House of Assembly Fifty-First Parliament, Third Session (51-3) 51 3 Parliament of South Australia House of Assembly published Question Time South Australian Economy SOUTH AUSTRALIAN ECONOMY Ms THOMPSON House of Assembly Reynell SOUTH AUSTRALIAN ECONOMY Ms THOMPSON (Reynell) (15:03): Will the Treasurer advise the house what the government is doing to boost the South Australian economy during these uncertain economic times? The Hon. K.O. FOLEY House of Assembly Port Adelaide Deputy Premier Minister for Industry and Trade Minister for Federal/State Relations SOUTH AUSTRALIAN ECONOMY The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (15:03): These are very difficult times, as we are all well aware, and it is encouraging to see the response today from the federal government in terms of a major stimulus package. Mr Williams interjecting: The Speaker House of Assembly The SPEAKER: Order! The member for MacKillop will come to order! The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: I would hope the house would give me an opportunity to talk about the economy without having to shout above members opposite, because this is a very serious issue and one that I hope can be dealt with in a more bipartisan manner than perhaps normally occurs. Today the government has tabled the final budget outcome for the financial year 2007-08, and, in doing so, we have recorded a major operating surplus to 30 June 2008 of some $464 million—that is $91 million above the then budget estimate for that financial year. We also had a net lending surplus to the end of June of some $222 million—which is an improvement. What it means is that the cumulative surpluses which we had delivered in our six budgets to that point included some $1.9 billion of accrued surpluses. Mr Williams interjecting: The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: I am glad the honourable member asked that question. Mr Williams interjecting: The Speaker House of Assembly The SPEAKER: Order! I am happy to give the member for MacKillop leave to ask a question. The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: The honourable member has asked, 'What are the accumulated borrowings?' Mr Griffiths interjecting: The Speaker House of Assembly The SPEAKER: Order, the member for Goyder! The Deputy Premier will take a seat for a moment. If members have questions of the Treasurer I am more than happy to give them the call—they only need to stand on their hind legs and I will do so—but I will not tolerate members calling out questions while the Deputy Premier is providing his answer. The Deputy Premier. The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: Thank you, sir. I think the would-be treasurer, the shadow treasurer, asked, 'Where has the $1.9 billion surplus gone?' Well, we had that question and we had the member for MacKillop asking, 'What is the debt?' In fact, the surpluses were used to wipe out budget sector debt. At 30 June 2008 the state had no net budget sector debt. In fact, at 30 June we had a surplus position of financial assets of $276 million. The accumulated surpluses we have accrued since coming to office have paid off remaining state budget debt which the former Liberal government left this state when it lost office. Members interjecting: The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: Well, it's a fact; it's a true fact. Members interjecting: The Speaker House of Assembly The SPEAKER: Order! The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: The truth of the matter is that the surpluses have paid off outstanding budget sector debt. Members opposite, in particular the leader, have been saying that somehow we have squandered the surpluses and we should have had ourselves in a better budget position ahead of this downturn. Can members imagine if I walked in here today and said, 'Instead of a net asset position at 30 June of $276 million, I had $2.1 billion.' I would be under enormous pressure from members on my side to spend it and members opposite would be deriding me for hoarding this money for no useful purpose. In fact, what has occurred since 30 June last year is the most significant wealth destruction that the world economy has ever seen. It has taken the state's budget position, as outlined in the mid-year review, from a surplus of $464 million at 30 June to a forecasted deficit of $112 million by the end of this calendar year. That is a massive turnaround—and that was prior to the Prime Minister's and the Treasurer's announcements yesterday that we are facing a further significant reduction in GST revenue. I do not think it is useful at this stage to give monthly updates on the financial position, but I will say that the state is facing a larger budget deficit than that which was predicted only a matter of weeks ago—which is the same language that the Prime Minister has used. Even in their estimates, since the end of November the world has continued to substantially deteriorate. I have just returned from the United States and the United Kingdom where I have been briefed on the economy. The Leader of the Opposition shared in some of those briefings. I know as a result of our discussions that he is extremely concerned about what is occurring internationally, which is beyond the control of not just a nation but also a sovereign state government. We are continuing to maintain a significant fiscal stimulus as a government. The Premier is insistent that we maintain, wherever possible, our substantial capital commitment to building in this state. In fact, the budget for 2008-09 in capital expenditure is forecast to be some $2.4 billion, peaking next financial year to $2.9 billion. This is an additional stimulus of some $1.5 million in capital spending compared with 2007-08. In total, over the forward estimates, the Rann Labor government will invest $5.6 billion in general government spending and $9.2 billion in total non-financial public sector expenditure. Our capital program is providing a significant fiscal stimulus over the forward estimates. In the current financial year, Treasury and Finance estimated that this spending is equivalent to around three percentage points of gross state product. This is up from the 2007-08 figure of some 1.6 per cent of gross state product. So, the fiscal policies and the stimulatory nature of our capital reinvestment program are on track. The major projects (except the delayed prisons project) are up and running, and I do not need to list those projects as they are well known. We maintain our AAA credit rating, notwithstanding the difficult times, because of our solid financial position. In the latest credit rating opinion, the ratings agency Moody's said that South Australia: ...is well-positioned to face the more challenging economic and fiscal environment that is unfolding in Australia as a result of the global downturn and credit crisis. Moody's listed South Australia's credit strengths as: A low debt burden Surplus operations supported by revenue growth and prudent management Large predictable transfers from the commonwealth government that support financial operations; and A well-established institutional framework that provides fiscal flexibility. In terms of the state's rating outlook, Moody's said: The stable outlook reflects Moody's assessment that the state will prudently manage its financial operations and maintain its low debt burden. Clearly, the continuation of the slide in the world economy will only put further pressure on this state budget, and it is an unknown quantity in terms of what the deficits will be when we bring down the budget later this year because we simply have not seen the end of this massive wealth destruction. I was able to listen to a number of commentators, with the leader, who talked about the incredible gloomy nature of the US economy. I have to say that the United Kingdom's economy is of even greater concern. Both the UK economy and Europe are contracting at a much greater rate than the United States. The banking system in the United Kingdom is all but nationalised. European banks are under pressure from their own domestic constituents to stop lending money to overseas markets such as Australia and are repatriating those line facilities back to the United States and United Kingdom. That is putting enormous pressure on good enterprises here in Australia, particularly here in South Australia. Good businesses and good projects are now facing serious difficulty in maintaining their lines of credit because European banks are heading back to a more protectionist position as taxpayers in those countries bail out their particular enterprises. But there is a continuation of unprecedented and unexpected consequences from actions that have been taken around the globe. This is an incredibly difficult and very uncertain time. It will be a period in which we must be very careful in what we promise and commit in terms of expenditure, and that discipline applies equally to the opposition and the government, as we head into an election year. I say this to the shadow tourism minister, with his commitment on radio yesterday (it was a commitment) that the Liberal Party will shift the Keswick interstate rail station to the City West precinct if they are re-elected: preliminary costings from the Department for Transport, Energy and Infrastructure determined that project would cost $1 billion. A $1 billion commitment given by the shadow tourism minister on ABC 891 yesterday morning demonstrates that there is no fiscal discipline from members opposite. There is no strategic approach to the state's finances, nor is there any coordination about rolling out— Mr Pisoni House of Assembly Mr Pisoni: The private sector. The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: The private sector! The private sector is going to do it. I will ask the transport minister: has the private sector been knocking on your door saying, 'We want to build a railway station'? The Hon. P.F. Conlon House of Assembly The Hon. P.F. Conlon: Yes, they have been asking us for half a million dollars to fix it up. The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: You know, Mr Speaker— Mr Pisoni interjecting: The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: So, he's predicted that they won't be in government at the next election. He just said that we will be building a hospital, so they cannot actually put it there because we will have built a hospital there. Is that your logic? Members interjecting: The Speaker House of Assembly The SPEAKER: Order! The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: The shadow tourism minister has said, 'We can make that commitment because we are not going to be in government; we won't have to deliver it.' You are a shambles of an opposition— The Speaker House of Assembly The SPEAKER: Order! The Deputy Premier will take his seat. The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: The Liberal opposition is a shambles of an opposition; they cannot be taken seriously— The Speaker House of Assembly The SPEAKER: Order! The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: —and I think the public deserves better. The Speaker House of Assembly The SPEAKER: Order! The Deputy Premier is now debating.