Bills

Appropriation Bill 2014

Second Reading

Adjourned debate on second reading.

(Continued from 1 July 2014.)

The Hon. I.F. EVANS (Davenport) (12:01): In rising to speak on the state budget I just want to go back basically over 20 years and look at what has been done to the budget and what strategy South Australia is using in its budgets to try to develop the state.

In 1992 I decided to run for state politics, primarily on the back of the State Bank disaster under the then Bannon government. That was interesting because the state debt at that time was rising to around $11 billion and the budget deficit at that time was around $300 million a year. Since that time, this is what the state has done: it has leased its electricity assets, it has leased its ports assets, it sold the TAB; it sold the State Government Insurance Commission, and it sold the good bits of the State Bank and offloaded the bad bits. I think it was last year, 20 years after the collapse of the State Bank, it finally got rid of the last bad asset from the State Bank.

The government has also outsourced a significant section of SA Water's management; it has outsourced the public transport buses; it sold the South Australian Pipeline Authority; there have been a lot of properties sold, the more famous of them 333 Collins Street; it has outsourced Fleet SA's management; it has outsourced some of the prison management; it has sold the South Australian Casino, it has sold the South Australian forestry licences for 100 years; it has sold SA Lotteries; and, in this budget, it is privatising the Motor Accident Commission.

Having done all of that to fix the budget, where are we? Under this budget, the state debt is not less than $11 billion, not less than it was 20 years ago, it is actually at $14.3 billion. The budget deficit the government is talking about is not $300 million a year but in this year it is $1,200 million. What South Australia has been doing, particularly this government, is selling off and offloading income-producing assets but not fixing the recurrent side of the budget.

History shows that in the last term of government this government offloaded or sold the forestry assets in the South-East, the timber harvesting rights for 100 years, and it sold SA Lotteries. The money received from selling the forestry rights and from selling SA Lotteries is less than the budget deficit the government is running this year, which is $1.2 billion.

What we have is a government that says, 'We are going to sell income-producing assets, to the tune of forestry and the lotteries, to try to reduce debt,' and then on the recurrent side of the budget they are running net operating balance deficits to the tune of a larger sum than the sale of those two assets produced. So, they are selling assets, in effect, and the poor performance on the recurrent side of the budget is actually wiping out any real gain in debt reduction.

I come to what is probably one of the biggest broken promises in this budget, and that is the decision to privatise the Motor Accident Commission, and they are basically privatising it. Currently, compulsory third-party insurance is offered by a government agency, and from a certain date (1 July in a couple of years' time) they are going to allow the private sector in. They are going to stop issuing government compulsory third-party policies and it will be the private sector running the third-party property system. So, they are effectively privatising that particular activity.

Before the election, of course, this was a government that ran around and said, 'Don't worry, we're not going to privatise any significant assets.' You could not get a more significant asset than the Motor Accident Commission. It has significant funds tucked away on behalf of injured motorists, for which the scheme was established many decades ago. Why are they doing this? Why are they breaking their election promise?

They are breaking their election promise because their budget is shot. The budget is in trouble, so exactly what they did last time they are doing this time. Last time, the budget was in trouble. The debt was budgeted to be about $14 billion. They had budget deficits of over a billion dollars. So, 'What will we do? I know what we'll do: we will sell the forests in the South-East, we will sell the Lotteries Commission and that will fix the budget.'

The reality is that it did not fix the budget. They kept on spending in an inefficient way and now they come to this term of government and the first thing they do after the election is break their promise on privatisation. They are going to privatise the Motor Accident Commission, and the reason they are doing it is that they want to get their hands on whatever surplus cash assets are available from within the Motor Accident Commission.

The media reporting is that it is around $500 million. I think it is fair to say that industry sources—and the Treasurer might have hinted at this himself at one point—suggest that it could be up to a billion dollars of excess cash within the Motor Accident Commission. If they are bringing that into the budget, you would have to ask: what impact does that have on the net operating balance? This is the real question that the Treasurer will ultimately have to answer at some point: is the government going to use a one-off, or maybe over two grabs—grab a lot of money out of the Motor Accident Commission (somewhere between $500 million and a billion dollars), and will that actually have a positive impact on the net operating balance? Will they actually achieve a surplus on the back of receiving the Motor Accident Commission money?

If they do that, of course—if that is the method they use to do it—then that becomes a falsehood because they have not fixed the recurrent side of the budget. The recurrent side of the budget would not be producing a surplus, it is just a one-off grant, essentially, from the Motor Accident Commission that will be producing the surplus.

The only time this government has produced a surplus in the last five or six years was at the 2010 election, and how did they produce a surplus at the 2010 election? The way they produced a surplus at the 2010 election was to receive somewhere between $1 billion and $2 billion extra in grants from the Rudd/Gillard government as part of their Building the Education Revolution money and a whole range of stimulus packages that flowed into the state budget.

Even though they were capital expenditure, they used the accounting practice of bringing them into the budget as an income, but when they spend it they bring them in as a grant, which reduces the net operating balance. So, it produced a surplus in that case; if it were not for those grants, it would have been in deficit. What they do is, when they spend them, they spend them out of the capital side of the budget, so these grants artificially inflate the true position of the surplus.

Even though they have produced six deficits in seven years, the truth is they have actually been running a deficit for seven years, because these one-off grants are not sustainable. As we can see, they have been cut the very next year. The question becomes: what are they then going to do with the Motor Accident Commission money? They say are going to do is spend it on roads. That will go out as a capital expenditure, it will come in as a grant from the Motor Accident Commission, and that will more than likely inflate the net operating balance to a more positive figure than it would normally be. Then, they will spend it out on the capital side of the agenda.

The reason I raise this is very simple. For 20 years, this state has been offloading assets to try to fix its recurrent budget problems. The reality is that the former Liberal government also got rid of assets to fix the budget. Indeed, we did reduce the debt from something like $11 billion down to $3 billion, and then the recurrent side of the budget was close enough to in balance the year we left. What has happened since is there has been an extraordinary lack of financial discipline, especially in the latter half of this particular government.

What we are finding now is there is no financial discipline at all on the budget matters. You only have to look at this particular budget to see what was promised before the election and what has been delivered after the election. Just look at the broken promises from this government about what it was going to build and construct, and what it was not going to do with taxation or privatisation.

They said there would be no privatisation of significant assets; I have touched on that broken promise in relation to the Motor Accident Commission. They promised a nearly $28 million upgrade of Modbury Hospital; that has been cancelled. They promised a $100 million upgrade to the Flinders Medical Centre; that has been cancelled. They promised a $125 million upgrade to The Queen Elizabeth Hospital; that has been cancelled. They promised a $31 million upgrade to the Noarlunga Hospital; that has been cancelled. They promised to deliver the Gawler rail electrification; that has been cancelled. There is just a litany of broken promises within this particular budget.

Then we have the promise of no new taxes and no tax increases. You only have to look at the emergency services levy and what they have done there, which is basically double it for everyone in the state, to realise that is also a broken promise. Why are they breaking their promises? This is not a new government. This is not a government of one colour taking over from a government of another colour and saying, ‘Look at that. What they told us before the election is simply untrue. We have to reconfigure things.’ This is actually a government of the same colour.

This is exactly the same government, with the same Premier and the same personalities, sitting around the cabinet table. They went to the election promising certain things, and since then there has been an absolute litany of broken promises within this budget. It really comes down to their own lack of financial discipline and lack of discipline at the cabinet level, and I point that directly back to the Premier and his commitment to get rid of the AAA credit rating.

Former treasurer Kevin Foley once said that if you got rid of the AAA credit rating the state would go into an abyss of debt. The reason he said that was very simple: trying to maintain a AAA credit rating maintains some financial discipline at the cabinet table, and as soon as you get rid of the financial discipline at the cabinet table, it becomes a spendathon. Look at what this government is doing.

This government has got rid of the forests, got rid of the Lotteries Commission, it is getting rid of the Motor Accident Commission, and the debt is still around the $14 billion mark, assuming that they can produce these magical surpluses within two years without the Motor Accident Commission money. Can they produce the surplus without the Motor Accident Commission money? Because if they cannot produce a surplus without the Motor Accident Commission money, then essentially what you have got is a budget that is perpetually in deficit, and that is what we are looking at in South Australia.

They really have mismanaged the expenditure and control of their financial discipline in this particular budget—seven deficits in seven years. Just have a look at the swings of their predictions. Why is this side of the house so suspicious about these promised surpluses in two years' time? That is pretty easy: in every budget they have promised surpluses in two or three years' time and, of course, they have never delivered them. They have promised surpluses, I think, for six or seven years straight and they have delivered six deficits in seven years.

Look at the difference in the predictions: the reality is that they have promised things like a $480 million surplus but produced a $1.2 billion deficit. That is a $1.7 billion error in their budget forecasting. They are looking at an $840 million surplus now. They are predicting a $479 million deficit. In that year, that is a $1.3 billion error. There was another year where they predicted a $304 million surplus and they delivered a $948 million deficit. That itself is a $1.2 billion error. So, you have got $1.2 billion, $1.7 billion and $1.3 billion errors in their budget forecasting. How can they get it so wrong and so consistently wrong?

The sad part about this budget, I think, is that there is no real jobs plan. If you had to ask the government what is its job plan outlined in the budget, it would be struggling to articulate where it is going to get the jobs to meet its 100,000 job creation target by 2016. Since making that promise in February 2010, the number of jobs has actually declined by about 800. To meet that target, they would have to create something like 4,800 jobs a month between now and when that target is meant to be reached. That is an equivalent of about a 6 per cent employment growth rate, and that is clearly not going to happen.

The whole budget has numbers on it that simply cannot be believed. I think the shadow treasurer, Rob Lucas, in another place has already been out on the artificially high level of expected revenue growth. The significant increase in revenue—something like the stamp duties, the payroll taxes, those sort of things—they are talking about significant increases well above the other states, and there is no indication that the South Australian stamp duty base or its payroll tax base is going to grow at 4 and 5 per cent.

The reality is that, if you look at our economic growth forecasts, even in the budget they have overstated where most independent commentators put South Australia's likely economic growth. So why has the government constructed a budget based on artificially high revenue figures? Well, if they construct the budget on artificially high revenue figures, it makes their deficits look smaller and their surpluses look bigger. That is what it does. It artificially inflates stamp duty revenue income and payroll tax income, and so what it means is it has an artificial income stream higher than we expect and that makes their deficit look smaller and their surpluses look bigger.

The reality is that the real story about the budget is the lack of jobs and the lack of cost of living relief for average families out there. The reality is that under this budget, if you look at the series of decisions over 12 months from this government, they will add about over $1,000 of extra costs every year to the average household. So, the reason that people are finding it hard to make ends meet and the reason that business confidence has slumped to the lowest in Australia is that there is no spare cash, so the retailing community is finding it hard and the restaurant and catering areas are finding it difficult. All of those discretionary spends are being taken up with extra government impost and charges.

The emergency services levy is a classic: it is another $150 to $200 per year for a family. That is simple. They pay the emergency services levy. They do not necessarily go to the theatre, they do not go and spend it on retail, and they do not spend it in areas that might be job creating for the economy.

The story of this budget is that it is really just a litany of broken promises. It shows that the government were dishonest with the people of South Australia before the election. They have broken a series of promises, not just on the privatisation but on capital works promises and on tax increase promises. There is a whole range of promises that this particular government have broken. They are really snubbing their noses arrogantly at the punters out there, the taxpayers out there, thinking that they will not remember or they simply do not care.

Hopefully, by the time the next election comes around, the public will realise that the government simply cannot be trusted and they have really lost control of the budget. At what point will South Australia develop a different model? At what point will South Australia start dealing with the recurrent side of its budget and not just keep off-loading income producing assets? There are only so many income producing assets you can off-load, and we are nearly at the end of the line there.

The reality is that this government has a responsibility to the state to stop being so inefficient in its administration of government and start putting in place a model that makes the recurrent side of the budget sustainable. If they do not do that, you will not be looking at six deficits in seven years, you will be looking at seven deficits in eight years and eight deficits in nine years. The reality is that without the federal assistance there would actually have been a deficit every year for some time.

The chickens are coming home to roost. It is time for South Australia to have a different model. If you look at all the income producing assets we have off-loaded as a state over the last 20 years and then look at the position of the budget, you can only draw the conclusion that it has been gross mismanagement by this government, particularly the last half of this government, that has got South Australia into the difficult financial position that it now is in, and it is the average taxpayer who is going to pay, through higher cost of living and higher employment as a result.

Ms SANDERSON (Adelaide) (12:22): I rise to make my contribution regarding the 2014-15 budget. As a state, we are currently looking at a deficit in the 2013-14 year of $1.2 billion, the largest in the state's history. In the 2014-15 year, the deficit is predicted to be $479 million. That will make six deficits in seven years, after originally budgeting for seven surpluses.

The Labor government promised $2.6 billion in surpluses and instead has delivered $3 billion in deficits. How can we trust any figures this government comes up with? Even prior to the federal budget, this government had budgeted for the largest debt and deficit in the state's history. Labor had already budgeted for debt increases of $4 million a day for eight years and had already budgeted a $1 million a year interest bill, which is larger than the police budget. This is wasted money on interest due to the incompetence of this Labor government and its inability to live within its means.

They already had the highest taxes in the nation and were already implementing a new car parking tax. Prior to the federal budget, South Australia already had the worst credit rating in the nation and was already borrowing to pay wages. This would be known as trading insolvent if the state was a business, and the liquidators would be on the way. Debt is rising to $14.3 billion in 2016. To quote from this week's CityMag, issue 5:

The 1991 financial implosion of the State Bank left the city $3.15 billion in debt, and had devastating effects not only on Adelaide, but also on the very psychology of Adelaideans. In order to repay the debt, successive state governments were forced into practicing extreme budgetary austerity.

We are now facing debt levels at four times this amount. With a $311 million expenditure blowout expected in 2013-14, this takes the total budget blowouts to close to $4 billion since Labor came to government. This is not for infrastructure or income producing assets; this is purely having more expenses than revenue, a cardinal sin of accounting, totally unsustainable, yet something Labor governments around the country have perfected to a fine art, building up debt and living beyond their means, relying on Liberal governments to come in and clean up their mess. To take from the leader of the Liberal Party's speech earlier this week, the only thing Labor is building, building, building is debt.

Premier Weatherill and Labor deliberately set out to lose the AAA credit rating, apparently choosing jobs over the credit rating. To quote Premier Weatherill from 14 September 2012, 'We've made those choices deliberately...that's led to the loss of the AAA credit rating.' Where are the 100,000 jobs that Labor promised in 2010 to be achieved by 2016? South Australia has actually lost 800 jobs since this promise was made at the 2010 election. Labor would have to create 4,800 jobs per month to meet its 100,000 new jobs promise.

We are in the midst of a jobs crisis, recording the highest unemployment rate on the mainland; 6,000 manufacturing jobs were lost in the three months to May and 16,000 were lost in 12 years of Labor, 4,000 South Australian construction jobs were lost in the three months to May, and northern Adelaide ranked the second highest in youth unemployment out of 79 regions that were measured. That is 45 per cent of youth unemployed. There is no plan to create jobs or grow the economy. Losing the AAA credit rating to save jobs clearly did nothing but cost the state an estimated extra $20 million in higher interest payments. Imagine what we could do for the community with an extra $20 million per year.

I was almost starting to believe the rhetoric of this government about how hard it has been with the global financial crisis, the high Australian dollar, how they were affected by the federal budget, whine, whine, whine. Then I read the budget speeches of the Liberal treasurers around Australia, who were also affected by the same global financial crisis, the same high Australian dollar, the same federal budget. These treasurers did not open their speeches whingeing about how hard things are, making excuses for their incompetency, like our Treasurer did. They spoke about their achievements, their plans for the future. They are all kicking goals while we languish, falling behind in nearly every economic indicator there is.

Reading the other states' budget speeches made me angry, even furious, about the incompetency of this illegitimate government that has bought its way to power with deals from the members for Frome and Waite, estimated to cost the state $16 million over the forward estimates. I call on the members for Frome and Waite to read the budget speeches around Australia and ask themselves 'Have I done the right thing?' I believe their decisions are pushing our state further and further behind, destroying businesses, destroying lives—all on their heads. The right thing to do is to call elections in their seats and give South Australians the chance to choose their government.

Let me give you some idea. From New South Wales on 17 June:

New South Wales is back in the game. Our budget is powerfully positioned. Net debt is down, expenses are under control, the triple-A credit rating is maintained…housing approvals are at the highest levels in over a decade…114,000 [jobs have been] created since 2011…In three years of hard work, the New South Wales government has done the repair job...When we came to office…We were lagging on jobs growth, productivity, housing approvals and business confidence. We were facing years of deficits and high net debt courtesy of the legacy left by those opposite—

being Labor, of course.

From the Queensland budget speech, in 2012 Queensland launched an economic blueprint. In two years a Liberal government has achieved a budget surplus for 2014-15, expenses growth no longer exceeds growth in revenue, major projects are now all subject to the cost benefit analysis. Think of how much money we would have saved if Labor had done a cost benefit analysis before doubling the desalination plant.

Water prices have more than tripled under Labor to 236 per cent, while CPI for the same period increased only 40 per cent. Adelaide has the highest capital city water charges in the nation, with the average household paying $600 per year more than when Labor came to power. Doubling the desalination plant cost $2.2 billion; this is now planned for mothballing, which will only reduce the cost by $6 per household. Labor's decision to use renewable energy for the desalination plant also added $37 million over three years, along with Labor's carbon tax adding a further $14.6 million over three years. What was Labor thinking? How could this ever be considered a good deal for our state? The list of broken promises is extensive under this Labor government. It includes:

the $1.7 billion new RAH has already blown out to $2.8 billion, let alone any further delays or costs that might be incurred;

the $450 million Adelaide Oval—not a penny more—as we know, blew out to almost $600 million;

the $61 million O-Bahn extension was scrapped and then re-promised and is now up around $160 million, just to save four minutes;

the $304 million water interconnector, which was required due to the desalination plant, has already blown out to $403 million;

the promise of no increase in taxes, charges and no new taxes was also scrapped—another broken promise—with a new car park tax being introduced, a new River Murray levy, gambling taxes up, mining royalties are up, the emergency services levy has a huge increase, and now we have a fun tax on public transport for major events;

the no increase in water rates has also been a broken promise, with water bills more than trebling under Labor;

payroll tax exemptions for trainees and apprentices was also scrapped;

the promise of 100,000 new jobs in six years has led to 800 fewer jobs in four years;

the no privatisations promise has also been broken with the sale of the forests, the Lotteries Commission, and now the Motor Accident Commission being privatised; and

the electrification of the Gawler line was promised three times and scrapped twice, and is again delayed.

In 2012-13, there were 5.5 million less boardings on public transport compared to the 2009-10 financial year. Increasing the cost of tickets, as this budget suggests, will not encourage more boardings. It is far more likely to have the opposite effect. Labor's attempt to save money by choosing the cheapest bus service provider led to a huge drop in the number of bus users and the highest ever recorded number of complaints for months on end. To try to compensate, the government reprinted the bus timetables, allowing more time for the runs that past bus companies managed to keep for years. They threw money into new bus lanes throughout the city which have caused congestion and frustration to many drivers and businesses.

To get workers back using public transport we need a system that is reliable, affordable, safe, clean and efficient—not a car parking tax. A car parking tax will not encourage people to use public transport. What it is more likely to do is to push shoppers and users of services such as dentists, lawyers, banks, etc., into the suburbs where they can park for free. The very people the city relies on for vibrancy are those who have the choice to go elsewhere. The high cost of parking is already the number one issue cited by many people as to why they will not shop in Rundle Mall. I feel this car park tax would be absolutely devastating for the City of Adelaide.

It is illogical for a government to be claiming that it is trying to revitalise the CBD and at the same time making it more expensive to participate in the life of the city. Mr Weatherill's toxic car park tax will hurt businesses and jobs, discourage people from entering the city and damage CBD vibrancy. The car park tax has been criticised by numerous industry experts, including the Property Council of South Australia, the Adelaide City Council, Business SA and the Rundle Mall Management Authority. The Property Council has said that it will add up to $6 per day to the average cost of a car park.

Most importantly, this tax will hurt residents who have been encouraged into the city on the back of the government's vibrancy agenda. Mr Weatherill's toxic car park tax is nothing more than a desperate cash grab by a broke Labor government after 12 years of financial mismanagement. Now the government plans to tax companies for hosting major events: any commercial event hosting over 5,000 people will now have to pay a levy or tax imposed—the amount is yet to be determined. How can you calculate ticket pricing or the event viability when the government can come along at any time and make up a new tax and cannot even tell you exactly how much it is?

In the budget, there is $46.5 million for the Festival Centre car park and the plaza. Whilst I welcome the upgrade to the car park (which we all know has concrete cancer), I do not welcome the idea of an office building on the plaza site. This site should be enjoyed by all South Australians and an office building would not improve city vibrancy. I call on the Labor government to release what the plan is for this area as soon as possible.

The emergency services levy is going up by an extraordinary amount, with the average household with a home of $400,000 paying an extra $150 per year for the emergency services levy and, as has been mentioned by my colleagues, you would not mind so much if the whole levy actually was going to the emergency services, but a lot of this is going to prop up the government's failed ability to balance its budget. So, how is this not a punitive tax on households and families? For a home of $750,000, they will now be paying $408 a year, a $280 increase, which is extraordinary.

According to the ABS figures for March 2014, the state budgets, we have had a CPI increase of 40 per cent during the 12 years of Labor, house rents have gone up by 54 per cent, property charges by 87 per cent, state taxes have risen by 92 per cent, gas bills by 136 per cent, electricity bills by 160 per cent and water bills by a massive 227 per cent. This all hurts the everyday Australian, and now volunteers will also be hit with screening and background checks, with application charges soaring by 33 per cent from $41.25 to $55 for most volunteers. The tax hike on volunteers will raise $3.2 million in the next year.

While many employers, including schools, aged-care and disability services, as well as non-government organisations, sporting services and service groups, require screening and background checks to comply with government regulations, every volunteer, virtually every sporting and service organisation and many businesses are adversely affected by this tax. The Weatherill Labor government's tax grab from volunteers runs the risks of discouraging people from providing their time and expertise in schools, sporting clubs, Meals on Wheels and many other organisations.

I encourage the Weatherill Labor government to look at a simpler, more streamlined system that reduces bureaucratic red tape and the associated costs to applicants. WorkCover is another cost to business and is an absolute shambles, as stated by our Deputy Premier. I welcome reforms to WorkCover and hope it will actually lead to a reduction in levies and lessen the cost to business. The South Australian WorkCover scheme has the highest levy in the country, has unfunded liability of $1.23 billion, has the worst return-to-work rate in the country, has the highest number of disputes in the country, takes the longest to resolve disputes and spends three times the proportional cost on rehabilitation than any other scheme in the country.

Ms Redmond: To no avail.

Ms SANDERSON: To no avail. As far as businesses go, taxes on businesses in South Australia are completely out of control. The increase in payroll tax, after deducting CPI, since Labor came into government is 39 per cent. Conveyancing duties have risen by 55 per cent over CPI, land tax by 195 per cent, property taxes by 79 per cent, taxes on gambling surprisingly have reduced by 8 per cent compared to CPI, taxes on insurance are up 41 per cent and motor vehicle taxes are up 31 per cent. So, no wonder businesses are struggling under such a high tax regime in this state.

This Labor budget will deliver more pain and increase cost of living pressures for families. After 12 long years South Australians are paying the high price for Jay Weatherill's budget of broken promises. This is a disastrous budget for all South Australians who are already struggling with soaring electricity, gas and water prices. The worst part about this budget is what it does not do. There is no plan to create jobs or grow the economy. At a time when South Australians are struggling to pay their bills, to find work and to keep their businesses open, the Weatherill government has delivered a state budget of broken promises and no plan to help with jobs or the economy.

Do not be fooled by the Treasurer blaming the federal budget for his cuts and broken promises. This budget is a culmination of 12 long years of Labor's economic chaos and mismanagement. South Australians deserve better. Premier Weatherill has embarked on a deceitful strategy of making ordinary South Australians pay for his government's years of financial mismanagement and ineptitude.