AUDITOR-GENERAL'S REPORT

Mr HAMILTON-SMITH (Waite—Leader of the Opposition) (14:29): How can the Treasurer guarantee that reduced expenditure targets set for the next two financial years will be met? The Auditor-General's Report confirms that the integrity of the budget depends on reduced expenses in 2008-10. The Auditor-General in part C of his report (page 5) notes these improved results have not been achieved for the past five years and are 'therefore considered more uncertain'. The Auditor-General further notes that the 2006-07 budget estimated that the expenses would fall in real terms by 1 per cent, but that the estimated result shows real term increases of 3 per cent—an overall variation on the year's $11 billion expenses budget.

The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (14:30): I love the way he feigns that anger. I suppose any bloke who goes around saying he is the alternate premier has a fairly high opinion of himself—but anyway.

Members interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: I do not know where the leader (or the alternate premier, as he prefers to be called) has been for the last three or four years, because I have repeatedly made very clear the difficulty we have in controlling expenditures in government and, in particular, health. Health cost pressure—that is, the growth in health expenditure—is increasing at anywhere between probably 7 and 10 per cent; probably closer to 9 per cent per year. We have been grappling with that since day one in government. And—surprise, surprise—so was the former Liberal government. It is extremely difficult to drive efficiency and reform in the health sector. We are doing that, and we have been doing it—

Ms Chapman: Other states are.

The Hon. K.O. FOLEY: They are not. The deputy leader says other states are. They are not, because you know what has been happening—

Ms Chapman interjecting:

The Hon. K.O. FOLEY: They have not.

Ms Chapman interjecting:

The SPEAKER: Order! I have called the deputy leader to order.

The Hon. K.O. FOLEY: Sir, I am happy to answer this question in a constructive manner, but if the members opposite want to shout me down I will sit down. They either want to hear me or they do not. Would you like an answer?

Mr Hamilton-Smith: Oh, Mr Speaker—

The SPEAKER: The Deputy Premier will get on with his answer, please.

The Hon. K.O. FOLEY: The pressure and the stress on all state budgets—indeed, the national budget—from an ageing community is extraordinary. Peter Costello makes that point at every treasurers' meeting we have each year—the cost of the PBS scheme, the cost of Medicare and the cost of our hospitals, as technology advancement, longevity and an ageing community produce enormous pressures. However, what has made it even more difficult (and I think the Prime Minister himself has acknowledged this now) is that we used to have roughly a 50:50 split between the commonwealth and state governments. That, I think, has now dropped down to approximately 40 per cent approximately from the commonwealth. So, as the cost increases occur, the contribution from the commonwealth has decreased. If we are having 9 per cent growth, instead of sharing that growth, the state budget is required to pick up the vast bulk of it.

What has been happening is that we have put in what we believe to be appropriate settings for health expenditure in our earlier budgets, and the expenditure exceeded what we forecast. I have made no secret of that. In the budget before last, straight after the state election, if members recall, I was quite upfront about that and I said we have had difficulty in properly provisioning the right amount of money for health growth. So, in that budget we factored in a very large forward funding provisioning for expected health growth. That was a genuine attempt to set a fiscal framework for health that we could live within. What happened then is that even that was not sufficient, because of the enormous growth in funding requirements for our hospitals.

Mr Hamilton-Smith interjecting:

The Hon. K.O. FOLEY: Just let my expenses go? When people arrive at an emergency department, when people arrive for critical care, governments have no choice—and nor should they—but to accept and treat those patients. When patients live longer in hospital, when technology gives people the opportunity to live longer, we take up that opportunity, but it comes at a real cost. To simply say that we cannot control our expenses indicates that the leader has no comprehension of government finances, and is not being fair and constructive in trying to put forward alternative solutions. This was the problem confronted by Dean Brown and John Olsen in the last Liberal government. That is why we are reforming the health system in the way in which we are. One way the former Liberal government dealt with it was to spend no money on the upgrade of the Royal Adelaide Hospital—or very little. So, you run down your capital program to such a point that a significant catch-up is required, and we are putting the significant catch-up into play; that is why we are building a new hospital.

However, I will say this. Notwithstanding the ridicule opposite, notwithstanding the ill-informed and quite silly comments like the member for MacKillop made earlier in question time, and the scaremongering that the leader is trying to whip up—he even trotted out the State Bank yesterday—I can say that, since coming to office, we have balanced each and every budget and we have restored in a very short time the AAA credit rating.

I can say that when the mid year budget review is released later this year you will all have egg on your faces, because what it will show is that the state's budgetary position continues to improve, surpluses remain strong, solid and growing, and the government's liabilities as a ratio to revenue surprisingly are in a better position than what they were at budget time. These figures jump around, for a whole lot of parameters. I will be meeting with Moody's in January in New York, as I meet regularly with them, and I will be updating them on the state's financial position. The former government had very little rapport with rating agencies. I have developed a very close relationship with the rating agencies. They trust me as a treasurer, they trust this government, they believe what we say, and they have access to all financial records of government. If any leader, or alternative premier as he prefers to be called, wants to go out there scaremongering and raising the State Bank they do so for base political reasons and it is not based on any substantial fact.