APPROPRIATION BILL 2013

Estimates Committees

The Hon. M.J. WRIGHT (Lee) (12:24): I bring up the report of Estimates Committee A and move:

That the report be received.

Motion carried.

The Hon. M.J. WRIGHT: I bring up the minutes of proceedings of Estimates Committee A and move:

That the minutes of proceedings be incorporated in the votes and proceedings.

Motion carried.

The Hon. L.R. BREUER (Giles) (12:24): I bring up the report of Estimates Committee B and move:

That the report be received.

Motion carried.

The Hon. L.R. BREUER: I bring up the minutes of proceedings of Estimates Committee B and move:

That the minutes of proceedings be incorporated in the votes and proceedings.

Motion carried.

The Hon. J.J. SNELLING (Playford—Minister for Health and Ageing, Minister for Mental Health and Substance Abuse, Minister for Defence Industries, Minister for Veterans' Affairs) (12:25): I move:

That the proposed expenditures referred to Estimates Committees A and B be agreed to.

The Hon. I.F. EVANS (Davenport) (12:25): I look forward to the opportunities to comment on the motion to note the reports of the estimates committees—and I indicate that I am the lead speaker for the opposition. These, of course, are estimates committee reports that deal with a budget that has delivered to the state the highest debt in its history and the highest deficit in its history. It is predicting a surplus that is the highest in the historical record of the budget which goes back 19 years in the net operating balance.

It is a budget where the government has overspent in the last 12 months their expenditure budget by $637 million. It is a budget that still delivers the highest taxes in Australia. It is a budget that delivers cuts to health to the tune of $949 million, cuts to education to the tune of $260 million, cuts to the police to the tune of around $150 million and introduces a car park tax, and other measures.

What did the independent commentators say about the budget to which the estimate committee reports apply? The Financial Review said that, 'like his counterparts, they chase rainbows into the forward estimates courtesy of optimistic rebounds in revenue and promises of cost-cutting'.

The Australian editorial said that, 'Truth be known, after almost a dozen years of Labor government, South Australia has squandered its opportunity to reset the state economy.' But perhaps the most telling comment of all was left to Judith Sloan, economic commentator in The Australian, who asked the question, after writing about the South Australian budget, as to, 'whether Australia can afford two Tasmanias'. They are the comments of the independent commentators, not in Her Majesty's loyal opposition, and the reason those people made those comments will become obvious when you look at the estimate committee reports.

The reality is that the government has really mismanaged the budget to a large extent, to the point now where this government is now offloading around 5,000 public servants across the forward estimates. They run around with a scare campaign of what oppositions may do, but they themselves have announced a $949 million cut to health, $260 million cuts to education, $150 million cuts to police and the offloading of around 5,000 full-time equivalents throughout the Public Service.

You only have to look at their budget management to understand why they have made those decisions. This is a government that has simply failed to meet its budget expenditures virtually every time they have set their budget. Just in the last 12 months the government has overspent by $637 million. Now, that is bad enough if it was one year, but if you go back three or four years, they were spending $599 million more, $670 million more and, as the Auditor-General continues to warn and continues to write, one of the issues with this government has been the lack of control of its expenses.

Having set the budget, can they live within their expenditure? They have not gone over by $10 million or $20 million; they are going over by $600 million a year on a consistent basis. That is why the independent commentators make the comments they do about whether Australia can afford two Tasmanias. The result is that this government is budgeting to run six deficits in seven years, and the net operating balance, the deficits total over those seven years, is $3,000 million.

A total of $3,000 million is a hard figure to put into context, so let's just imagine it for a minute. If it was just spent on capital works, for instance (and of course the net operating balance does not pay for capital works), you could pay for five Adelaide Oval projects with the deficits this government has budgeted to run—five Adelaide Oval projects. It is a staggering amount of money that the government has run through budget deficits.

What it wants us to believe, why the Financial Review says this budget is about chasing rainbows, is this. For the 12 months just finished, the 2012-13 year, the budget deficit it is predicting is over $1,300 million in one year—$1,300 million, or over $100 million a month in deficit, just for that year, just in the net operating balance side of the budget and not on the capital works side of the budget, just on the net operating balance side of the budget. That is the biggest deficit in the state's history.

Roll forward to the year we are in now, the financial year we have just started, and it is predicting a $911 million deficit. That is the second biggest deficit in the state's history. Roll forward three years to the 2016-17 year and the government is predicting a $661 million surplus. It is expecting South Australians to believe that from 2012-13 to 2016-17 (four years) the budget bottom line will improve by $2 billion—a $2 billion turnaround in that period. That is why the Financial Review says that this government is chasing rainbows with its revenue predictions.

The $661 million surplus is the highest surplus in the historical record of the budget. The budget papers go back 19 years, and if you go back 19 years and look at the surpluses and the net operating balances you cannot find one that is $661 million. The reality is that what it has predicted over the lifetime of this government is about $2.6 billion in surpluses. What it has actually delivered for the same years is a $3 billion deficit. That is a $5.6 billion difference in what it has budgeted to achieve and what it has actually achieved. This is why the independent commentators talk about missing their opportunities to reset the economy and whether Australia can afford two Tasmanias.

Just look at this year, 2013-14. The budget deficit it is predicting now for 30 June in 12 months' time is $911 million. When it was first predicted, it was put against a surplus of $480 million. Just in this 12 months alone, that is a nearly $1,400 million difference between what it budgeted originally and what it is now predicting to be the outcome. The result of all this is that when you run big budget deficits your debt goes up.

We know that former treasurer Snelling, when he held the post, came out on his very first day and said that he would not allow this state to run up a credit card debt which would be left to our children to pay. The government went out and said, of course, that it was going to sell the forests and the Lotteries Commission. It was going to do that to reduce our debt and keep the AAA credit rating.

What has happened with the state debt as a result of running these budget deficits and, indeed, with other expenditure? The reality is that the state debt has increased to a point where it is now budgeted to reach a figure of around $13.75 billion. That is after receiving $1 billion, in round numbers, for the sale of the forests and the licence to run the Lotteries. The debt is increasing at a rapid rate. In fact, it has been increasing at around $4.2 million a day, every day, for eight years. It is a big, steep increase in the debt, and that is after selling the Lotteries and the forests. At one point in the 2011-12 budget speech, Treasurer Snelling said:

...to take on debt merely to pay for the running of costs of government is tantamount to stealing from our children...That is why I cannot agree with those...who...recommend running up debt as a quick fix.

That seems to be a totally different approach to the reality of what has happened. The then treasurer says one thing, that they are not going to run up debt as a quick fix, and at the very same time, the government introduces budgets running up massive debts—indeed, the highest debt in the state's history. Of course, the current finance minister, minister O'Brien, let the cat out of the bag in 2010 when he said:

We are actually having to borrow to pay wages...that is unsustainable...We are in a position as a government if we were being financed by the banks, they would pull the overdraft on us because we are currently, year on year, operating in the red...

That was not the opposition saying that; it was the now finance minister, minister O'Brien, who said that at a public meeting in Mount Gambier. To try to control the debt—or to try to give at least some perception about controlling the debt—the government then introduced a debt cap, and it was going to restrict debt to 50 per cent of revenues. Regrettably, that debt cap did not last 12 months. This budget and, indeed, the Mid-Year Budget Review both have that debt cap being broken.

The government has said that it would not run up debt. It has run up debt, it has set a debt cap and then broken the debt cap. Ultimately, it is South Australians who are going to pay very dearly for that. You only have to look at the level of interest that is now being paid, and budgeted to be paid, through the state budget by South Australian taxpayers and you can understand why people's cost of living is going through the roof under this government.

The interest on state debt is going to increase to $952 million when the debt is at its peak—$952 million a year. To put that into some context, if interest payments were a government department it would be the fifth biggest expenditure line by a government department. To look at it another way, the police budget is $867 million and interest payments are $952 million. This government has got us into a position where we are paying more money on interest than we have been on the police.

If you go to the liability side of the budget and look at things like unfunded super, we are still in a position as a state where our Public Service superannuation is underfunded. It is underfunded to the tune of around $13.5 billion, and it is going to take until 2034 to have that fully funded. If you go the WorkCover scheme—and the South Australian WorkCover scheme is recognised around Australia as being the worst performing scheme in Australia—it has the highest levy in Australia by a streak and it has the worst performance for getting injured workers back to work. If you are injured in South Australia, it takes you longer to get back to work.

Another thing that came out in the estimates committees is that, as far as rehabilitation goes, the scheme in South Australia has three times the proportional cost of rehab in the scheme compared with other schemes around Australia. The South Australian scheme is not only the most expensive, it not only takes the longest to get back to work, but according to the WorkCover CEO and estimates committees it has three times the proportional cost of rehabilitation in the scheme than other schemes around Australia. So, we are spending more and more and more on rehabilitation, and people are taking longer and longer to get back to work.

The reality is that the WorkCover scheme in South Australia is a debacle. You add all this together—the budget mismanagement, the debt, the budget deficits, the liabilities, the unfunded superannuation and the like—and what it means is that state liabilities under this government have essentially tripled from around $10 billion up to $30 billion; they have tripled under the management of this government.

What does that matter? Well, what ultimately matters is that it is the people's cost of living that is impacted by the budget mismanagement. The reason why South Australia's business taxes are the highest in Australia is that the government needs revenue to pay the interest, to run its budget deficits, and to pay for its programs. That is why business is so heavily taxed in South Australia.

You only have to look at the household level to see the price of water, which was gone up around 249 per cent at 30 June just gone. It had gone up around 249 per cent, or about three times over what has been the doubling of the desal debacle—the desal plant, of course, is now going to be mothballed. So, you can see how mismanagement can impact on cost of living. If people want to understand the mismanagement of this government, they need to only do one thing: pick up your water bill and have a look at it. The reality is that their mismanagement is shown there for everyone to see.

As a result of this mismanagement, South Australia has lost its AAA credit rating; that is 12 years of hard work that has been trashed by this government. It was lost, of course, under the Bannon government in 1992. The Liberal Party did a lot of work trying to rebuild the state economy. The AAA was regained after 12 years of work; since then, it has been downgraded twice, and we now have the worst credit rating in Australia.

Why is that, Mr Deputy Speaker? The reason is that this Premier and now Treasurer made a deliberate decision to go out and trash the AAA credit rating. When former treasurer Foley was in the job, he was running around saying things like:

[The government] are focused, committed and determined to keep our AAA credit rating—

Why did he say that? He said that—

...so we do not pass on to generations an absolute nightmare scenario. [It is] good for our state for investment and jobs.

Treasurer Foley argued, 'Get the AAA credit rating, keep it; it was good for investment and jobs.' So then Mr Foley left, and treasurer Snelling came on the scene. What did treasurer Snelling say? Treasurer Snelling said, 'We are committed to making sure that we retain the AAA credit rating.' Why did treasurer Snelling say that? He said that because:

[A] AAA credit rating was a signal to investors about the relative strength and stability of the state's economy.

So, it was about the state's economy—jobs again, Mr Deputy Speaker. Then, the Premier comes on the scene (now Treasurer Weatherill), and he says:

We've made those choices deliberately...that's led to the loss of the AAA credit rating.

Why did he say that? Well, he is 'not prepared to put the future jobs of South Australians at risk'. When they want to get the AAA credit rating and keep it, it is all about jobs; when they want to lose the AAA credit rating—when they do lose the AAA credit rating—they claim it is all about jobs.

We all know that when the credit agency looks at the government's finances and brings out a credit rating, it is an independent judgement about the budget management and financial strength of the state's budget. The reality is that this budget and previous budgets have been marked down by the credit agencies because of financial mismanagement of the state.

The reality is that last year's growth forecast was originally 1.75 per cent. This year's employment forecast for the same year—the new forecast—is now 1 per cent. The reality is that the employment forecast is dropping, not growing. The reality is the reason we lost the AAA credit rating, as Moody's said, was because of the pace of the debt accumulation. It is amongst the fastest growing in the nation.

South Australia has one of the fastest growing debts in the nation and, what is worse, if you go to the Queensland audit commission report, where they looked at all the states' debts, they report that South Australia is paying the highest interest on its debt in the nation. Not only do we have one of the fastest-increasing debts but we are paying the highest interest in the nation, according to the Queensland audit commission. What that means is that, ultimately, when we pay interest on our debt, we will be paying more interest than if we had a credit rating of a higher value.

This should not have been a surprise to the government. The Auditor-General (the independent umpire) has been writing to this government through the Auditor-General's reports for many years saying, 'Your expenditures are too high and you are building in expenditure based on revenues that may not be sustainable.' For instance, in 2005-06, the Auditor-General said, 'Given the forecast expectation that such revenue growth may not be sustained, control of expenditure will be important.'

The reason he gave warning was that they had overspent $370 million. The government's response, of course, was to go out and respond to overspend by $374 million. Just in case the government missed it, the Auditor-General then warned them again in 2007-08. The reason he warned them was that they had overspent by $304 million. The government's response was to go out and overspend by $670 million.

Just in case they missed that, he warned them a third time in 2008-09 because of that $670 million overspend, and the government's response was to go out and overspend by $599 million. This year, of course, the overspend for the year just finished is $637 million. This results in a high cost of living for households and a high cost of taxation for businesses. There have been numerous reports—by Pitcher Partners and the Institute of Public Affairs—saying that South Australian businesses are the highest taxed in the Australia.

In this particular budget, the government, just like its federal colleagues, thinks the answer to everything is a new tax. Just like the carbon tax and mining tax, this government is introducing a car park tax. Quite uniquely to Labor governments, what they are doing is spending the money on projects this year but not collecting the tax until after the election. The Liberal Party is committed to abolishing the car park tax if and when we are elected in 2014.

The reason the independent commentators talk about chasing rainbows on revenue is the forecast revenue within this budget. Let us just look at two areas. In relation to stamp duty, during the boom times, stamp duty grew at around 7 per cent. In this budget, they are predicting stamp duty to grow at 15 per cent, 15.9 per cent and 10.9 per cent, which is revenue growth above what was the average growth in the boom times. On payroll tax growth during the boom tax times, the average growth was around 6 per cent and in this budget they are talking about 7 per cent, 6.8 per cent and 6.6 per cent, so revenue is up high. This is the point the independent commentators make.

One of the real tragedies of this government's budget performance was the decision of treasurer Snelling in last year's budget to design the budget all around the Roxby Downs expansion proceeding before the deal was finalised. So we all sat here last year and watched the then treasurer stand up and say in the budget speech that South Australia will be a very different place in a few years. The expanded Olympic Dam mine, the largest open pit mine in the world, will be operating, and off the then treasurer went and explained. They built their whole budget revenues and employment strategy around Roxby Downs proceeding.

Of course, we all know the deal had not been done and the deal fell over. However, the government had already locked us in to large expenditures like the new Royal Adelaide Hospital costing $400 million a year. We have got the expenditure built into the budget—contracted for, and we cannot get out—and, of course, they do not have the extra revenue coming from the increased employment or the increase in mining that would have been generated out of the Roxby deal.

The government has no-one to blame but themselves. They made the classic mistake of spending the money before they got it. They were planning on Roxby starting, and they were signing up on the basis that they were going to get all this employment generated, which would flow through budget revenues through things like payroll tax. The reality is, the deal fell over, and it is a classic mistake of Labor governments.

The reality is that the budget is now under significant pressure. How else do you explain a $1,300 million deficit last year and an over $900 million deficit this year? Let's just talk about that $900 million deficit this year. The only reason this year's deficit is not over $1 billion is the government went to the Motor Accident Commission, or there was some discussion between the Motor Accident Commission and the government, and—surprise, surprise—they have handed $100 million over to the government that is brought onto the operating side of the budget this year so it lowers that deficit by $100 million. If it was not for that $100 million from the Motor Accident Commission, South Australia would be running back-to-back deficits of over $1 billion each.

Now, during the estimate committees, we had the joy of questioning the Motor Accident Commission, and they have a solvency requirement of 108 per cent. The first time in its history (according to the CEO) that they reached 108 per cent, they suddenly decided they could spend the money on road projects. They did not think about holding the money back in the Motor Accident Commission and making motor registration insurance cheaper for the motorist. They did not even model that. We have asked for the modelling, but they did not even model it. They did not even have the courtesy to the motorist, because not all of this money is being spent this year. Some of this money is being spent over two and three years, as we understand it.

They did not even hold onto the money and only forward it to the government as the government needed it so that the insurance fund could earn interest on the unspent monies. What they have done is handed the $100 million over to the government so they could lower their budget deficit by $100 million to bring it in under $1 billion. Of course, when we asked former treasurer Snelling about going in and raiding money out of the Motor Accident Commission, the answer was that it would simply be an unsustainable thing to do, an unwise thing to do and they would not be doing it. So 12 months ago they were not going to do it, and guess what: this year, they are doing it.

Then we went on to ask a few more questions about the Motor Accident Commission, because we know that the Motor Accident Commission is obviously going to look at other ways to assist this government. It is obvious to me that there is some discussion going on at informal levels between the Motor Accident Commission, or someone within the Motor Accident Commission or its committees, and the Festival Centre Trust about investing in some building down along the riverbank here. The reason I say that is really quite simple: I asked during the estimates committees a number of questions to minister O'Brien, who, in fairness to him, sought advice from the CEO of the Motor Accident Commission who was in the estimates committees.

There were four, five or six questions about whether the Motor Accident Commission had been in discussions with the government about investing in or providing money for other purposes 'like the Festival Centre Trust.' The answers were no, there was not. Eventually, we asked the question:

Are there any members of the MAC Board or people on the MAC committee that are also members of the Festival Centre Trust?

To the surprise of the whole committee, the CEO advised the minister that there was one person who was involved in both committees. I then asked whether that person had had any discussions with the Motor Accident Commission. It is clear—the minister says:

The briefing that I have just received from the chief executive officer is that there are lots of propositions put forward in an informal manner, but nothing in a formal sense has come to the MAC Board or the Investment Committee and been formally dealt with and minuted as such. So it may be a proposition that—

I interject, 'It may have,' and Mr O'Brien says, 'It may have, yes.' So, it is clear to me that there are discussions going on at an informal level between someone in the Motor Accident Commission and someone in the Festival Centre Trust about investing down the back. Unfortunately, this government is divided and lacks discipline, because the Minister for Transport, when interviewed on the weekend, was asked the question, and this is the news report transcript:

The Opposition says it's an act and wants the Government to make all plans publicly available before consulting the people. And questions remain regarding funding too. Finance Minister, Michael O'Brien, has suggested Festival Theatre upgrade funding may have been discussed with the cashed up Motor Accident Commission. Today that was denied.

Then minister Koutsantonis says:

That was a question that wasn't based on any fact, on any evidence. It's merely speculation, and it's not true.

So, minister O'Brien told the estimates committee that there were members who were involved in both entities, and that there may well have been informal discussions. Minister Koutsantonis says it is simply not true. The reality is that there is a conflict between two senior ministers and it will be interesting to see whether there will be any announcement between now and the state election about the Motor Accident Commission investing in any of the development work down along the Riverbank Precinct.

That will be an interesting point, I think, for people to watch between now and the election. The reality is that the government is well short of its 100,000 jobs promise. It is well short of the export targets that it set and the economic activity in South Australia—the state final demand—has declined rapidly.

The summary of everything I have been speaking about is best shown by the South Australian Centre for Economic Studies' report into the state economy which was released on 28 June. Again, this is not the opposition. This is the independent South Australian Centre for Economic Studies, and in its report it says that South Australia has gone backwards in 2012-13 in both state final demand and overall economic growth. In other words, South Australia is in a recession.

SACES economic growth forecast for the next two years are also far more pessimistic than the budget.

The SACES report says this, and I quote:

The South Australian economy has experienced arguably its largest downturn since the 1990 recession over the past year.

Their words not mine. It goes on to say:

The sustained decline in State Final Demand suggests that the South Australian economy is in a recession.

Their words not mine It continues:

The budget forecasts state final demand growth of 1.25 per cent for 2012-13...it is almost impossible to see this forecast being realised...there is no way that growth in [state final demand] for the current June quarter could be sufficient enough to meet the budget forecast...it is also highly unlikely that the [growth state product] forecast will be achieved.

At either end of my contribution, I quote independent commentators. The opposition has been consistent about analysing this government's performance, about it running budget deficits and building up debt, and what we find now is not that we have jobs but that South Australia is in a recession. That is what the estimate committee questions are all about, and that is what the independent commentators say about the economic performance of this state government.

Debate adjourned on motion of Mrs Geraghty.

[Sitting suspended from 12:59 to 14:00]