House of Assembly Fifty-Second Parliament, First Session (52-1) 52 1 Parliament of South Australia House of Assembly published Ministerial Statement Ministerial Statement State Finances STATE FINANCES The Hon. K.O. FOLEY House of Assembly Port Adelaide Deputy Premier Minister for Federal/State Relations Minister for Defence Industries The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Federal/State Relations, Minister for Defence Industries) (15:58): Madam Speaker, I am pleased to offer you my warmest congratulations in achieving the high office of Speaker of this parliament, and I look forward to working constructively with you over the course of the next four years. Madam Speaker, you can be assured of my cooperation: the Treasurer of the past in this chamber shall not be the Treasurer in the future. The Hon. J.D. Hill interjecting: The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: No, I'm staying as Treasurer; don't worry. Don't get any ideas, guys. Members interjecting: The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: No, you haven't got rid of me that quickly. I seek leave to make a ministerial statement. Leave granted. The Hon. K.O. FOLEY House of Assembly The Hon. K.O. FOLEY: I rise today to update the house on the government's fiscal priorities for the next four years. As members would be aware, the government framed the 2009-10 budget in the midst of the global financial crisis. The government was faced with a massive decline in budgeted revenues, over $3.3 billion less in GST and state revenues over the forward estimates period. Treasury and other economic forecasters were predicting the state and national economies to slow dramatically, and governments at both levels were charged with doing all they could to limit the impact of an economic slowdown. The Rann government's response was to provide a massive stimulus to the South Australian economy in partnership with the commonwealth government, with $11.4 billion of capital investment over the forward estimates and $3.9 billion in 2009-10 alone, supporting nearly 14,000 jobs. We maintained our commitment to cut payroll tax, with the latest round of payroll tax cuts implemented from 1 July 2009—a rate cut from 5 per cent to 4.95 per cent and an increase in the tax-free threshold from $552,000 to $600,000. Operating funding was also increased for our hospitals, schools and in the areas of families and communities. In doing all this, the government took on an increased but responsible level of budget debt. We also outlined a commitment to review areas of government expenditure and identify savings going forward. The government announced the Sustainable Budget Commission, chaired by noted economist and founder of Access Economics, Geoff Carmody, who, as we know, also undertook a similar exercise for former Liberal prime minister John Howard and Peter Costello. It includes the chief executive of the Department of Premier and Cabinet, the Under Treasurer, Monsignor David Cappo, Bruce Carter, Chairman of the Economic Development Board, and Jennifer Westacott from KPMG. The commission was initially tasked with reviewing the annual budget process and recommending an appropriate budget date for the post-election 2010-11 budget. The government released the commission's first report prior to the election and has accepted the commission's recommendations. The commission's more substantive task, which is currently underway, is to review all areas of government expenditure and revenue and identify a menu of budget improvement measures to reach the savings targets outlined in the 2009-10 budget. The commission has been undertaking this task since the election. They have sought very significant amounts of data from government agencies, outlining what we spend, where we spend it, and why we spend it. Cabinet has also approved the 2010-11 budget process and, as part of that, has allocated the savings task to individual agencies. Agencies are now expected to identify measures to meet their specific savings task, and to submit them to the commission for appraisal. In doing so, cabinet deliberately sought a larger amount of savings from agencies than what is required to meet the government's budget objectives. This enables the cabinet to make appropriate choices from the measures submitted by each agency. The commission will report to the government, outlining its recommendations to improve the budget and, from those recommendations, the government will select the measures that it wishes to incorporate in the 2010-11 budget and rule out those that it does not intend to implement. Prior to the election the government also released the 2009-10 Mid-Year Budget Review, which outlined better budget outcome forecasts across the forward estimates than at budget time. The Mid-Year Budget Review advised that revenues had begun to recover: 2009-10 revenue forecasts were expected to recover nearly $200 million against the $850 million anticipated as a loss of revenue at budget time. Across the forward estimates a revenue improvement of just over $1 billion was forecast against the $3.3 billion estimate of revenue lost at budget time. Further revisions to GST estimates were outlined in Treasury advice provided to the government and to the opposition prior to the election campaign. The government has recently received further information in relation to the GST pool and the state population shares that supersedes the advice that was provided to the opposition during the election. GST revenue estimates will be further revised following the release of the commonwealth budget next Tuesday. Current estimates indicate that even with these improvements in revenues the state budget is nearly $1.2 billion down on revenue across the forward estimates against what was originally forecast in the 2008-09 budget prior to the global financial crisis. This means that the work of the commission remains as necessary today as when it was announced in June last year. It is important to put on the record yet again that, while we are at the end of what has been the global financial crisis, we are not anywhere near back to the revenue strength we had prior to the global financial crisis and, if we look at what is now occurring in Greece and what may yet occur in other European countries and what, if any, contagion effect there is, there are still global difficulties with the global financial environment. Therefore, the ongoing review of expenditure should be a priority for any government, let alone one faced with the challenges of lower revenues, strong demand for increased and improved service delivery, and a mandate for ongoing infrastructure investment. The Rann government has never shied away from seeking out savings and reviewing expenditure priorities. In the government's first budget for the 2002-03 financial year $967 million of savings were identified across the forward estimates. In the following budget a further $538 million of savings were identified. In 2006, following the state election, the Greg Smith review of priorities identified a further $695 million of savings. Further savings tasks have been outlined in each budget since. It is an important and necessary part of strong budget management to target public expenditure as accurately and as effectively as possible. The public expects nothing less. I expect that the commission will recommend to government a series of measures which will better focus our expenditure on the key priorities of government: better services for the community and increased investment in infrastructure while maintaining our AAA credit rating and keeping debt levels low. I also expect that some of the decisions that will be necessary to deliver these savings will be difficult and will cause angst and concern both inside and outside the public sector. These decisions will be made to ensure that the government continues to deliver quality services and infrastructure to South Australians, maintains our AAA credit rating and ensures that this state continues to live within its fiscal means, and continues to underpin the best performing economy in all Australia. The Speaker House of Assembly The SPEAKER: Thank you, Deputy Premier. I am sure we will enjoy a very cordial and respectful relationship through the next four years—or else.