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House of Assembly - Fifty-First Parliament, Third Session (51-3)
2008-10-30 Daily Xml
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Ministerial Statement

GLOBAL FINANCIAL CRISIS

The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (14:09): I seek leave to make a ministerial statement, a matter of substance for the house to involve itself in.

Leave granted.

The Hon. K.O. FOLEY: Let us get to the main game of what this legislation should be about and not the nonsense that members of the opposition come up with all the time. I rise today to update the house of a direct impact of the continuing global financial crisis on the state's finances. Members will recall I advised the house on 14 October that the state's net operating position since 1 January 2008 had weakened by a total of $280 million as a consequence of the global financial crisis. This was due to the higher nominal interest expenses associated with the deterioration in our unfunded superannuation liability, a combination of losses of earnings and discount rates, and downward revisions to some revenues based on the anticipated flow-on effects of the financial crisis on the real economy. Despite the unprecedented actions of central banks and governments in recent times, the global financial instability and volatility continues. For the financial year to date, the Australian stock market is down 26 per cent and the global stock markets are down 35 per cent.

I have previously stated that I would report back to the parliament with a full financial statement before the house rises at the end of this year. The timing was originally based on the proposed Council of Australian Governments meeting of 17 November, at which time it would become clearer this state's share of commonwealth special purpose payments and national infrastructure payments—and national partnership payments should be included. It has recently been widely reported that the Prime Minister will be attending a G20 meeting on the global financial crisis in Washington on 15 November this year. The commonwealth has since advised us it is increasingly likely—and I am not sure whether it has now been confirmed—that the COAG meeting of 17 November—

The Hon. M.D. Rann: It has been put back about 10 days.

The Hon. K.O. FOLEY: The Premier has just advised me that it has been postponed, Mr Speaker. Prior to that, the state treasurers were scheduled to meet three days earlier so that we could agree on a set of financial arrangements for presentation to COAG.

To this end, I can advise that the financial statements will now be incorporated into a midyear budget review when we are in receipt of the commonwealth Mid Year Economic Fiscal Outlook and the financial settlements agreed at the Council of Australian Governments.

As I have already advised the house, I have asked the Department of Treasury and Finance to provide cabinet with a full range of options for the deferral or, in some cases, the cancellation of capital projects not considered essential to service delivery in the current financial climate. In these very uncertain financial times, I also want to provide certainty to the local infrastructure market wherever possible. This has become particularly acute in relation to the timelines for the new prisons and secure facilities project.

I emphasise that the timelines for the procurement process for this project remain unchanged. Bidders are required to submit fully costed proposals to government in December, including their estimated construction timelines. The government project team will then assess bids and announce a preferred bidder in April 2009. The final contract will be announced in July 2009 as per existing timelines, and construction will commence thereafter based on the winning bidder's construction program.

However, today, I can advise the house of the government's decision to announce new commissioning dates for the prisons and secure facilities projects. The new commissioning dates are:

for the men's and women's prison, 2013-14 (previously 2011-12, a delay of two years);

for the forensic mental health centre, 2013-14 (previously 2010-11, a two-year delay); and

for the secure youth training centre and pre-release centre, 2011-12 (previously 2010-11, a 12-month delay).

The overall budget impact of delaying this project will improve the government's net lending outcomes over the period of 2009-10 to 2011-12 by $359 million, and clearly will ease the financial liabilities to revenue ratio for this period.

It should be made clear that the revised prison time frames are certainly not a precursor to deferring the government's other PPP projects, such as the six new super schools (which the successful tenderer will be awarded shortly) and the Marjorie Jackson-Nelson Hospital, where the process is now in full operation. As I stated previously, the timelines for these projects remain on track.

The government recognises that the revised prison timelines will result in demand pressures on existing prison facilities. The government will address this by constructing additional cell capacity. The Department of Treasury and Finance advises that the additional cell capacity of 160 permanent beds will require an investment of $30 million across the 2010-11 to 2011-12 period, plus associated operating costs. These will be permanent new structures and they will add to our prison capacity when the new prisons are on stream. These new structures will be located within regional facilities and provide enhanced facilities into the future, even when the state takes delivery of the new prisons and secure facilities.

This is unfortunate, but necessary, as the government is taking—indeed, all governments and, as I read today in the financial papers, many major corporations are taking—the opportunity to defer capital works projects which are not considered essential in order to ensure that we have the capacity to meet the stress caused by this quite extraordinary time. When the mid-year budget review is released, a full schedule of reprioritised projects will be provided.

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