Supply Bill 2016

Second Reading

Adjourned debate on second reading.

(Continued from 24 May 2016.)

The Hon. G.A. KANDELAARS (17:53): I rise to speak in support of the Supply Bill 2016. The Supply Bill 2016 provides for $3.444 billion to be appropriated from the Consolidated Account. This will provide sufficient appropriation to meet the government's expenditure requirements from 1 July 2016 until approximately the end of September 2016, and will ensure that government services continue until assent is given to the Appropriation Bill 2016. These funds will be administered by the Department of Treasury and Finance to agencies, in accordance with the Supply Act and financial controls and governing public accounts. Today, I would like to take the opportunity to cover a number of issues, the first being the state government's brief analysis of the 2015-16 Mid-Year Budget Review; secondly, a discussion on the comparison of payroll tax effort in South Australia versus other states; and, finally, I would like to look at a number of initiatives that have been undertaken through the Attorney-General's portfolio.

On the expenditure side of the budget, the general government operating expenses are projected to increase moderately by 0.7 per cent in real terms over the four years of the forward estimates. The constrained growth over the forward estimates is largely driven by savings measures the government has introduced in previous budgets. General government operating expenses as a percentage of gross state product are projected to decline over the forward estimates from 17 per cent to 16.2 per cent.

The Mid-Year Budget Review projected that all three fiscal targets set out in the state budget will be met. Fiscal target 1 projected a net operating surplus by the end of the forward estimates, with the 2015-16 Mid-Year Budget Review projecting a surplus of $355 million in 2015-16, increasing to $978 million in 2018-19. Fiscal target 2 projected that, once surplus is achieved, operating expenditure growth will be limited to trend growth in household incomes. In the Mid-Year Budget Review, the government's target of limiting expenditure growth to trend growth in household incomes in years of operating surplus was projected to also be met.

Fiscal target 3 projected that the achievement of the level of general government sector net debt is to remain affordable over the forward estimates, with a maximum ratio of net debt to revenue of 35 per cent. The net debt to revenue ratio projected in the Mid-Year Budget Review was predicted to remain below 35 per cent across the forward estimates. The net debt to revenue ratio peaks at 34.8 per cent in 2016-17, with the recognition of the new Royal Adelaide Hospital in the state's balance sheet for the first time, and declines thereafter in 2017-18 and 2018-19. I seek leave to have incorporated in Hansard a chart from the Mid-Year Budget Review for the fiscal targets across the forward estimates. The chart is essentially of a statistical nature.

Leave granted.

Fiscal targets outcomes—2015–16 MYBR estimates

The Hon. G.A. KANDELAARS: The chart shows that, for fiscal target 1, as I said earlier, the Mid-Year Budget Review shows at 2015-16 a net surplus of $355 million, with that increasing in the next year to $500 million, in 2017-18 to $897 million, and in 2018-19 to $978 million. On target 2, expenditure growth is estimated in the Mid-Year Budget Review to be 1.8 per cent for 2015-16, 3.4 per cent in 2016-17, 2.1 per cent in 2017-18, and 2.3 per cent in 2018-19. The net debt to revenue ratio in 2015-16 is 20.6 per cent, 34.8 per cent in 2016-17 with the RAH coming on the books, 32.7 per cent in 2017-18, and 29.7 per cent in 2018-19.

The government's key funding priorities have been able to deliver significant stimulus measures while projecting to meet its fiscal targets. Some of the projects the government is and will invest in are the Torrens to Torrens on South Road; the north-south corridor Darlington upgrade; the Northern Connector, a 15.5 kilometre road west of Port Wakefield Road linking the Northern Expressway, the Port River Expressway, the South Road Superway and Salisbury Highway connector. This project will improve freight access to Port Adelaide and industrial areas in Adelaide's north and north-west and improve road safety and efficiency.

There are also the last mile freight access road projects which are expected to improve freight access in a range of locations across the state through junction upgrades, overtaking lanes and safety improvements. We are also improving critical road infrastructure with shoulder sealing and audio tactile line marking. Sites for this work include the Copper Coast Highway between Paskeville and Kadina, Farrell Flat Road between Clare and Farrell Flat, the Riddoch Highway between Willalooka and Padthaway, and also Keppoch and Naracoorte.

Other projects include work on the Adelaide Festival Centre precinct which includes upgrades of the Festival Plaza and the Adelaide Festival Centre, and a new car park; additional prison beds at Mobilong, Port Augusta and Mount Gambier prisons; environmental projects that will improve the long-term health and resilience of the Riverland flood plains; and ongoing works on health facilities include the new RAH and development of other hospitals.

The 2015-16 budget delivered a $985 million package including tax reforms and targeted investments in growth industries and infrastructure to grow the economy and create jobs. The 2015-16 Mid-Year Budget Review delivered a further $518 million in additional economic initiatives including the bringing forward of tax cuts for business to encourage investment and jobs, and for the construction of 1,000 South Australian Housing Trust homes over the next three years.

I will now discuss the issue of payroll tax and how South Australia compares in relation to payroll tax efforts versus other states and territories. Just as some background, the Commonwealth Grants Commission measures tax effort ratio. The Grants Commission assessment of a state's revenue raising capacity is used in determining the distribution of GST to the states and territories. The commission publishes the tax effort ratio for each jurisdiction for each of the taxes it assesses. This is the ratio between the actual revenue a state raises from a tax and the revenue the commission calculates it would have raised if it had applied the national average policy for that tax.

A tax effort ratio of 100 implies that a state raises the same amount from a tax as the commission calculates it would collect if it applied the average policy. That is, a ratio of 100 per cent implies that a state's tax effort is at the national average. For example, if a state raises $1.2 billion from a tax, which the commission calculates $1 billion would have been raised under the average policy, it would have a tax effort ratio of 120. If it had only raised $800 million, it would have had a tax effort ratio of 80. In the case of payroll tax effort ratio, the Commonwealth Grants Commission in determining the payroll tax effort ratio considers the actual revenue a state raises from payroll tax and compares this to the revenue it would raise if it applied the average payroll tax policy, that is, the average tax-free threshold and average tax rate.

To determine the amount of revenue a state would raise under the average policy, the commission uses the Australian Bureau of Statistics (ABS) data on wages paid by businesses in each state. It makes an adjustment to remove wages from businesses that have a payroll lower than the average tax-free threshold across all jurisdictions. This gives the value of wages in each state that would have been subject to payroll tax under the average policy.

The national average tax rate is then determined by dividing the total payroll tax collected by all jurisdictions by the total average wages that would have been subject to payroll tax. This average tax rate is then multiplied by the value of wages that would be subject to payroll tax in a given state to determine the amount of payroll tax a state would be expected to raise under the average policy.

South Australia's payroll tax effort in 2016, as published by the Commonwealth Grants Commission's most recent report and the basis for the distribution of GST for 2016-17, was 87.7, the lowest payroll tax effort ratio of any jurisdiction. Victoria has the second lowest ratio of 92.3. This implies that the South Australian jurisdiction raises 12.1 per cent less revenue from payroll tax than the Grants Commission expects it would have if it applied the average tax rate and the average tax-free thresholds. Mr President, I seek leave to table a chart detailing the tax effort ratio of each Australian jurisdiction, and seek to have that incorporated into Hansard.

Leave granted.

Payroll tax effort ratio

The Hon. G.A. KANDELAARS: This chart clearly shows that the payroll tax effort for 2014-15 for New South Wales is 101.6, Victoria is 102.2, Queensland is 92.3, Western Australia is 104.6, South Australia is 87.9, Tasmania is 106.8, the ACT is 116.7, and the Northern Territory is 103.7. A state's payroll tax effort can be influenced by a number of factors, including wage levels, proportion of businesses with wages below and above the average tax threshold, tax rate, tax-free threshold and marginally by changes to other states' policies.

It is worth assessing the impact of the recent Victorian government's budget announcement on payroll tax for 2016-17. In its 2016-17 budget, the Victorian government announced it would increase its payroll tax-free threshold from $650,000 (currently $550,000) by $25,000 per annum over the next four years to 2019-20.

While it is not possible to determine with certainty the impact this will have on the payroll tax effort in the future, given the current differences between Victoria and South Australia's effort ratio it is expected that South Australia would still be assessed by the Commonwealth Grants Commission as having the lowest payroll tax effort of all jurisdictions. Again, I seek leave to table a chart detailing South Australian state and territory comparisons of payroll tax rates and tax-free thresholds, and seek to have that incorporated into Hansard.

Leave granted.

State and Territory comparison of payroll tax rates and tax-free thresholds

The Hon. G.A. KANDELAARS: This chart shows that, in the case of New South Wales, the rate for payroll tax is 5.47 per cent, Victoria is 4.85, Queensland is 4.75, Western Australia is 5.5, South Australia is 4.95, Tasmania is 6.1, the Northern Territory is 5.5, and the ACT is 6.5. The tax-free thresholds in each jurisdiction are New South Wales, $750,000; Victoria, $550,000, but that is moving upwards; Queensland, $1.1 million; WA, $850,000, as at 1 July 2016; South Australia, $600,000; Tasmania, $1.25 million; NT, $1.5 million; and ACT, $1.85 million.

Now, I will move on to other initiatives involving the Attorney-General. Particularly, I would like to talk about the Surveillance Devices Act, which was recently passed in this place, and the ReBoot program. The Surveillance Devices Act was assented to, I am advised, on 18 February 2016. It was the third time the bill had been put before this place and it was finally passed.

Part 2 of the act restricts the use of devices such as optical surveillance devices—that is, hidden cameras—to covertly record the private activities of others. For example, the act would prevent a nosy neighbour from using a camera to record the activities that occur in an adjoining property, providing important privacy provisions to South Australians.

Exceptions have been provided for those acting in the public interest or those acting in one's own lawful interest. Restrictions have also been made in regard to the communication of footage obtained, so that one cannot publish covert footage or information obtained. This will help prevent scenarios where information communicated to the public unjustly causes harm to the interests and reputations of individuals or organisations.

Exceptions have been made for media organisations or for those who obtain a judicial order if the release of the information or material would be in the public interest or in one's lawful interest. Part 2 of the act also restricts the use of listening devices, tracking devices and data surveillance devices in a similar way, again providing important privacy provisions for South Australians. Parts 3 to 5 of the act provide powers to police to use modern surveillance technology in a responsible way and allow for cross-border recognition of surveillance device warrants. Police have long been asking for reforms in this area.

The passing of the Surveillance Devices Act provides an important update to law in South Australia to ensure that the use of surveillance devices is properly regulated, not only for law enforcement but also for private citizens. I would now like to talk about the ReBoot program, which the state government is trialling. The government provided funding in August 2015 to the not-for-profit organisation Helping Young People Achieve to deliver an intervention program for young offenders. This program is run in conjunction with the Red Cross and the Youth Court to rehabilitate young South Australians who have come into contact with the justice system.

Over the course of the trial to date, 29 clients have been referred to the program and there are currently 14 active participants. Fifteen young people have been matched with a mentor and there are seven pending referrals. Meetings have been held with the family conferencing team in the Youth Court and the judiciary to maintain an awareness of, and engagement in, the ReBoot trial. There has since been a spike in referrals from family conference teams.

As part of the program, young people referred take part in an Operation Flinders wilderness camp. The first of these camps will take place next month in June. It is essential that the government focuses on rehabilitating young offenders so that they can lead productive lives. The ReBoot program is intended to assist in the rehabilitation and provide support for young South Australians.

Finally, one thing we do need to recognise is the impact on the state government as a result of commonwealth government cuts. The $5.5 billion in cuts to commonwealth funding to South Australia for health and education over the next two years is not sustainable. Notwithstanding the commonwealth cuts, the state upheld its commitment to additional education funding for the full six years of the national education reform. South Australia is embarking on a major transformation of its health system to deliver the best and most efficient health care possible. That said, efficiencies will not be sufficient to address the funding gap for health created by the commonwealth government cuts.

In conclusion, South Australia faces significant challenges with the imminent closure of the Australian automotive industry, particularly the closure of GM Holden's manufacturing plant at Elizabeth in 2017. No help to those opposite in trying to defend the automotive industry. When you get the federal Treasurer essentially begging the industry to leave this country, that is exactly what they have done. What a tragedy that is!

Members interjecting:

The Hon. G.A. KANDELAARS: It is just amazing that those opposite still cannot recognise their failure to stand up for South Australia.

The Hon. J.S.L. DAWKINS: On a point of order, the Hon. Mr Kandelaars ought to be well aware, as no doubt you are, Mr President, that this is the Supply Bill about the state government's supply acquisition to cover until the budget is completed—nothing to do with the federal government, and he ought to be brought back to that fact.

The PRESIDENT: The Hon. Mr Dawkins, I would have had a bit more sympathy if you had said this 20 minutes ago. He has about one line left.

The Hon. J.S.L. Dawkins: I didn't want to—he tempted me!

The Hon. T.T. Ngo: He's got two more lines.

The PRESIDENT: Two more lines, the Hon. Mr Kandelaars.

The Hon. G.A. KANDELAARS: We are getting to the end.

Members interjecting:

The PRESIDENT: Order!

The Hon. G.A. KANDELAARS: We are going through a significant transformation in our economy. The state government continues to work with industry suppliers, employers, unions and employees and the community to deal with this challenge. I commend the Supply Bill to the council. It will ensure the ongoing operation whilst the Appropriation 2016-17 is dealt with by this parliament.

Debate adjourned on motion of Hon. A.L. McLachlan.