what we are, particularly the bigger states like Victoria and NSW.

A couple of different things are happening. One is that SAFA, which raises our debt on behalf of the government, is thinking about how global markets might influence how we go to market and also which markets we go to as well. Then, as treasurers and treasuries collectively across the country, we are also trying to coordinate with one another about how we go to market, because I am told that we are all regarded as being sort of one and the same to offshore markets.

They think that South Australia is a semi-government authority or a subnational jurisdiction in Australia, so they would consider us through the same sort of lens as they would look at other states like New South Wales when they are working out whether they want to buy our bonds. So we have agreed to start working a bit more closely together, as state and territory governments, on what our bond issuances are going to be and where they are going to be.

We have states that are considering all sorts of bond issuances to overseas capital markets, which they have not done before, and we are considering doing the same thing. I would probably argue that we are being a little bit more conservative than some of the other states; we are going to those markets where we have established relationships or prior jurisdictional relationships.

Big purchases of state government bonds have traditionally been like the big four banks, for example; to make their APRA requirements they only need so many bonds, and because we need to raise so much debt going forward we have sort of exhausted their appetite for state government bonds, or we are getting close to exhausting their appetite I am advised.

Mr TELFER: Is the work being done—and this is obviously in the public interest—as far as the bonds to raise the debt that we are increasing, have we got a breakdown on where that debt lies internationally?

Are we relying on some overseas jurisdictions? There are plenty who are more affluent and may want to be investing, but does that add risk? What proportion of our debt, for instance, is funded from China, from South-East Asian countries, from European countries?

The Hon. S.C. MULLIGHAN: I am sure I can give you that answer. We have a session for SAFA a bit later if you want to hold it until then when I have Anthony and his team.

Mr TELFER: I will save it for the SAFA guys. As I said, it is obviously something that has a heightened awareness and public interest in at the moment.

The Hon. S.C. MULLIGHAN: Yes.

Mr TELFER: I think it is something that the people of South Australia deserve to have a bit of clarity around.

The Hon. S.C. MULLIGHAN: Yes, I think that is fair enough.

Mr TELFER: Do you have a threshold? Do you have a line with that net debt to revenue ratio where it is going to be getting up to 135.9? Is there a level where that ratio is considered to be unsustainable that the government is working towards?

The Hon. S.C. MULLIGHAN: I am not sure it would bear itself out in that ratio in particular. Probably the first test of unsustainability, or not being able to be sustained, is if the budget could not afford to service it to meet the cost of having that debt on its balance sheet, and the government trading enterprises, of course—housing, Renewal and SA Water—raise sufficient revenues so that they can meet the costs of their operations and also their debt. Really then, it becomes a function of the general government sector and how sustainable the debt is in that context.

One of the things that we would look at is interest costs and how big those interest costs are as a proportion of the overall operating account: for example, meaning that we can no longer record surpluses in a net operating balance. You made a point before about whether having to take on this debt to build these projects, and the interest costs that come with that, we are having to make decisions or whether we are constrained from making decisions to be able to do things that the community would otherwise expect us to do—like invest in, I think you said, nurses and teachers and all those sorts of things.

We have not been at that point, and we do not forecast that we are going to be at either of those points going forward. If there is an objective measure that a ratings agency might have—that they would not disclose to me, that if you go above that particular figure on that particular metric then that is a trigger point for me—but the way we look at it is: what does the debt look like; how does it fit within the various ways that people kind of measure that debt, including the interest costs and whether it pushes the operating account by itself into deficit; and is it becoming so great as to constrain the government from being able to fund the expectations of the community?

Mr TELFER: There are a few questions on that which may well be better suited when SAFA come in, so I will hold off on that. I think at page 63 it says:

The debt management framework is reviewed regularly, and such reviews consider any significant changes in the state's debt levels and changing market conditions.

When was the last time the debt framework was reviewed? Is it a formal process?

The Hon. S.C. MULLIGHAN: There is a SAFA advisory board, and I am advised that they regularly monitor it, but there was a specific review of it done in the current financial year.

Mr TELFER: The other aspect of debt is obviously around revenue. From page 79 there is a bit of commentary around the risks around revenue in particular. Some of the commentary around it obviously talks about fluctuations in state economic activity. Are there any specific or foreseeable potential shocks that have been identified which could pose a risk to the budget across the forward estimates, specifically looking at this revenue aspect in particular, I guess, and obviously as a result of the state credit rating?

The Hon. S.C. MULLIGHAN: If you think about what our major revenues into the budget are, obviously GST is clearly the largest one. If there is a significant change in national economic activity or forecasts of GST revenue from the commonwealth, then that could have a pretty significant impact. I think we got $9-odd billion in the current year from GST. Even a 1 per cent variation there is getting close to $100 million, so it is pretty material.

Beyond the GST, we are looking at our major sources of revenue that we raise for ourselves and, in particular, things like payroll tax and conveyance duty—or stamp duty, as most people know it—which is spoken about over the page. If there is a significant change in forecast economic conditions and there is a drop in payroll of businesses, like there is a big economic shock and unemployment goes up and so on or whatever that would impact payroll tax revenues, if there is a significant correction or fluctuation in the South Australian property market, then that would obviously impact conveyance duties. But what we have tried to do on conveyance duties, for example, each budget is we have continually been in receipt of higher revenues against—

Mr TELFER: It is underestimated.

The Hon. S.C. MULLIGHAN: —yes, what we have previously forecast. I would argue—and it is Greg and his team who does it—they have still been pretty reflective of the strength of the property market in trying to work out what our future revenue estimates have been.

Mr TELFER: It has just gone over and above every time.

The Hon. S.C. MULLIGHAN: It has just gone over and above. How many years have we had double-digit growth in average prices now? I think it is two or three years in a row. If it has not been double-digit, it has been close to it, whereas we would say that even a 5 per cent increase in property prices in one year is pretty bold growth. What we have tried to do, as we have seen those higher levels of average price or volume, like number of house sales happen, is predict when it is going to come back down towards what we would consider to be a more normal, ongoing trend of house prices, and each year we have had to recalibrate that return.

In fact, on page 81 you will see how there have been those fluctuations over many years, but, in particular, even in the last five or six years, leading into COVID, during COVID and after COVID, how the annual growth in conveyance duty has just bounced around so incredibly.

Mr TELFER: The aspect in that revenue risks line at the top of page 80 states 'renewed inflationary pressures could result in central banks raising policy rates, intensifying monetary policy divergence across countries'. Obviously, there is always commentary around interest rates, and the federal government's statements publicly have been around obviously pushing for further interest rate cuts. This commentary talks about increases. Do you believe there is going to be an interest rate increase due shortly?

The Hon. S.C. MULLIGHAN: No, I think it just highlights the risk that, if we return to where Australia has been in the last two or three years where we had some quarterly results recording through the year inflationary growth, then that might mean that the RBA has to consider moving interest rates accordingly to get inflation back under control. But that is not where we are at the moment. It is just recorded as a risk in the same way that we record a risk of being in a global downturn in economic activity or a national downturn in economic activity or a big fluctuation in our local housing market or if there was something significant that happened to the labour market it would drive down payroll tax revenue.

The purpose of this statement is to say: while we have forecast where we think revenues and expenditures are going across the next four years, these are all of the risks that we consider when setting those forecasts and what might change those outcomes really significantly against those forecasts.

Mr TELFER: What about the ongoing drought conditions that are being faced at the moment? What impact on the South Australian economy has been identified due to that, and has any modelling been done on how the drought may impact food prices, for instance, for the next 12 to 18 months, which could have that local inflationary impact?

The Hon. S.C. MULLIGHAN: I am not sure I will be able to put my hand on it quickly, but I think we have something that says that in 2024-25 there was a 40 per cent reduction in broadacre crop production, which equates to about three-quarters of a percentage point of GSP in the current financial year. What we try to take into account then is what the national forecasts are. ABARES—I will not even attempt to spell out what that acronym stands for, but I assume the first two are Australian Bureau—

Mr TELFER: Agriculture and Research Economic—

The Hon. S.C. MULLIGHAN: If you do not know it, none of us are going to know it.

Mr TELFER: I should know it. You should know it, too, sir.

The Hon. S.C. MULLIGHAN: We should all know it. We nearly got there between us. I am told that they forecast for the next financial year a 40 per cent increase in crop production—so obviously a 40 per cent decrease and then 40 per cent increase trending back to where it was previously. But that relies on a return to more normal rainfall conditions. So a risk, of course, would be that if, as you have highlighted in the context of your question, the dry conditions persist into 2025-26 then we will not see that 40 per cent rebound in crop production and then we would see a similar dampening effect on overall gross state product.

Mr TELFER: I certainly think that that is probably an area which has an affect not just on the GSP, but obviously the potential flow-on inflationary costs for food and people's bottom line at the moment—something which should definitely not be underestimated. There is also an aspect that talks about the revenue risks and talks about sectoral capacity constraints, in particular, material supply and labour constraints on construction limiting government's ability to deliver economic infrastructure projects. Are there any specific risks to construction productivity in South Australia?

The Hon. S.C. MULLIGHAN: Yes, we have the two largest projects that have ever been undertaken in our state ramping up over the same period—that is the hospital and the tunnels. Some of the key skills of the labour forces which are required for both of those projects are similar. So if we are boring a massive tunnel underneath the South Road corridor and then lining it with concrete, you can imagine that there is going to be a pretty high demand for formworkers, etc., for that project at the same time that we will be trying to build floors of the new Women's and Children's Hospital and requiring the necessary formworkers there.

On top of that, we have government projects outside of our direct control, for example, tripling the size of the submarine construction yard at Osborne, which will place very significant demands on civil construction services, and so on. Why everyone in the Australian economy is banging on so much about labour at the moment is making sure that there are adequate supplies of skilled labour for all these projects around the country, but we have a microcosm of that challenge in South Australia.

I will not pretend to be able to speak authoritatively on where we are at with the actual materials that go into this, but increasingly what is being anecdotally reported now is that some of the materials availability challenges we had coming out of COVID and out of HomeBuilder are smoothing out regularly, so hopefully that remains the case.

Mr TELFER: Just on the labour shortage aspect in particular, not just here but later on page 91, the commentary around labour shortages across different construction trade skills: does the government have any plans to negotiate changes to the state's Designated Area Migration Agreement (DAMA) with the commonwealth, or provision for training of migrants to allow for that skill shortage to be addressed in the short term? I have taken a fair interest in looking at the dynamics in that space around how it has been geared towards advantaging the Eastern States as opposed to us in particular. Is there a mood within the government to negotiate some of those arrangements around the DAMAs in particular?

The Hon. S.C. MULLIGHAN: I cannot speak as authoritatively as perhaps you would like on the specific issue of the DAMAs, although I know it is an ingredient, potentially part of the solution here. I know that the Premier and Deputy Premier—the Deputy Premier having this newly created portfolio of workforce—are both leading negotiations with the commonwealth to try to make sure we get some improvements to migration policies, both to make sure that South Australia gets a greater number or a greater share of skilled migrants coming into the country and actually coming to South Australia, rather than all being directed to the western suburbs of Sydney and Melbourne, and, secondly, trying to reach bespoke agreements where we think it will be particularly important for the state.

As the previous term of the federal government was restricting the number of university places and international student places across the country, we were able to negotiate an additional 1,000 places for nuclear-related skills for our universities so that we could generate a proportion of demand in those areas. Those sorts of things will continue on, but it might be something that you or your colleagues might want to pursue with the Deputy Premier in particular.

Mr TELFER: Keeping an eye on the clock—I want to make sure I get the opportunity to ask some of the questions that I do not think fit under some of the agencies later—I refer to the Fines Enforcement and Recovery Unit (we have the team here at the moment). I refer to Budget Paper 4, Volume 4, Agency Statements, page 163 to 165. Looking at this unit in particular, the estimated FTEs are 11 less than the budgeted 112.9—can you give an explanation as to why?

The Hon. S.C. MULLIGHAN: I will check, but these staff have an incredibly difficult job trying to recover fines from people who have them outstanding to the state. It is probably not the easiest phone call to be in receipt of, and so sometimes we have found it difficult to hold FTE numbers. Let me see if I can provide you with some specific advice.

At times during the course of the financial year we have not been able to fill our vacancies with ongoing Public Service employees, and so we have had to backfill those vacancies with some contractors who are not reflected in these FTE numbers, for example, but they would be picked up as part of the contractor expenditure that is recorded in the Agency Statements.

Mr TELFER: There is obviously a pretty significant increase from the 2023-24 actual figure to the budgeted 2024-25 figure. Is this a case of just never being able to actually fill the positions that are budgeted, due to the challenges that you speak about? Is this FTE number somewhat of an aspirational number that you are hoping to get to but that you never really achieve?

The Hon. S.C. MULLIGHAN: I will see what further advice the team can provide me. It is a really difficult job: imagine the warmth that you project down the phone when someone rings you and asks you to pay up for an outstanding fine. These are not often contacts or phone calls that are warmly received. Regrettably, some of these staff are often on the end of quite a robust exchange, and that is a really difficult task to be confronted with time and again during the course of the day, throughout the week and on an ongoing basis. We find in this particular area, and also to an extent in Shared Services, that trying to hang on to staff can be really challenging because the work is really difficult. I will just see if there is anything else I can provide. No, given the other questions you have, I think that is probably enough on that—unless you want me to take something on notice.

Mr TELFER: No, that is fine. One of the explanations given in this area is the centralisation of accommodation and information technology expenses of $2.1 million. What was the initial budget for this target? Has that centralisation process finished?

The Hon. S.C. MULLIGHAN: I might come back to you on that. The advice we have is that that change of $2.1 million does not necessarily relate to a change in overall cost but to where the budget is held for accommodation expenses. Previously it was accounted for in one particular budget area and it is now accounted for elsewhere, but I will provide some further particulars to you and come back.

Mr TELFER: Considering the discussion we had right at the start about the increase in fines, and you specifically referred to some of the traffic management—mobile phones, speed, etc.—there has not been a change in the amount of FTEs from the estimated result to the budget. Speaking about increased expectations and fines and, with that, especially the sorts of interactions that you have spoken about, if you are interacting with a larger number of people there are going to be more challenges that are faced, as far as that goes. It is not very often that I look at an increase of FTEs, but, if you are adding a burden of an expectation of revenue onto certain aspects, is this not a resourcing challenge that needs to be properly recompensed for the amount that is going back into the state government revenue coffers?

The Hon. S.C. MULLIGHAN: Yes, there are two things. One is, you would have seen that when the cameras were initially budgeted for and announced there was an increase in the number of FTEs from 2023-24 to 2024-25. Even though we did not get to 112.9, it is still a reasonable increase from 86.2 to 101.9.

These Agency Statements only really cover a window of financial years, like 2023-24, 2024-25 and 2025-26. I am also advised that there is a further budgeted increase for 2026-27 as the cameras become operational, so there will be some change there. On page 165, you can see what some of the changes in forecast activity are as well, especially the second row. That sort of reinforces the point that you make about the number of enforcement action notices issued, and so on, continuing to increase.

Mr TELFER: I might jump to a few questions around the Lifetime Support Authority. That is Budget Paper 3, Agency Statements, Volume 3, pages 147 to 150. Regarding the Lifetime Support Authority, how does the budget from the financial year compare to the actual spend? Can you give me some explanation of the expenditure and the inflows?

The Hon. S.C. MULLIGHAN: Sorry, could you just remind me of the page reference? I am struggling to put my finger on it.

Mr TELFER: Yes, hang on.

The Hon. S.C. MULLIGHAN: I also have the chief executive, Rick Howe, coming for the subsequent session, I think, but I am happy to do what I can now.

Mr TELFER: It was not specified, so I thought this might be the time, but I am happy to do LSA later on.

The Hon. S.C. MULLIGHAN: If you are happy to, sure.

Mr TELFER: Yes, we may as well do it when he is here, as opposed to asking questions when he is not. We will flick back then to fines enforcement stuff, because I think that this is something, once again, that there is a fair public interest in. Sorry to jump back to Budget Paper 4, Volume 4, pages 163 to 165. Regarding the numbers, especially around the income and expenses, do we have a number as to how many fines the unit actually collected, the number of fines in 2024-25?

The Hon. S.C. MULLIGHAN: I have the dollar amount, but I do not think I have the number of fines in front of me. On the table on page 165, there is the number of matters referred for enforcement, but I might have to see if that is the most accurate representation. Otherwise, we have the dollar amount.

Mr TELFER: You have the dollar figure rather than the actual number of fines?

The Hon. S.C. MULLIGHAN: I have a little bit of information about the number of fines which are referred from other government agencies to FERU. We manage them on behalf of a range of different agencies. Last financial year, that figure was 304,285 fines. Year to date, as at 30 April, so a few weeks back, there were 258,013. The value of that debt in 2023-24 was $207 million and year to date, 30 April, it was $170 million.

Of, for example, that 304,000 in the 2023-24 financial year, the number of payment arrangements where people might say, 'I will give you $20 a fortnight' or whatever was 63,280. But if there are particular statistics or metrics that you are interested in, I am happy to take it on notice and give you that detail.

Mr TELFER: In the last five minutes, I might just jump to page 177 of Budget Paper 4, Volume 4. There is a line there, minister, that talks about building indemnity insurance. This is something that has had a fair bit of attention. It has gone from a budget in 2024-25 of $618,000 up to $18.6 million, the estimated result, and then the budget back down to 2025-26. Can you give me a bit of an explanation as to the reasons for that?

The Hon. S.C. MULLIGHAN: There has been a series of significant building companies which have collapsed, which has meant that we have had to pay out a much larger number of building indemnity insurance claims through SAFA. There is a particular insurance fund within SAFA that has been set up for this ever since the government started underwriting QBE, providing the insurance coverage. So that obviously shows why there has been a massive increase in the amount of money that we have had to pay out in the course of the financial year against what was originally budgeted, which was quite minimal.

Mr TELFER: How many building companies have collapsed in that period of time?

The Hon. S.C. MULLIGHAN: I am pretty sure we will have that detail. I am told it is primarily due to the insolvency of Felmeri Group, 7 Star Construction and Qattro Built during the course of 2023-24. The number of claims we have had from April 2024 to February 2025, so not quite a perfect financial year, is 75.

Mr TELFER: You refer to the Felmeri stuff. There were some questions last estimates that you are going to go and check and get back to us on. That has not happened yet, as often happens with estimates.

The Hon. S.C. MULLIGHAN: It has not? My apologies.

Mr TELFER: There is a bit of a question around the timing of when the Treasurer or your office or Treasury or the Under Treasurer actually were provided with any sort of forewarning of Felmeri's perilous financial position. When did you know about it and did you do enough in the lead-up to try to make sure that those who were exposed to it were properly prepared and looked after?

The Hon. S.C. MULLIGHAN: I will not say that we are the last to know, but we are in the chain of knowing usually when the company becomes insolvent or it goes into administration, because that is, I guess, the crystallisation of them as a company not being able to make good their building contracts. They are not able to complete the build or they are not able to correct any building defects in the build that they have delivered. What can lead up to that of course is, as commonly happens, a customer has a complaint against their builder and says, 'I want you to fix this' or 'When are you blokes going to show up and finish the build?'

Mr TELFER: Just to get to the nub, this is the bit I think the public need to know. The FOI showed that 3½ months before Felmeri went into administration and 5½ months before it went into liquidation, there was discussion amongst Treasury, including the Deputy Under Treasurer and the Under Treasurer. I will quote from a from an email that I have read. It says Felmeri was 'in significant financial distress and it is a matter of when, not if, they enter administration'. If this is 3½ or up to 5½ months before the actual day that you are saying when it crystallises, is this good enough when they have this sort of knowledge and allow it to continue to roll on and then only act when things crystallise?

The Hon. S.C. MULLIGHAN: I am not sure what that email is. I am not sure that I have seen that before. Certainly, SAFA is responsible for managing the fund that we pay building indemnity insurance claims out of and that usually happens when a builder is unable to meet their obligations to their client, either finishing a build or rectifying building works that have been undertaken. Sometimes that can be because there is a consumer dispute: 'Why I think I have built it as you asked', the other party does not believe that they can, or there becomes a sequence of these sorts of claims.

Mr TELFER: So you are only reactive, rather than proactive?

The Hon. S.C. MULLIGHAN: You have to remember that there are other government agencies, particularly in Consumer and Business Services, that every day of the week are mediating these disputes between builders and their clients. It is only when a claim gets crystallised (i.e. the builder cannot make good, they cannot finish the house or they cannot make the building alterations to meet the contractual obligations) that we get it, so we get it right at the end.

Mr TELFER: And it is the only power Treasury has with this sort of thing?

The Hon. S.C. MULLIGHAN: If the suggestion is that we get a claim with respect to a builder, which happens from time to time, and the builder is continuing to trade and trading quite solvently and, except for this claim, quite capably—it is certainly not the majority of cases—then if the expectation is we go out and start flashing public notices that there is a problem in the building industry, or there is a problem with this particular builder that may or may not be an accurate reflection, you can easily appreciate the capacity that has to crystallise an insolvency, for example.

I appreciate the point you are trying to make. I do not think it is fair to say that we had the opportunity to stop Felmeri from going under or to protect their consumers. Treasury protects consumers by underwriting the insurance that otherwise the insurance industry has completely vacated, and because of what we have seen since we have been in government we have been working with the industry to increase the insurance payout limits from 150,000 up to 250,000 because the 150,000 figure had not been changed for a long time, as well as make sure that we are starting to require and enforce builders taking out the insurance policy in the first place, which is something that had become apparent to us during the course of this term of government.

There were some builders—some bad actors—out there who were entering into contracts without taking out the necessary insurance policy and I have had to make a series of decisions as Treasurer to pay out on policies that were not even entered into in the first place so as not to leave consumers completely out on their own and that comes at a real detriment to the state's finances and the fund that SAFA maintains for those purposes.

So I do not dispute you raising the question. I think that that is fair enough, but I do not think it is reasonable for anyone to form the opinion that we have not been doing everything we can to protect consumers through this period when we have seen a number of builders go under.

The CHAIR: The allotted time having expired, I declare the examination of the Department of Treasury and Finance completed.

Sitting suspended from 11:03 to 11:15.

Membership:

Ms Hood substituted for Mr Odenwalder.

Departmental Advisers:

Ms T. Pribanic, Under Treasurer, Department of Treasury and Finance.

Ms J. Holmes, Commissioner of State Taxation, RevenueSA.

Mr A. Coates, Chief Executive Officer, South Australian Government Financing Authority.

Ms J. White, Director, Insurance and Strategic Projects, South Australian Government Financing Authority.

Mr P. King, Head of Financial Markets and Client Services, South Australian Government Financing Authority.

Ms T. Blight, Chief Executive, Super SA.

Mr P. McAvaney, Director, Policy Risk and Governance, Super SA.

Mr A. Mills, Chief Executive, HomeStart Finance.

Mr J. Piteo, Chief Executive Officer, Funds SA.

The CHAIR: I advise that the proposed payments remain open for examination, and I call on the minister to make a statement, if he so wishes.

The Hon. S.C. MULLIGHAN: I will just introduce the change of advisers. I have Anthony Coates, who looks after SAFA, and Julie Holmes, who looks after RevenueSA, Commissioner of State Taxation. I am happy to start wherever you like, sir.

The CHAIR: I call on the lead speaker for the opposition, if he wants to make an opening statement.

Mr TELFER: We can get straight into it. We will start with SAFA. My reference is Budget Paper 3, Budget Statement, pages 23, 49, 50, which are the key SAFA ones. The estimated dividend result is $1.5 million for the financial year 2024-25 when the budget was $49.8 million—a pretty significant change. Can you give me an explanation as to the reasons behind that significant decrease in distributions?

The Hon. S.C. MULLIGHAN: I am advised it is mainly for insurance loses. It is a higher than budgeted provision for what we will need to payout against the victims of sex abuse in state care under that funding regime, which was put in place by the previous government.

Mr TELFER: That equates to all that $48.3 million drop?

The Hon. S.C. MULLIGHAN: That is by far the largest component, but I will see if I can provide some further detail if you like on it, because there are some other movements that are both up and down: changes in returns to the Treasury function, changes in returns to the fleet function as well. I am happy to take that on notice, if you like.

Mr TELFER: You will take it on notice, okay. On page 50, I would like to unpack a little bit further, if possible, some of the detail that is described there. What was the increase in value for the provisions established for insurance claims that impacted the distribution, and what was the value of the higher budgeted portfolio growth that impacted the distribution?

The Hon. S.C. MULLIGHAN: The variance, I am advised, for the insurance is a $113 million variance in the provision, so that is obviously a significant increase. Then there are some other movements with the other two functions of Treasury and Fleet moving in the other direction, which provides that net outcome of the $40-odd million figure you identified in your earlier question.

Mr TELFER: On page 64, it talks a bit about the insurance arrangements. Prior to the establishment of a new insurance fund, fund 5, what fund or funds or what process was construction insurance administered through?

The Hon. S.C. MULLIGHAN: Fund 5 is particularly for the tunnels project, I am advised.

Mr TELFER: Okay.

The Hon. S.C. MULLIGHAN: We have reinsurance arrangements with the insurance market globally for our regular activities and construction program, but when we went to market for specific coverage for elements of the tunnels project, they indicated that the global market conditions were such for the insurance market that the level of cover we would be given under an insurance policy was basically the same as the premium that they would charge us for that insurance policy.

We are talking coverage in the order of, say, $50 million, so rather than pay a roughly $50 million premium in order to get $50 million worth of coverage we decided to create that fund within fund 5. We will collect the $50 million premium out of the project budget and if there is any call on it then we will pay it out, and if there is not a call on it then obviously that ends up not being required.

Mr TELFER: Is there a breakdown of what the increase in debt has been used to cover, like the Torrens to Darlington, the new Women's and Children's Hospital, or other capital projects?

The Hon. S.C. MULLIGHAN: In terms of how much SAFA's debt increases across the forward estimates?

Mr TELFER: Yes.

The Hon. S.C. MULLIGHAN: I can give you that. Even if government debt was not increasing we would still be out in the market issuing bonds and raising money, particularly to finance the operations of government. Our revenue receipts are quite lumpy through the year, whereas our outgoings can be fairly consistent—I mean, you have to pay wages every fortnight and so on.

Mr TELFER: Those bonds are used to flatten out the need for cash as revenue comes and goes.

The Hon. S.C. MULLIGHAN: Yes. Then there is also the need to refinance debt which is maturing that has been taken out in previous financial years. There are three different reasons why we are out in the market every financial year, generally speaking. We see that our long-term debt increases by $19.7 billion over the forward estimates. Our short-term debt increases by half a billion dollars over the forward estimates, and then the total debt figure increases by the sum of those two. Are you after a year-by-year breakdown?

Mr TELFER: There is the big number. How much of that number is equated to some of the projects? A lot of the time you talk about in the commentary the big two, the Torrens to Darlington and the new Women's and Children's Hospital. How much of that debt is equated to those specific projects and other major capital projects?

The Hon. S.C. MULLIGHAN: We will see what we can provide you, but I just caution by saying that SAFA is not raising debt, sort of, initiative by initiative. They are just understanding what the total requirement is—

Mr TELFER: Total fulcrum.

The Hon. S.C. MULLIGHAN: —in a financial year and then going out and raising it accordingly. We have a pretty good understanding of what our construction spend is across the forward estimates, which you see in the budget figures. We can provide that. We can provide it by project, but I am not sure those two marry up, because when we are out in the market, as I said, we are often refinancing debt which is maturing, which might have been taken out five or however many years ago, as well as being out in the market for cashflow purposes. But anyway, I will see what sort of comprehensive information we can provide.

Mr TELFER: Thank you. A question I brought up with you before, before the team was here, was around the sourcing of that debt. Is there a conglomeration? Are there major sources internationally for that debt? Can you give me a bit of a breakdown, if that is available, please?

The Hon. S.C. MULLIGHAN: I am told that usually about 20 per cent of our debt is raised offshore. Yesterday there was a debt issuance of $1.5 billion; 34 per cent of that $1.5 billion was offshore. The offshore markets that we are talking about are Asia—which is principally South Korea, Singapore and Japan—the UK, Europe and the Middle East. But we have minimal or no holdings from China and Taiwan. They would be restricted to Chinese or Taiwanese domiciled banks rather than other entities.

Mr TELFER: You say that normally it is 20 per cent offshore?

The Hon. S.C. MULLIGHAN: Overall?

Mr TELFER: Yes. Is that a pretty consistent, static number over the last—

The Hon. S.C. MULLIGHAN: Except that yesterday what we saw—

Mr TELFER: I will unpack yesterday. So 20 per cent is the usual?

The Hon. S.C. MULLIGHAN: I am told that it fluctuates. There have been a number of issuances in the last two years where it has been lower than 10 per cent, for example, but, overall, roughly 20 per cent is how it looks in total. We will do a bond issuance and see what the market response is and, from that market response, we will determine how much is offshore, how much is onshore.

Mr TELFER: So is this latest call of $1.5 billion, which is 34 per cent offshore, purely a symptom of the market? Is that a symptom of the domestic market being more cagey around borrowings at the moment, or is it offshore markets looking to be more involved? What is the cause for this latest much-larger-than-average issuance?

The Hon. S.C. MULLIGHAN: There are a few different factors that come into it. One is: I mentioned in the session we had before the morning tea break that, traditionally, state and territory governments have raised a lot of their debt onshore from banks in Australia, and they are getting close to the limit of how much debt they need to hold in semi-government bonds, for example. So there is a decreasing amount of debt that we can issue to them and hence onshore. All states and territories that have debt programs are increasingly looking to offshore markets. That is, I guess, the major trend.

Mr TELFER: So the domestic banks have an obligation for X amount of their holdings to be within these government bonds. They are reaching that saturation point or that obligatory level. They are deciding it is best for them not to go over and above that level.

The Hon. S.C. MULLIGHAN: They only have to raise so much debt in order to finance the operations of their bank. So they will know how much money they need to raise so that they can lend it to people like you and I who want to take out a home loan or a small business—

Mr TELFER: But they are obligated to do a certain amount with government bonds—

The Hon. S.C. MULLIGHAN: That is right.

Mr TELFER: —and once they get to that threshold, they can go wherever they like?

The Hon. S.C. MULLIGHAN: Yes, or they might have raised all the money they need for their operations so they do not need to take anything else out. Increasingly we are looking offshore. The second point is: in looking offshore, what can fluctuate who takes up the bonds is the pricing of it as well.

Mr TELFER: Obviously, the exchange rates as well.

The Hon. S.C. MULLIGHAN: We issue in Australian dollars but some of the pricing might be better from people who are purchasing it from overseas than what we are offered domestically.

Mr TELFER: At 34 per cent for this latest issuance, is this a level that you expect it to equalise out at—over a third of bonds now being financed from those offshore investors?

The Hon. S.C. MULLIGHAN: We would anticipate that as we will be increasingly looking offshore, like the other states and territories, that 20 per cent will continue to trend up to a higher figure around 30 or 35 per cent, potentially. But we cannot really say because it depends on what the pricing is. So if we get better pricing locally from people who want to buy semi-government bonds, then we will take that up rather than go offshore, but, alternatively, if the opposite is true, that the pricing is better offshore, we might go in that way, but we do expect the trend to head up towards that 30 to 35 per cent over time.

Mr TELFER: Obviously, we have a pretty rapid and significant increase in debt. If the domestic sources are limited and not obligated, is there an additional risk for us as a jurisdiction, do you think, with that—especially at a pretty volatile time internationally—that there will be an increasing interaction and reliance on those overseas investors as a proportion of our debt-raising capacity? Do you know what I am saying? At a time where we are going to be pushing up to nearly a third from overseas and at a time that is pretty challenging internationally, are there additional risks for us as a state, I guess, is the question?

The Hon. S.C. MULLIGHAN: I think I would say that the SAFA team and the advisory board realise that, like all of the other states and territories, we are increasingly going to have to go offshore. What mitigates the sort of risks you raise is where we are going offshore and how attractive we are as a jurisdiction issuing bonds. There are not too many subnational jurisdictions, states and territories in any country in the world that have credit ratings as strong as ours.

Even compared with some of the subnational European jurisdictions, Canadian provinces, and that sort of thing, Australian jurisdictions compare very favourably. Right now we would think that those Australian jurisdictions compared pretty well. You asked that question before the break on whether SAFA has reviewed its policies: those sorts of considerations that sit behind your question are some of the reasons these policies are being actively revised and that we keep on top of understanding how the global environment is functioning.

Mr TELFER: We are also obviously in a situation where it is not necessarily even a policy decision to pursue a greater percentage of overseas investors; it is something where we have been at the receiving end because of the change in the market and the potential reaching of saturation point for local investors. It is not just a policy decision but something we will have to be reactive to because of both domestic and international pressures.

The Hon. S.C. MULLIGHAN: There are a couple of different elements to it. Anthony has just pointed out to me that yesterday we went out to market for $1½ billion of bonds and the response was offers of nearly $5½ billion. That indicates a couple of things: really healthy and strong demand for the bonds but, secondly, by going out so broadly, not just locally but offshore as well, getting such a diverse response also then reflects itself in pricing so that we can get better pricing for the bonds.

Mr TELFER: You can gauge options, yes.

The Hon. S.C. MULLIGHAN: The other element worth highlighting is that we put some effort in the last two budget papers, or the last two years, into deliberately building relationships with new overseas markets through SAFA so that we can issue increasingly offshore, should we need, but particularly packaging up our bond issuances as sustainability bonds. Given South Australia's comparative advantage and performance in terms of renewable energy penetration and some of the things we are using to spend that money on, we compare quite favourably with how other governments are using money. It is further making our bonds more attractive in that respect.

Mr TELFER: It is fascinating. I guess that way you can rely more on policy direction if you have the choice of source?

The Hon. S.C. MULLIGHAN: That is right.

Mr TELFER: You speak about the $5½ billion offering: what percentage of that was from international?

The Hon. S.C. MULLIGHAN: I think the offers were similar in terms of the 34 per cent, but it was 65 per cent Australia/New Zealand, 9 per cent Asia, 24 per cent UK/Europe and the Middle East, and 1 per cent from the US.

Mr TELFER: That was of the $5½ billion offered?

The Hon. S.C. MULLIGHAN: Yes.

Mr TELFER: Rather than the $1½ billion that was accepted, but it was similar proportions in what was accepted as to what was offered?

The Hon. S.C. MULLIGHAN: Yes.

Mr TELFER: Thank you for the bigger picture debt stuff—it is important not just for us to understand but for the public as well in a challenging time across the world. On page 64 of Budget Paper 3 it states:

At 31 March 2025, the solvency ratio (total assets over total liabilities expressed as a percentage) was 97.3 per cent for Insurance Fund 1…

Does that mean that SAFA does not have sufficient assets to meet its liability to the insurance fund?

The Hon. S.C. MULLIGHAN: SAFA is underwritten by the Treasurer—by me—so if they need additional cash that gets paid from the state budget to support what SAFA has to do. In reference to your earlier questions, I think what has significantly changed is that we have had to increase the provision by more than $110 million for those child sex abuse claims coming into the state. When you look at those figures you can see how much that has changed the relationship between the total assets and the total liabilities.

What we have had to do from time to time in order to provide additional funds to SAFA to establish these funds—at the very end of the 2017-18 financial year after the Marshall government came to office, I think it was $146 million that was provided to SAFA for claims for those victims of sex abuse—as actuaries have continued to look at and value the liabilities going forward, is to continue topping that up. So they can change, year to year.

I am also told that these are very long-tail liabilities, so it is not an issue of having cash on hand to pay them out, because these liabilities might only be realised many years into the future. It is about making sure that we have an accurate assessment of them. Also, that $146 million figure was not in fund 1, which you have drawn my attention to, it was in fund 4, so my apologies for that.

Mr TELFER: There is a line on page 64 that states:

If the solvency ratio remains consistently below SAFA’s target of 100%, SAFA will consider adding a risk margin to premiums in future underwriting years.

How many years of below-coverage ratio would qualify as consistent and thus reach that threshold?

The Hon. S.C. MULLIGHAN: It is a difficult question to answer definitively because—

Mr TELFER: Yes. The statement was in there and that is what I am asking, so—

The Hon. S.C. MULLIGHAN: No, that is fine. It is an important question to raise. The assets are invested, and so if there are stronger returns on the investment of those assets—if the share markets are performing strongly, for example—that will catch the value of the assets up from year to year. Similarly, if we have a dreadful year in the share market the value of those assets declines.

I am advised that what would inform us about changing the premiums would be if the actuaries were saying that, despite the fluctuations in returns on assets, it is looking like there is going to be a widening disparity between the value of assets and liabilities long term and so you will have to increase premiums.

For the figures that you have referred to, the biggest component of that is the medical malpractice liabilities. SA Health pays a premium each year for medical malpractice claims, but there is also a $1 million deductible which SA Health pays for each claim, which is then paid out as well.

What I can say is that some of the figures that have been paid out for these medical malpractice claims are huge, just astronomical. Some of the claims date back 20-plus years. It might have been an obstetric or paediatric issue that happened and now the claimant is 20 or 30 years on with very significant disabilities or impacts to their livelihoods, and claims are now being progressed and having to be realised. If the claim had been settled 20 years ago, it would probably have been settled at a much lower rate than what we are now having to calculate as a reasonable estimate of losses for the remainder of their lives in the current environment.

Membership:

Mr Odenwalder substituted for Mr Brown.

Mr TELFER: Just one more on this. On page 64, there is this statement:

SAFA aims to maintain sufficient assets to meet liabilities. At 31 March 2025, the solvency ratio (total assets over total liabilities expressed as a percentage) was 97.3 per cent for Insurance Fund 1…

Is that liability gap now present in the budget due to an excess of claims, an excess of excessive claims, an excessive of expected payments or an unexpected shortfall in revenue allocations?

The Hon. S.C. MULLIGHAN: I am advised that the reason it has dropped from that 113.7 per cent down to 97.3 is because of the actuarial revaluation of the claims for future years. I am told that while this quotes as at 31 March, the continued strength of share market returns has actually improved the value of the assets to date, so these two things can continually change.

Mr TELFER: I might jump to some RevenueSA questions. I refer to Budget Paper 4, Volume 4, Agency Statements, pages 150 onwards. Under Sub-program 3.1: Revenue Collection and Management, highlights for 2024-25—and this is a fascinating nuance, really, of the revenue we were speaking about big picture before—there is a line:

Expected to deliver around $119 million in housing grants and stamp duty relief to support over 3500 first home buyers purchase a new home or vacant land on which to build a new home.

How much of this expected $119 million is housing grants and how much is stamp duty relief?

The Hon. S.C. MULLIGHAN: I am happy to bring down a breakdown, but if I hazarded a guess three and a half thousand first-home buyer grants at $15,000 would be $52.5 million, and then the balance would be in stamp duty relief. But let me just check that, and I will come back to you.

Mr TELFER: Get your calculator out.

The Hon. S.C. MULLIGHAN: That's right.

Mr TELFER: Regarding the stamp duty relief for first-home builders, do you believe that this line item causes inflation?

The Hon. S.C. MULLIGHAN: Do you mean causes inflation or causes a change in house prices?

Mr TELFER: Yes, causes inflation of house prices. Does it have an upward pressure on house prices?

The Hon. S.C. MULLIGHAN: I realise that we have different views on how to provide relief here. I will keep my comments as polite as possible in that context.

Mr TELFER: I always appreciate that.

The Hon. S.C. MULLIGHAN: I have a reputation for politeness in the parliamentary context, so I will just do my best to continue that. Our view is consistent with what the Productivity Commission says, and that is, if you are going to provide some form of financial support to first-home buyers to get them into home ownership, if you are not addressing the issue of supply of housing, then when you are increasing demand against a fixed supply, that is likely to drive up house prices. That is the reason why we focused our first-home buyer support on the construction of new houses or the purchase of a newly built house, so a house which is adding to overall housing supply.

If you created three and a half thousand people entering the market for the first time because they have some sort of financial support, and they are competing in a fixed market or a market where there are no changes to housing supply, the basic tenets of economics would suggest that that increase in demand will increase prices because there are three and a half thousand people who have more money to pay for the set pool of homes.

So what we have done is say, if people want first-home buyer support, they have to increase the number of homes so they are not adding demand to the existing market; they are instead creating their additional supply for the market that they are purchasing. It is also hoped then that if those first-home buyers are being redirected away from existing homes to new homes, any others who are looking at existing homes have less competition and hence less pressure on prices continuing to go up as well.

Mr TELFER: That is the compare and contrast between policies, but just standalone looking at this, do you think stamp duty relief for first-home builders causes an increase in inflation of the cost?

The Hon. S.C. MULLIGHAN: If we are not looking at the inflation of house prices, which is I guess what I was trying to address in my previous answer, but you are looking at general inflation of housing and housing construction costs, I think what we have perhaps both heard from the housing industry is that the huge spikes in input costs to housing construction have massively moderated from where they were, for example, during the previous commonwealth government's HomeBuilder policy supports when timber was, to pardon the pun, going through the roof.

Mr TELFER: Or during COVID when supply chains were challenges.

The Hon. S.C. MULLIGHAN: Indeed. That is exactly right. In that respect I do not think it causes house price inflation or generalised inflation across sectors of the economy either. But, of course, to the point that you made before about small business outlooks, I do recognise that all businesses have increases to their operating costs and so on, whether they are involved in the housing construction industry or not,

Mr TELFER: What your assumptions are also probably assuming is that builders' current building capacity can meet demand, because if it cannot then additional funding into a system where it is not keeping up with demand could be inflationary, could it not?

The Hon. S.C. MULLIGHAN: Let me answer it like this. I do not have the figures in front of me, but I hope I am accurately representing them. Our rate of dwelling commencements is now at about 14,000 per year and a good year for South Australia, generally speaking, was about 10,000 houses being built per year. So that shows that over the last small number of years, there has been about a 40 per cent increase in the number of homes getting under construction.

Let's say that wasn't happening. Let's say there had not been that 40 per cent increase and there were still only 10,000 or maybe even 11,000 homes per year being built, and we were adding further demand into that very constrained housing supply environment by incentivizing a further three and a half thousand homebuyers per year to get into the market because they have some sort of financial assistance, or, as you put it, a stamp duty concession on existing builds. You can imagine what that does to house prices because the competition for those existing homes has gone from red-hot to white-hot.

That is why we formed the view, consistent with the commonwealth's Productivity Commission, that you should only be providing support for first-home buyers if it is unlocking additional supply. I would say the problem with the policy that your leader is promulgating is that it does not address supply, it only enhances demand, and when you have enhanced demand against fixed supply, prices go up. That is a basic tenet of economics.

Mr TELFER: On page 151, Budget Paper 4, Volume 4, there is a line in targets 2025-26 that states:

Support eligible medical practices to comply with their payroll tax reporting obligations implementing system enhancements and providing continuous education and communication to the industry and their professional representatives.

How much is expected to be spent on these system changes and programs?

The Hon. S.C. MULLIGHAN: The expenditure I am about to refer to relates to, I guess, internal expenditure within RevenueSA and the amount on system changes is roughly $400,000.

Mr TELFER: On internal system changes?

The Hon. S.C. MULLIGHAN: Yes, and that is just changes to the system. Then, of course, you could build that out by including the cumulative wages of all the people who have been involved in this effort. I do not have that figure, of course, but as Minister Picton advised the other place yesterday during question time, we worked with the Royal Australian College of General Practitioners to come up with South Australia's solution to this payroll tax issue where it became apparent that GPs, who have long been obliged to pay payroll tax on their wages, had not been.

Of course, I have had all sorts of correspondence from lawyers who thought they were being extremely clever designing corporate structures to evade tax obligations for their clients and embarrassingly have been caught out because they had not carefully read the Payroll Tax Act 2009 changes, which have been in place for more than 15 years.

Notwithstanding the poor advice those legal practitioners have provided their GP clients, we put the interests of GPs first and provided them with a full amnesty on payroll tax obligations for a full financial year and then, even though the longstanding obligations were only holding them to account for the current financial year, we have not required them to pay those payroll tax obligations during the course of the year like we normally would for an employer. We have said they can get to the end of the year and they can make a reconciliation in that respect. As Minister Picton said yesterday, when you look at the regimes that have been put in place in other states like New South Wales and Victoria, we are leaps and bounds ahead of those other states.

Mr TELFER: Continuing on those targets, Treasurer, there is one there that states:

Engage with the conveyancing industry to improve the experience and outcomes for both practitioners and RevenueSA in delivering efficient property settlements through continued industry partnerships and education opportunities.

What challenges have been identified within the conveyancing sector to date and how might these impact the cost of housing and the like?

The Hon. S.C. MULLIGHAN: I am advised that the focus has been on engaging with industry to understand what some of the frustrations or pain points, as they are described to me, have been.

Obviously, conveyancing has gone through really radical change in the last 10 years, where we have gone from a highly paper-based system to electronic conveyancing, or should I just say the PEXA system. That means all the other participants within those transactions, whether it is the conveyancers or whether it is us at RevenueSA or Land Services, are making sure that all our systems and requirements are equally efficient and electronically based.

That has meant that we have had to continue making changes; for example, introducing the BPAY option, those sorts of things. I presume that as improvements and efficiencies continue to be rolled out in the market we will have to respond accordingly, finding opportunities to make sure that our requirements and practices are consistent with that.

Mr TELFER: There is a line in the Consolidated Account items that stamp duties forecast very modest growth from the 2024-25 estimated result to the 2025-26 budget year. We had a bit of discussion around stamp duty forecasting in the previous section.

The Hon. S.C. MULLIGHAN: Sorry, what page is this on?

Mr TELFER: Sorry; this is in Budget Paper 4, Volume 4, in the commentary around page 151 (it is not as easy to interact with a small screen). Is Treasury's forecast of declining residential transactions—I mean, we spoke about that level, the return to 3 per cent property price growth—is that a large factor in the small increase in the budget amount? As we spoke about before, you are conservative with your estimates, and happy days for you if it goes higher, over and above. Is that the mentality when it comes to trying to ascertain the conveyancing duty methodology?

The Hon. S.C. MULLIGHAN: Yes, and as you have correctly identified in the course of your question, there are two main contributors to this. One is the number of transactions that are occurring in the market as well as the average price of those transactions. Greg Raymond, who looks after Revenue and who was with us in the morning session, what he and his team have been trying to establish is that as we have consistently seen higher than forecast numbers of transactions as well as higher than forecast average prices, what does a return on both those metrics look like?

We have tried to plot a return to lower transaction numbers and lower levels of annual price growth in each budget for the last three budgets in particular, as the performance of the property market has been really strong. I am not sure if I have the transaction—perhaps what I can do is take on notice the forecast number of transactions for 2025-26 as well as forecast price growth. It is certainly provisioning that we are just going to see locking in high price growth and high transaction volumes across the forwards.

We do realise—the point I have made and that you guys have made on repeated occasions—that housing affordability in South Australia is getting to the point of many multiples of average wages, and it is not reasonably foreseeable that the market can continue climbing at the same rate that it has been in recent years before people just stop being able to afford these house purchases, and these transactions are being reflected in these stamp duty figures.

Mr TELFER: Do you have a number, because it is not reflected in the budget in particular, about how much—you had a forecast of what the cost of the first-home builders stamp duty exemption was going to be. Do you have an actual number?

The Hon. S.C. MULLIGHAN: When we first announced the policy in 2023-24, which was an exemption up to a threshold, we set out across the four years what we thought that would look like, then when we announced the additional initiative in last year's budget—that there would be no price cap on that—we reflected a new additional cost to that, but I think it is safe to say that both of those two incremental costs have been revised upwards given the number of transactions and the average price growth.

At the very back of Budget Paper 3, in Appendix E, there is a tax expenditure statement, which is basically all the policy positions that the government of the day has that foregoes revenue—it brings a tear to the eye of successive treasurers—and it estimates the cost of having policies like the stamp duty exemption for first-home buyers. You will see in that tax expenditure statement that for 2023-24 the value of the home concession was $21 million, and in 2024-25 it is now $72 million. That is the value for first-home buyers in not having to pay it.

Mr TELFER: That is actual in 2024-25?

The Hon. S.C. MULLIGHAN: Yes, that is what we estimate it to be. Next year we will be able to publish the actual for 2024-25, as well as the forecast for 2025-26.

Mr TELFER: Yes, it is best estimated actual, knowing 90 per cent of the data but not knowing the last proportion.

The Hon. S.C. MULLIGHAN: That is right.

Mr TELFER: Is there any understanding as to what stamp duty revenue is raised from people purchasing properties outside the Greater Adelaide region, regional South Australia as opposed to internal? Is that body of work done within your department?

The Hon. S.C. MULLIGHAN: We could potentially identify it. It is not something that we look at. We tend to process the whole of South Australia transactions each year and take our estimates based from that, but we can see what information we have, if you like, and come back to you on a question on notice.

Mr TELFER: We look at increases, we look at the—as we have pointed out before—rapid increases in the take, but I am interested in whether there are multiple paces of that within the state. It is the fulcrum of dollars, absolutely. If you could take it on notice we would appreciate it, from Greater Adelaide to outside, but also a compare and contrast to other years where if it is red hot to white hot, as you say, in some areas but growing at a lesser—

The Hon. S.C. MULLIGHAN: What we do get data on are the average house prices, for example, in inner metro, greater metro and regional South Australia. I am just not sure that we have that via stamp duty receipts, but let me take it on notice and see what information we can provide.

Mr TELFER: In the explanation of significant movements, taxation receipts, higher land tax and payroll tax collections in the 2025-26 budget compared to the 2024-25 estimated results, they are primarily due to strong property market and labour conditions. In trying to work it out, does Treasury as a whole—and this has been with my regional hat on as well—know how many additional taxation revenue dollars are collected for an average 1 per cent increase in the property market? We talk about you aiming for 3 per cent, but do we have a number, as that increases, as to what the revenue ramifications are for the state?

The Hon. S.C. MULLIGHAN: In the risk statement that we were looking at before, with respect to other matters, it talks about what 1 per cent variations in revenues look like. It says that a 1 per cent variation in 2025-26 for property values equates to about a $19 million change in conveyance duty revenues, while a 1 per cent variation in transactions equates to about a $17 million change.

Mr TELFER: I might go to Budget Paper 3 and talk a little bit about payroll tax. Page 35 refers to payroll tax receipts. The commentary around that states, 'Payroll tax receipts for 2024-25 have been revised down by $14 million since the 2024-25 Budget.' Is this a softer than expected collections experience? What is the reasoning behind that?

The Hon. S.C. MULLIGHAN: There are a few different things that influence the payroll tax receipts. One is the number of hours worked across the labour force and, in particular, of course, in those businesses which are above the tax-free threshold. But in relation to what the forecast versus what the outcome result is in terms of the wages being paid, because it is the actual wages that are taxed, if there is a significant change in forecast wage outcomes, then that will cause a change in payroll tax receipts.

On top of that, there is also any change in overall workforce numbers, but that would usually be caught up in the number of hours worked. So it is really a function of number of workers and the hours being worked and how they are being remunerated and whether that changes. Then there is any change in the compositional impact, as Tammie reminds me, of whether businesses are above or below the tax-free threshold and whether that changes up or down.

Mr TELFER: Do you have an insight into how many businesses that were below that threshold in 2023-24 have gone over and above? How many more businesses are now paying payroll tax?

The Hon. S.C. MULLIGHAN: We certainly know how many businesses pay payroll tax, and how much that was last year, how much it is this year, and how much we forecast it to be next year. I am not sure how accurately we can say one is becoming in another category, although we probably could interrogate the data and provide some information. But I think I am right in saying it is about 9,000 or 10,000 businesses that pay payroll tax, out of the 140,000 to 160,000 businesses in South Australia, depending on whose estimate you look at.

I am advised that there is an annual payroll tax registration process where businesses can register for payroll tax at the outset of a financial year, and that occurs between June and July of each year. It closes at the end of July. Any further changes of new businesses being registered for payroll tax purposes, either because it is a change in their relativity to the tax-free threshold or whether it is a new business just being established or a business that has come into South Australia, that would be picked up. So we would know more once that end-of-July data has been interrogated and reconciled.

Mr TELFER: Do we know the percentage increase of businesses? Like you say, you can follow how many business are paying payroll tax and it is around 9,000 or 10,000. What does that increase look like? The challenge for business is, once that threshold is reached, there is a certain additional cost that they have to bear. With the rising cost of business, of living, of wages, how many more are reaching that threshold as a percentage growth?

The Hon. S.C. MULLIGHAN: I am told I do not have that data here. It does not tend to change much from one year to the next but perhaps the best thing to do is I can take the question on notice and provide you the data.

Mr TELFER: I appreciate that. Continuing on the same budget paper, but let's flick to page 81, revenue risks. There is a line there I was interested in, under gaming machine revenue: 'Regulatory reforms can also impact on gaming machine taxation revenue collections.' This is a risk. Does the government have any regulatory plans at hand to impose on pubs or hotels that would materialise such a risk?

The Hon. S.C. MULLIGHAN: No.

Mr TELFER: It is just a fascinating line to include in a government document when it is government regulation that is the risk factor.

The Hon. S.C. MULLIGHAN: It is a significant source of revenue. If a 1 per cent change is $5 million then that indicates this is roughly a $500 million source of revenue. I think the only thing that might change with respect to this—and it is not a proactive change that the government is pursuing—is just whatever the shake-out of the regulatory arrangements are around SkyCity given all the enforcement activity that has been occurring at the national level and then in the process that they have been going through with the review that was initiated by the commissioner for liquor and gaming and the work that they have been doing. But there is no policy change being developed or anything like that in this respect from the government.

Mr TELFER: Keeping an eye on the clock, I might jump to some HomeStart questions.

The Hon. S.C. MULLIGHAN: Sure.

Mr TELFER: I refer you to Budget Paper 3, Budget Statement, page 77, and a bit of commentary around public financial corporations. Income tax equivalents for HomeStart Finance are budgeted to be lower in 2025-26 than the 2024-25 estimated result. What expected activity changes in HomeStart are influencing that estimate?

The Hon. S.C. MULLIGHAN: I will just introduce Andrew Mills, who is the Chief Executive of HomeStart Finance. I am advised that the significantly higher result is as a result of the increased value of the shared equity book, so the value of the properties that are subject to a shared equity arrangement with the HomeStart customer. That has that arrangement that has been reflected in 2024-25, and so for 2025-26 going forward, we do not see the property values will escalate as significantly as they have in the current financial year, and so the forecast is lower at 16.5 per cent.

Mr TELFER: And, thus, on that same line, the 2026-27, 2027-28, it drops away even more in those forward years. Can you give an explanation as to why? Are these based on assumptions that HomeStart is making around the broader market?

The Hon. S.C. MULLIGHAN: I am told that there are a couple of things here, particularly the change, for example, in the number of loans, so more people discharging their loan agreements with HomeStart. Particularly in an environment where interest rates are coming down, people think quite rightly that, if they refinance with one of the big four or another South Australian based bank, they might be able to bring down their monthly repayments.

Secondly, the funding costs' forecast over the next four years, and hence the margins, are such that funding costs go up and the margins become tighter. Overall, we would say that what we have forecast across the forward estimates is a more normal performance from HomeStart, rather than the really strong performance we have had particularly in the current and the previous financial year.

Mr TELFER: So more people are discharging their loans because the loans they are receiving from some of the major financers are more competitive than they are receiving from HomeStart?

The Hon. S.C. MULLIGHAN: Yes, and they have probably come to HomeStart because of the offer of very low-deposit loans with no lenders mortgage insurance, but given that house price growth has gone up so much, the equity in their home has gone up so much that they can probably go to a bank and say, 'My loan to value ratio is now lower than 80 per cent, so before, when you didn't want to lend to me because I needed 90 or 95 per cent, you will be happy to lend to me because I have so much equity.'

Mr TELFER: It is just as much a service that has been provided for entry into the world of mortgage than from go to whoa as far as a loan process goes?

The Hon. S.C. MULLIGHAN: Absolutely, and Andrew and I talk about this a lot. HomeStart was established in 1989 with the whole idea that South Australians who cannot get into housing finance through a traditional bank can come in through HomeStart with much lower deposits required and none of those other imposts like lenders mortgage insurance and, once they are more financial, they have been in for a few years, they have more equity in their home and they are a more suitable client for a regular bank, then they can leave and that frees up lending capacity for HomeStart to go to the next group of South Australian buyers looking to get into home ownership.

Mr TELFER: My reading of this page, Treasurer, is that HomeStart is expected to return a net of $45.8 million to Treasury; is that right?

The Hon. S.C. MULLIGHAN: Yes, for 2025-26.

Mr TELFER: Yes, for this budget period?

The Hon. S.C. MULLIGHAN: Yes.

Mr TELFER: Expected return of $45.8 million to Treasury: does this align with the agency's core role of supporting housing affordability? It is a fair revenue stream for the government. Could that be better geared to even more effectively aid people looking to enter the housing market?

The Hon. S.C. MULLIGHAN: You also have to appreciate that HomeStart's loan book is nearly $3½ billion. They have been growing quite strongly in recent years as South Australians have found it harder and harder to get into a regular mortgage with a regular bank. While we are very confident in the fact that HomeStart's lending for bricks and mortar, for quiet, resilient and reliable assets for South Australians to own, has competitive neutrality principles to which the government signed up as part of the 1995 competition reforms, where we have to treat any sort of trading enterprise operating in the market as if it was just a regular market participant, making sure they are not getting subsidies or benefits that the other banks do not get.

We are raising money, we are borrowing money, to give to HomeStart so that they can lend it to South Australians trying to get into the housing market. We obviously have a very attractive borrowing rate compared to what perhaps some of the other banks in South Australia might have access to, so, for competitive neutrality reasons, we have to charge a margin on that, recognising that we are allowing HomeStart to use the government's balance sheet to raise capital to lend and to operate the business. But we do not necessarily want them having an outsized competitive advantage against the existing market in doing so.

Mr TELFER: So basically you are making money out of the equity stake.

The Hon. S.C. MULLIGHAN: Yes.

Mr TELFER: As a hot market is rolling along on the wave of increased property prices it is an even better story for HomeStart.

The Hon. S.C. MULLIGHAN: It is good for HomeStart, but it also recognises that, when HomeStart is using so much of the government's balance sheet to raise capital to operate this business, there should be a charge for that. There should be a cost of having that debt facility, so we charge them that. Regarding the income tax equivalent line that you pointed out before, we have to treat this business as if it were any other business operating in the market, and so they have to pay the same sorts of tax obligations, even though they are an entity of government.

Along with our stamp duty receipts, improved returns from HomeStart are allowing us to spend the $3.2 billion in the whole package of measures that we put together to try to deliver more housing supply across our four budgets.

Mr TELFER: There is a line that shows $9.2 million in CSO payments to HomeStart. How is that being applied to support loan access for lower income or disadvantaged homebuyers? How do you measure whether this level of support is adequate?

The Hon. S.C. MULLIGHAN: Generally speaking, across HomeStart but also all the other government businesses, we pay CSOs to them in order for them to do things which you would deem to be non-commercial. Again, it is a transparent way of making sure that we are meeting our competition principles.

There are three things that HomeStart finance does, which cost at $9.1 million in the current year and $9.2 million in the next year and for which the government pays a CSO towards HomeStart. One of these offers a substantial interest rate subsidy for the Advantage Loan. The Advantage Loan is a product that is available to households earning under $65,000 a year. So if they earn less than $65,000 of household income they can access an Advantage Loan as part of their borrowings with HomeStart. The Advantage Loan can be up to $70,000 of the total borrowings that they will have with HomeStart, and the interest rate charged for that Advantage Loan is 2.04 per cent, obviously well below market rates.

There is also a financing facility of $5 million in a loan that is being provided to the YWCA, and then there is also a non-commercial credit risk subsidy which is paid by the government to HomeStart for them to incur that credit risk.

Mr TELFER: What is the take-up on the average loan? A $65,000 household income is very low.

The Hon. S.C. MULLIGHAN: Year to date for the current financial year, we have had 74 of the Advantage Loans—so not very common, but there is a reasonable number of them—with a total amount of $2.36 million lent. What is more common, though, is people taking out the shared equity loan. There have been 998 of those this year, for a total of $134.1 million.

Mr TELFER: Is that cumulative number of those two the total number of loans issued by HomeStart in 2024-25?

The Hon. S.C. MULLIGHAN: No.

Mr TELFER: Can you provide me that number, the total issued in 2024-25 and the forecast for 2025-26?

The Hon. S.C. MULLIGHAN: Sure. Perhaps what I can do is, for the 2024-25 financial year, provide you with all of the numbers of the different loan products and the average loan amounts. Is there anything else you want us to take on notice?

Mr TELFER: What are the projections for 2025-26?

The Hon. S.C. MULLIGHAN: Okay, and then replicating those figures for 2025-26 as well? I am happy to provide that; that is fine.

Mr TELFER: Thank you.

The CHAIR: The allotted time having expired, I declare the examination of the South Australian Finance Authority, Funds SA, RevenueSA, Super SA and HomeStart complete.

Membership:

Ms Savvas substituted for Ms Hood.

Departmental Advisers:

Ms T. Pribanic, Under Treasurer, Department of Treasury and Finance.

Mr M. Carey, Executive Director, Shared Services SA.

Mr B. Petrovic, Acting Chief Executive, Lifetime Support Authority.

Mr A. Coates, Chief Executive Officer, South Australian Government Financing Authority.

Ms J. White, Director Insurance and Strategic Projects, South Australian Government Financing Authority.

Mr D. Price, Chief Executive, CTP Regulator.

Mr M. Hardy, Chief Commercial Officer, Department of Treasury and Finance.

Ms P. Chau, Chief Operating Officer, Department of Treasury and Finance.

Mr J. Chapman, Industry Advocate.

The CHAIR: I advise that the proposed payments remain open for examination.

Mr PATTERSON: The omnibus questions are:

1. For each department and agency reporting to the minister, how many executive appointments have been made since 1 July 2024 and what is the annual salary and total employment cost for each position?

2. For each department and agency reporting to the minister, how many executive positions have been abolished since 1 July 2024 and what was the annual salary and total employment cost for each position?

3. For each department and agency reporting to the minister, what has been the total cost of executive position terminations since 1 July 2024?

4. For each department and agency reporting to the minister, will the minister provide a breakdown of expenditure on consultants and contractors with a total estimated cost above $10,000 engaged since 1 July 2024, listing the name of the consultant, contractor or service supplier, the method of appointment, the reason for the engagement and the estimated total cost of the work?

5. For each department and agency reporting to the minister, will the minister provide an estimate of the total cost to be incurred in 2025-26 for consultants and contractors, and for each case in which a consultant or contractor has already been engaged at a total estimated cost above $10,000, the name of the consultant or contractor, the method of appointment, the reason for the engagement and the total estimated cost?

6. For each department or agency reporting to the minister, how many surplus employees are there in June 2025, and for each surplus employee, what is the title or classification of the position and the total annual employment cost?

7. For each department and agency reporting to the minister, what is the number of executive staff to be cut to meet the government's commitment to reduce spending on the employment of executive staff and, for each position to be cut, its classification, total remuneration cost and the date by which the position will be cut?

8. For each department and agency reporting to the minister, what savings targets have been set for 2025-26 and each year of the forward estimates, and what is the estimated FTE impact of these measures?

9. For each department and agency reporting to the minister:

(a) What was the actual FTE count at June 2025 and what is the projected actual FTE account for the end of each year of the forward estimates?

(b) What is the budgeted total employment cost for each year of the forward estimates?

(c) How many targeted voluntary separation packages are estimated to be required to meet budget targets over the forward estimates and what is their estimated cost?

10. For each department and agency reporting to the minister, how much is budgeted to be spent on goods and services for 2025-26 and for each year of the forward estimates?

11. For each department and agency reporting to the minister, how many FTEs are budgeted to provide communication and promotion activities in 2025-26 and each year of the forward estimates and what is their estimated employment cost?

12. For each department and agency reporting to the minister, what is the total budgeted cost of government-paid advertising, including campaigns, across all mediums in 2025-26?

13. For each department and agency reporting to the minister, please provide for each individual investing expenditure project administered, the name, total estimated expenditure, actual expenditure incurred to June 2024 and budgeted expenditure for 2025-26, 2026-27 and 2027-28.

14. For each grant program or fund the minister is responsible for, please provide the following information for the 2025-26, 2026-27 and 2027-28 financial years:

(a) Name of the program or fund;

(b) The purpose of the program or fund;

(c) Budgeted payments into the program or fund;

(d) Budgeted expenditure from the program or fund; and

(e) Details, including the value and beneficiary, or any commitments already made to be funded from the program or fund.

15. For each department and agency reporting to the minister:

(a) Is the agency confident that you will meet your expenditure targets in 2025-26? Have any budget decisions been made between the delivery of the budget on 5 June 2025 and today that might impact on the numbers presented in the budget papers which we are examining today?

(b) Are you expecting any reallocations across your agencies' budget lines during 2025-26; if so, what is the nature of the reallocation?

16. For each department and agency reporting to the minister:

(a) What South Australian businesses will be used in procurement for your agencies in 2025-26?

(b) What percentage of total procurement spend for your agencies does this represent?

(c) How does this compare to last year?

17. What percentage of your department's budget has been allocated for the management of remote work infrastructure, including digital tools, cybersecurity, and support services, and how does this compare with previous years?

18. How many procurements have been undertaken by the department this FY. How many have been awarded to interstate businesses? How many of those were signed off by the CE?

19. How many contractor invoices were paid by the department directly this FY? How many and what percentage were paid within 15 days, and how many and what percentage were paid outside of 15 days?

20. How many and what percentage of staff who undertake procurement activities have undertaken training on participation policies and local industry participants this FY?

Mr TELFER: I might start with the Lifetime Support Authority. This is Budget Paper 3, Budget Statement. This is the public financial corporations aspect, page 77. Obviously, there is not the quite the same breakdown in budget specificity in that line. What is the budget from financial year 2024 compared to the actual spend for 2024?

The Hon. S.C. MULLIGHAN: I should introduce the change of advisers at the table. I have Mark Carey who is the Executive Director of Shared Services, and Boris Petrovic is the Acting Chief Executive of Lifetime Support. Are you after the current year and next year?

Mr TELFER: Firstly, the current year's budget versus actual and then looking forward as well.

The Hon. S.C. MULLIGHAN: The full year budget for 2024-25 was $335.36 million. For revenue and expenditure it was $362.2 million. The forecast for income is $336.3 million and expenditure is $369 million. Did you want the main sources of variance?

Mr TELFER: So that is a 10 per cent change? So that is 10 per cent more expenditure than income—

The Hon. S.C. MULLIGHAN: That was budgeted for.

Mr TELFER: —in the estimated current?

The Hon. S.C. MULLIGHAN: Yes.

Mr TELFER: What is the—

The Hon. S.C. MULLIGHAN: What is the reasoning?

Mr TELFER: I will get to that. Those are 2025-26 numbers and then you can give me an explanation as to why.

The Hon. S.C. MULLIGHAN: So, for 2025-26, the budgeted income is $360.1 million and the total expenses are 375.99. I am advised that there is a particular accounting standard that relates to how we provision for the future liabilities of treatment for participants in the scheme in each year and, while that may not reflect the actual expenditures on that treatment, the provision for it has to be accounted for in each financial year. So, for the current financial year that is just about to end and the next financial year, even though we are receiving those incomes from the levy they are not provisioned for to equate to the total amount of liability that is forecast by the actuaries.

Mr TELFER: Yes, so there is a shortfall. I think it was a $35 million shortfall in the current financial year. Is that shortfall covered by Treasury?

The Hon. S.C. MULLIGHAN: No, and I think this is the challenge of trying to reconcile the actual operating incomes that are coming into the organisation and the expenditures going out of the organisation for the provision of care and managing the organisation's efforts and so on versus how we have to account for the overall increasing liability for the number of participants in the scheme.

I think what we also look to is: what is the difference in the latest actuarial valuations of the claims liabilities and the investment assets? In the previous year, we had a significant disparity between those and that disparity is closing—the total outstanding claims liabilities of $1.954 billion versus the investment assets of 1.858—so that we have a solvency ratio of 95 per cent, which is substantially improved from the solvency ratio when we were sitting here this time last year.

So even though we are not recovering a level of income from motorists to provide a break-even profit and loss statement, we are making sure that there are enough assets being held by the Lifetime Support Authority to meet its obligations.

Mr TELFER: How many current participants are there currently in the Lifetime Support Authority?

The Hon. S.C. MULLIGHAN: There are 403.

Mr TELFER: How does that number compare to previous years?

The Hon. S.C. MULLIGHAN: I am advised that it goes up roughly—it fluctuates, obviously—40 per year. In the current year it is forecast to increase by 36. Last year in 2023-24 it was 42, in 2022-23 it was 37, and in 2021-22 it was 30—

Mr TELFER: So a 10 per cent increase a year, basically.

The Hon. S.C. MULLIGHAN: Yes; it bounces around by that 35 to 40 number per year.

Mr TELFER: With those future-looking or forecast numbers, you do not see any reason for that around 35 to 40, or 10 per cent, increase to change?

The Hon. S.C. MULLIGHAN: No. I think the biggest impact is not so much the number of participants in the scheme, it is the cost of providing care for those participants in the scheme. In a not too dissimilar way to the costs increasing for the NDIS, for example, we are seeing some of the impacts of the demand for those treatment services impacting the LSA's costs as well.

Mr TELFER: How has the Lifetime Support Authority performed in the financial year compared to some of its KPI matrix measures? I have a few here to consider: participant survey, experience, current MyPlan in place for active participants, funding ratio, investment returns since inception, net expense ratio, cost managed against budget. How is the Lifetime Support Authority performing against some of those key KPIs?

The Hon. S.C. MULLIGHAN: I am advised that the LSA's strategic KPIs include achieving at least 80 per cent of participant survey satisfaction, which they have achieved. It was 81 per cent for the current financial year and 82 per cent for the previous financial year. For the scheme's sustainability, the funding ratio target is between 80 per cent to 120 per cent. It is currently at 95 per cent, significantly improved from last financial year.

The investment return target is 6.25 per cent, and they are forecasting 7.4 per cent. The net expense ratio they target to be equal or less than 12 .5 per cent and they have achieved 10.6 per cent. The costs managed against budget, they target that to be zero and that has come out at $1.9 million favourable, so that is good. With staff engagement, I think they target at least 70 per cent and last year it was 71 per cent, this year 73 per cent. That is a bit of a snapshot.

Mr TELFER: Kicking goals then.

The Hon. S.C. MULLIGHAN: Meeting their targets.

Mr TELFER: There are a few different aspects I was interested in. It is probably getting a bit more granular, but we have seen some credit card statements obtained through FOI, specifically for the period from 24 October to 25 March. One that caught my eye is multiple transactions for payments for gym memberships. It ranges from $120, which is pretty minimal, to over $2,000, which is why it caught my eye. What do these payments to various gyms relate to? Obviously there is rehab work and the like, but are you able to give us some information?

The Hon. S.C. MULLIGHAN: You are right, it is for participant treatment and rehabilitation. The participants are able to choose which gym they want to go to, and the reason for using credit cards is because it is the experience of the LSA that most gyms only take that form of payment; hence using it rather than having an invoice-type regime.

Mr TELFER: Do you know how many gym memberships are paid for; for how many participants?

The Hon. S.C. MULLIGHAN: We do not have that but we can take it away and see if we can get you that number.

Mr TELFER: Is it the practice of the LSA to fund them short term or are annual memberships paid?

The Hon. S.C. MULLIGHAN: I am advised that there are annual assessments of what treatment and care is required by each of the participants. If the treatment team identifies that there is an ongoing need for the use of a gym for treatment and rehabilitation purposes, then that would inform perhaps a view that an annual membership is taken out. If the treatment plan is that it might be more one-off or sporadic, then that might inform not paying a full annual amount and doing it incrementally.

Mr TELFER: Is there a vigorous audit process to make sure that the nature of credit card payments and direct debits and the like is that they can be rolling on? Plenty of us, I am sure, have gym memberships that probably go on longer than we actually use them for, sadly.

The Hon. S.C. MULLIGHAN: Yes.

Mr TELFER: Is there a vigorous audit process that—

The Hon. S.C. MULLIGHAN: I would be included in that.

Mr TELFER: —is followed to make sure that this cumulative cost is actually kept in check?

The Hon. S.C. MULLIGHAN: I am advised that when those annual treatment plans are worked out then there is a reconciliation of the costs incurred of delivering that treatment and care plan each year. I guess I should say that while they are always topical, the use of credit cards in the government or government entity sphere, they can be far more cost-effective payments as well as easier to track, rather than doing an invoicing and accounts payable regime.

Mr TELFER: Do we know the amount that is budgeted for gym memberships for this financial year?

The Hon. S.C. MULLIGHAN: I am advised that we do not budget specifically for gym memberships, but it falls within what I am told is the rehabilitation category of expenditure. The budget for the current financial year was $7.3 million for rehabilitation services, and the full year forecast outcome is $6.7 million against that budgeted amount. I am told that aside from the gym memberships the actual majority of that expenditure is for physiotherapists and occupational therapists.

Mr TELFER: I might bounce to some procurement questions, so I will look at Budget Paper 4, Volume 4, Agency Statements, page 162. There is line in the highlights, dot point 2, that says, 'Created a procurement probity training course for public officers.' Has this course been fully rolled out?

The Hon. S.C. MULLIGHAN: I am advised that it has been rolled out. Did you want some particulars?

Mr TELFER: Yes, what were the take-up numbers? It is one thing to roll it out. How many actually took it up?

The Hon. S.C. MULLIGHAN: Sure. Perhaps I can come back to you with the number of agencies that participated and the number of participants from each agency.

Mr TELFER: Thank you. There is also a line in highlight no. 7:

Completed a secondary procurement process for 23 agencies under the telecommunications services marketplace panel through an aggregated mobility services request for quote.

Which agencies does this apply to?

The Hon. S.C. MULLIGHAN: I am advised that it was most of the major agencies in the general government sector—Treasury, of course, Premier and Cabinet, Health, Education, Primary Industries and so on—but I am happy to come back with a list of the 23, if you like.

Mr TELFER: Yes, that list of 23. Then the bottom dot point in the highlights: 'Established an across government procurement internship program with the university sector.' What universities are involved in this program?

The Hon. S.C. MULLIGHAN: It was certainly done with the University of Adelaide, but I will have to check whether UniSA or Flinders was included as well—as well as, of course, the University of the Third Age.

Mr TELFER: Both in the highlights and the targets there is a reference to the Aboriginal enterprise procurement strategy. Obviously, it was a highlight to commence it and a target to finalise it. At what stage during the financial year is this strategy expected to be finalised?

The Hon. S.C. MULLIGHAN: Just to provide a bit of context for this, Treasury coordinated the first across-government Indigenous Expenditure Report, which was how much money was being spent by government agencies specifically on services or initiatives for the benefit of Indigenous South Australians. That was released about 18 months or two years ago, I think.

It was an enormous body of work surveying all of the government agencies and getting them to detail all of their spending programs and then how much of it related to Indigenous South Australians. That highlighted what that proportion was and whether there was the capacity to increase it or improve that amount. One of the ways in which that can be improved is by getting Aboriginal controlled organisations to win more government contracts to deliver in their businesses, including for the benefit of Indigenous South Australians as well.

This budget includes a measure in Treasury where we have allocated $5 million over a number of years to work with the ACCO sector to get them ready for or skilled up to bid for government procurements and carry out work on behalf of government. What you have identified there, that Aboriginal enterprise procurement strategy, has been aimed at that sort of outcome. I will try to give you a particular date about when we push the button on it for it to go live, but that is the sort of context in which that procurement strategy has been developed.

Mr TELFER: Are there any KPIs for that strategy?

The Hon. S.C. MULLIGHAN: I might have to take that on notice. I cannot recall off the top of my head.

Mr TELFER: Was the Voice consulted on this strategy development?

The Hon. S.C. MULLIGHAN: Given that the draft may not have been completed, it has not been yet, but it will be before it is released.

Mr TELFER: So it will be developed and then consulted and then—

The Hon. S.C. MULLIGHAN: Finalised post consultation.

Mr TELFER: What about strategies to appropriately engage not just with the ACCOs but with the actual businesses that might be able to deliver some of these services? One of the frustrations I hear from my community is that some of the Aboriginal-run organisations would love to be able to engage in this sort of thing, but they do not understand the processes, especially some of the complicated procurement steps. This is a strategy that is the Aboriginal enterprise procurement strategy. When it comes to actual engagement, what work has been done in that space?

The Hon. S.C. MULLIGHAN: The Office of the Industry Advocate has been developing these events called Meet the Buyer events. We have held a series of them now and I think the next one is on 2 July, where we hold basically an expo and we have all of the government agencies, the government procurers of goods and services—

Mr TELFER: I went to one years ago. How many of them are actually run?

The Hon. S.C. MULLIGHAN: This financial year, it is either two or three. There was an extra one, which was held in Whyalla, obviously in response to the Whyalla package that the government announced, where part of that was to try to get more Whyalla-based businesses or businesses in the Whyalla greater region to be doing Whyalla-specific work, so that if we had work to do to government facilities or whatever that we would use the local tradies for that. Then I think we have two outside of that, during the course of this year, but I will double-check that. I will get the dates and the details for you.

John Chapman, who is the Industry Advocate, has confirmed the advice that we have had those Meet the Buyer events that you have attended previously, and the next one is on 2 July. There is a dedicated staff member in the Office of the Industry Advocate who works on this and promotes this.

There is a register of Aboriginal businesses or Aboriginal enterprises so that, when there are tendering opportunities, that list can be notified and enlivened. The next Meet the Buyer event will also be delivered in partnership with the South Australian Business Chamber to try to make sure that we are reaching out to a broader cross-section of the business community when it comes to these procurement opportunities as well. The job is not complete in making sure we have left no stone unturned in getting more Aboriginal enterprises involved in government procurement, but we feel like we are making significant advances with these additional efforts.

Mr TELFER: How many Meet the Buyer events will be on in 2025-26?

The Hon. S.C. MULLIGHAN: In terms of the big Meet the Buyer event, we would probably do just one main one but have separate smaller sessions across different areas or industries, as we have done in the past when we have done ones specifically for the housing and construction industry and so on, when we have been trying to get more South Australian builders involved in working for the Housing Trust. Perhaps we can get a list to you after the agenda has been finalised.

Mr TELFER: Will any be in regional areas?

The Hon. S.C. MULLIGHAN: The recent one was in Whyalla. Perhaps I will take on notice whether there are plans to do another one elsewhere.

Mr TELFER: The great challenge is not just with Aboriginal businesses but with small business as a whole, and South Australia is a small business state and we should be doing what we can with the procurement purse the South Australian government has. As far as specific measures, you have spoken about the role of the Industry Advocate. What other measures has the Treasurer taken to ensure that South Australians are not shut out of procurement opportunities through state government, but especially due to the skill shortage challenges we spoke about earlier?

The Hon. S.C. MULLIGHAN: That's a good question. At the last election we had a comprehensive procurement policy for government, identifying that, if we can increase the proportion of South Australian businesses providing goods and services to government, for no extra cost to government or to Treasury, we are increasing the amount of work done in the South Australian economy for the benefit of the small business community.

In January 2024 our revised procurement policy came into effect, and there has been quite an effort from Treasury in Procurement Services SA, as well as the Industry Advocate, to get that policy not just applying to government agencies but to get it understood and adhered to in the government agencies. At the same time, we set a target for an additional 5 per cent of government procurement expenditure to be delivered to South Australian businesses away from interstate and overseas suppliers, and my advice is that that additional 5 per cent has been achieved. I think we have gone from something like 74 per cent of government spend being spent locally to something closer to 80 per cent, but I will come back to you on those figures.

It is even better than that. I am told that in 2023-24, in the number of contracts we were able to monitor, the figure was $4.7 billion of contracts (or 84 per cent) being awarded to South Australian business, and year to date, from 1 July 2024 to 30 April 2025, $4.18 billion (or 91 per cent) of contracts have been awarded to South Australian businesses. That is two months shy of the financial year.

Mr TELFER: That is for major projects as well? We spoke a bit about major capital projects. Is that part of that measure point?

The Hon. S.C. MULLIGHAN: That is all contracts.

Mr TELFER: So Torrens to Darlington and the new Women's and Children's Hospital are included?

The Hon. S.C. MULLIGHAN: I am not sure that the Women's and Children's Hospital has been included in that, because we are still in a procurement process with that.

Mr TELFER: Early days, yes.

The Hon. S.C. MULLIGHAN: The Torrens to Darlington project is a little bit late, even though we have awarded a head contract and there are subcontracts that are awarded through that process, which the OIA is responsible for monitoring to keep DIT accountable for what the lead contractor is awarding.

Mr TELFER: What about the North Adelaide Golf Course?

The Hon. S.C. MULLIGHAN: They have not finished designing it yet.

Mr TELFER: Did that design go out to procurement?

The Hon. S.C. MULLIGHAN: I will have to come back to you. I think that is being managed out of DPC, but I can check. I think the intent is that someone's expertise in particular is going to be procured for that project.

Mr TELFER: Not a South Australian, though.

The Hon. S.C. MULLIGHAN: Well, he played his first championship title on a South Australian course. In fact it was at Grange—

Mr TELFER: He is a Queenslander who now lives overseas. It is not really in South Australia—

The Hon. S.C. MULLIGHAN: Some of my best friends are Queenslanders. They are not as bad as Western Australians.

Mr TELFER: That explains a lot. It explains a lot.

The Hon. S.C. MULLIGHAN: They are not Australians; they are Western Australians.

Mr TELFER: We jest, but, seriously, this is a pretty significant project as a whole, budget wise. Do we know when procurement is expected to be completed by for that project?

The Hon. S.C. MULLIGHAN: I do not, but let me take that on notice.

Mr TELFER: I would appreciate that because, obviously, it feels like the government is building up an urgency for it, and it would be appreciated if we knew what that procurement process will look like.

The Hon. S.C. MULLIGHAN: Sure.

Mr TELFER: An aspect in the budget—I do not know if it is here or not, minister, but I am just interested, in the last few minutes, if possible, if it is under your remit—

The Hon. S.C. MULLIGHAN: Sure.

Mr TELFER: —in the Venture Capital Fund announcement. It is in the—

The Hon. S.C. MULLIGHAN: Budget Paper 5—just to help the member.

Mr TELFER: It is in the Budget Overview on page 24. It is a highlight that I want to extrapolate out.

The Hon. S.C. MULLIGHAN: There are many highlights in the budget and this is but one.

Mr TELFER: This is one where there is not a lot of information and explanation. What is envisioned with the Venture Capital Fund? Obviously, it is something that the government has contributed $50 million to. Can you give me an outline as to what the structure of that fund is going to look like and what you are aiming for it to deliver?

The Hon. S.C. MULLIGHAN: We will provide $50 million towards the Venture Capital Fund. There will be a board or an oversight committee that will be established, similar to what we did the first time around with the first Venture Capital Fund in 2017. They will then go and procure an investment manager, and the investment manager will be the one responsible for identifying investment opportunities, assessing them and providing advice to the oversight committee about which investments are—

Mr TELFER: So it will not be managed internally by government?

The Hon. S.C. MULLIGHAN: I think SAFA will be the responsible government entity for it, but we will have external expertise assisting us. I think that in the first iteration we had Raymond Spencer, who was the chair of the Venture Capital Fund, and we had some people external to government, who were familiar with venture capital enterprises and had some experience, provide that oversight. They went out to market—I think they initially engaged Blue Sky investments, and then they changed and it went to Artesian investments, which have managed that. So it is basically the same sort of process, but we will look for others to populate the advisory role, and we will go out and have a process to identify the investment manager who will actually conduct the assessment of the investments and place them as well.

Mr TELFER: I am interested in the 2017 iteration—depending on the perspective as to the success of it at the time, and I am always cautious when it is government involved in something like this. It makes it too onerous for what really is, in this space, in the private sector or private investment. It is pretty aspirational. Is there going to be ministerial influence or involvement in this process, or is it going to be completely external to the decision-makers at the ministerial level?

The Hon. S.C. MULLIGHAN: There will be ministerial accountability.

Mr TELFER: Accountability is one thing, but as far as some of the strategic investments that may be—

The Hon. S.C. MULLIGHAN: It is not how it worked last time. I would not necessarily envisage that I or another minister would be sort of involved in the decision-making. We may need to ultimately authorise the decisions that are made about investment and allow funds to be disbursed, but, in terms of the discretion of decisions, previously that was done by the committee and based on the recommendations of the investment manager, and that is how we envisage it going ahead.

We recognise that, while people might think that government is not naturally the home for this, the first fund did have a lot of successes. It generated a positive return for the government, and it meant that companies that the member for Morphett would be well familiar with—companies like Fleet Space, Myriota and Inovor, and people doing big and wonderful things now in the space and advanced technology sectors—get their start. That is generally how we see it working again, but we have a bit of work to do to work out who is going to be doing it.

Mr TELFER: For the structure of the board and/or chair, do you envision that those will be positions that are recompensed?

The CHAIR: Does the minister want to answer that question?

The Hon. S.C. MULLIGHAN: That is okay. Yes. If we are getting someone external—

Mr TELFER: At equivalent rates to what?

The Hon. S.C. MULLIGHAN: To government. We will have to assess that. We pay board fees for things like Super SA and Funds SA and other boards, and we might have to do the same thing here. I will need to understand what the frequency of the meetings would be and how much work is involved in the meetings, and that would also determine how much we might need to pay—

Mr TELFER: The funds manager will be reporting to them.

The Hon. S.C. MULLIGHAN: I am happy to come back with some detail on notice.

The CHAIR: The allotted time having expired, I declare the examination of the CTP Regulator, SA Government Insurance and Fleet, Strategic Procurement, Industry Advocate and Shared Services complete. The examination for the proposed payments for the Department of Treasury and Finance are now complete. Further examination of the proposed payments for the Administered Items for the Department of Treasury and Finance is adjourned until Tuesday 24 June. Thank you, everybody, for your contribution.

Sitting suspended from 13:17 to 14:15.