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House of Assembly - Fifty-Fourth Parliament, First Session (54-1)
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Bills

Supply Bill 2018

Second Reading

Adjourned debate on second reading.

(Continued from 3 May 2018.)

Mr KOUTSANTONIS: Mr Speaker, I draw your attention to the state of the house.

A quorum having been formed:

Mr MULLIGHAN (Lee) (21:45): It gives me great pleasure to rise to make a contribution on behalf of the opposition on the Supply Bill, and I indicate that I am the lead speaker for the opposition. To put everyone out of their misery, I can state up-front that we will be supporting the bill, which will be of very modest relief to the government to hear that.

It is an important bill. I will come to its purpose in a moment. Of course, at the beginning of a new session of parliament, it is almost without exception considered straight after the Address in Reply. It presents an opportunity for members to discuss the nature of the bill but to do so with quite an amount of latitude which provides for members a terrific opportunity to speak about all manner of things related to government expenditure or, more particularly, departmental expenditure.

By their very nature these bills are particularly brief. The purpose is, as its name suggests, to supply the government with sufficient funds to carry on the business of government while the parliament goes through the process of considering and approving a budget for the coming financial year, or indeed the financial year which already commences. This bill seeks to appropriate $6.6 billion, which is, as I roughly make it, a fraction over about a third of the operating expenses of the general government sector for a financial year, which is interesting when you consider the context in which we consider the Supply Bill.

It is the bill that we consider to provide that funding in the lead-up to the budget, which is to be delivered a little later than normal, although not without precedent, of course. It has been the remit of governments in the past to hand down a budget after the commencement of the financial year for which that budget outlays funds. This budget is to be received by the parliament on 4 September, I think it is, in the first week of September.

If you were to carry that amount of appropriation forward conceptually, roughly a third, if you assumed that government expenditures were made roughly on balance equally throughout the year, a third of the year being four months would take us through to the end of October. It is interesting, I think, that this Supply Bill would provide for a little over a third of the necessary appropriations for the operating expenses of the year of government, which would get us through to a period only a small number of weeks after when the budget is to be tabled in this house, to be considered by this house, to pass through the estimates process and to head upstairs for the usual expeditious treatment that the other place treats pieces of legislation with.

I will be interested to hear, during the committee stage of this bill, what the rationale is behind that level of appropriation and what the estimates are by the government for how many funds will be within the government's remit, certainly within the first half of the financial year and certainly as we go through that period where the expenditures of government start to eat into that $6.6 billion.

I say that I will be interested to hear that during the committee stage of deliberation because, of course, although this is the Supply Bill and although the parliament considering a supply bill is a very regular occurrence, it is the convention that government bills, upon their introduction into the house, are not only provided with a period of time so that members can get their heads across the vast amount of detail that has been provided in this bill but also given the opportunity to be briefed by the government on the contents of the bill and the implications of parliament's passing of the bill.

I raise that because, despite the shadow portfolio responsibilities that I hold being reasonably widely known, I have not yet been offered such a briefing by the Treasurer or his office, despite writing to the Treasurer one month ago requesting one, as opposition members do in their shadow portfolio areas, and also reinforcing the need, for the appropriate passage of bills and legislation through the parliament, for us to receive briefings on these sorts of bills. I hope it is an oversight; I trust that it is.

Certainly, knowing not so much the Treasurer but his relatively recently appointed Chief of Staff, I am not yet of the opinion that it would be a deliberate omission not to provide that opportunity to the opposition to be briefed on the bill or the implications of it, but I do note it because it would be most unfortunate if this were to become somewhat of a trend or a habit where the opposition—or, indeed, other members of parliament, given that we do have crossbenchers in the current make-up of the parliament—are not given timely briefings on these sorts of matters.

I mentioned before that this is, of course, a regular occurrence for the parliament and, given the broad nature of the purpose of the appropriation of these moneys for expenditure by the government across its responsibilities, members are allowed a significant amount of latitude in directing their remarks. I perhaps will not take advantage of that full width of opportunity in making my remarks this evening on the Supply Bill but I do want to talk, both with examples but also conceptually, about the concept of state budgets, state budgeting and financial management.

I think most people would agree that a government's budget is a pretty well-distilled expression of its priorities. Governments, in determining budgets, are constantly having to make choices between areas of expenditure, areas of investment and areas of revenue raising. Those choices bring with them those decisions which reward one option over another. It is a difficult choice. It is a difficult choice when financial resources are significantly constrained, but it is also a difficult choice when there are strong revenue flows into government as well.

In fact, sometimes the choice is that much harder because there is a broader understanding or conception throughout the Public Service—let alone ministers responsible for agencies and portfolios across government—that if there are revenues to be bid against, then those bids will be made in great number and very aggressively for the size of the investment or the size of the program or the initiative which is sought.

It is also a difficult process because establishing a budget and hence establishing a set of priorities and taking a set of choices, speaks much to the ethos and the mindset of the government making them. While this government is only a small number of weeks old, it has set out what it says is an agenda which it intends to prosecute, which will necessarily involve the making or the adoption of many choices across nearly all areas of government expenditure. Many of those choices will not be easy.

The very first question we asked from the opposition to the government was to the Premier about whether he remained committed to delivering every one of the election commitments made in the lead-up to the recent state election on 17 March this year. He immediately answered in the affirmative. While in the very early days of a government it might seem a very easy commitment to make—that all election commitments will be delivered—as time goes on, as ministers and the cabinet spend more time superintending the business of government, the pressures and the competing demands on the finite financial resources of government become evident.

It becomes challenging to maintain the course, to stay the course on delivering an agenda. The Premier was very quick to tell us in that answer that the Liberal Party had made some 300 commitments in the lead-up to the last state election and each and every one of them would be delivered. Some of them will not necessarily trouble the scorers in a budgeting sense; some of them will trouble them very greatly. Some of them committed to very significant expenses of public resources, either to commit more expenditure or to forgo revenue, which will be quite a juggle to balance for both the Treasurer and the cabinet in arriving at a budget.

I am pleased to say that the groundwork has been laid out in what the former Labor government have left this new government. They inherit a budget in surplus. They inherit a budget position that specifically included an additional $150 million in the current financial year for the operations and cost pressures within SA Health and specifically allocated a further $24 million for child protection activities and cost pressures in this current financial year. Those contributions in those two portfolio areas were not just one-offs in the current financial year. They were repeated—in fact, in the case of child protection, in a growing sense—across the forward estimates with further financial resources, which left that budget position in the net position that was reported in the Mid-Year Budget Review.

So you can imagine the surprise, I think, with which South Australians greeted the proclamation by the Treasurer on ABC radio on the morning of the federal budget—the day when, ostensibly, state treasuries and their treasurers are advised of the most recent updates for revenue projections to come from the federal government into state governments—that the Treasurer had already written off the 2017-18 budget to be a deficit. Of course, it did not take long for just about everyone to see through that thin veneer of political opportunism from the Treasurer.

Of course, it is in what he would see to be his political interests to confect a budget deficit outcome for the 2017-18 financial year, to be painted as the last financial year of the former Labor administration, before swiftly moving into a budget surplus position for the financial year 2018-19 onwards. But given that the Treasurer was left a budget surplus, given that the reasons he identified for causing the budget to move into deficit had already been provisioned and provided for within the budget figures left to him in the Mid-Year Budget Review, it became a very hollow cry from the Treasurer about this fiscal circumstance that he allegedly finds himself in.

It was even more so, of course, when less than 12 hours later the federal budget was handed down. It showed an additional boost to goods and services tax revenue to come from the federal government to the South Australian Treasury, not just in what was broadly reported in the 2018-19 financial year, where there is more than $500 million extra of GST revenue year on year from 2017-18 to 2018-19, but importantly an extra $272 million from the 2018-19 estimated result in the Mid-Year Budget Review on top of what is in the federal budget papers.

So there is $24 million in 2017-18 and $272 million extra revenue from the Mid-Year Budget Review to the commonwealth budget. It is extraordinary—nearly $300 million of additional revenue. Again, if you consider that early proclamation by the Treasurer that the budget in 2017-18 is to be in deficit, starting nearly $40 million in the black with the surplus that was left plus the additional GST, plus the extra $175-odd million of provisioning for health and child protection cost pressures, it only really leaves, I think, the conclusion for people to make—and many in the media have already drawn this conclusion—that this is to be a confected budget deficit, if one is indeed to eventuate in any event.

That is for a few very good reasons. One is, of course, that the business of financial management in government is constantly managing those agencies and those departments, some of which underspend throughout the year and fail to spend the appropriation provided to them balanced against those other agencies, which tend to overspend, particularly those which are departments mostly engaged in service provision where there is very high public demand for those services. Of course, you only have to think of agencies like health, where those services are not only in high demand but very expensive to provide. I cannot think of a South Australian health practitioner in the public health system who takes the approach of, 'Well, I've got a budget to manage, and I'm sorry, I can't treat you today for your particular ailment.' So of course that occurs.

The business of financial management is balancing those two different outcomes between those two different types of agencies, the underspenders and the overspenders, but also working within those agencies, particularly those overspending agencies, to try to get them to land their end-of-year position on budget so that they do not detract from the broader government end-of-year budget position.

I worry that nearly two whole months out from the end of the financial year, when the Treasurer goes on talkback radio and says, 'Don't worry about it; it's going to be a deficit,' what message that sends to chief financial officers, chief operating officers and their equivalents across the public sector who are responsible for financial management in their agencies, who are responsible for balancing their budgets and for making sure that the expenditure of their agencies is delivered within the appropriation which is provided to them. What message does it send to them when the Treasurer says, 'My hands are off the wheel. We're going to be in deficit'?

It sends a very bad message, and that incentivises poor behaviour, particularly on the part of those agencies that have a challenge from time to time in meeting their budgets. It is a particularly difficult or poor message to send these agencies when you march out of the door four of the most senior chief executives in government, bearing in mind that chief executives have a contractual responsibility to the Premier and to the government for financial management and for achieving balanced budgets in their areas of responsibility.

So you can see why this premature proclamation by the Treasurer is the last thing that robust financial management would call for in the early stages of framing a first budget of this fledgling, new government. It is also, I think, a very poor thing to consider when time has moved on quite significantly from the last time the Treasurer handed down a budget in South Australia.

I will ensure, because I think it would be inappropriate, if not unparliamentary, that I do not reflect on the Treasurer personally, so I will not do so. I have no interest in doing so, but I draw the attention of the house to the fact that the last time he brought down a budget the accounting standards were different. The budget was reported in cash terms, not accrual terms, similar to the way the federal budget is reported today in cash terms. In those terms, it does not particularly matter if there are minor movements or discrepancies from one financial year to the next: it is a simple cash reporting of the inflows and outflows of government in one particular financial year versus another.

But that is no longer the case. That changed, on my recollection, in the 2002-03 or 2003-04 budget—many, many years ago now—and the accrual accounting standard, which is now used to put the state budget together and reported under, establishes a far higher and more stringent bar for financial reporting. This means that these sorts of confected movements of expenditure from one financial year to another are not just a reporting anomaly in one column or the next but they actually have a financial consequence.

There is actually an important end result of whether there is a net operating surplus or a net operating deficit in one year or the other. It goes back quite a way towards the bill that we are discussing here, which is what the financial needs of the government are; what the supply of money is to the government; how much money is appropriated for the purposes of government expenditure; how much of that money is to be received, either from specific purpose grants or general revenue assistance grants from the commonwealth or in GST revenue grants; how much is to come in from own-source revenue; but, also, how much has to be borrowed on the financial markets in the short term to make sure the regular business of government can continue to be carried out.

If we are confecting deficits to make a political point and the end result is, as a consequence, that we are having to adjust our activity on the financial markets to take account of that, then there would be a real financial cost to that and a regrettable one. I would hope that we do not see any behaviour from the Treasurer where a confected deficit in a financial year, purely to try to prove some political point, means there is an additional financial burden or consequence on behalf of the state. That would be, at the very least, regrettable and, at the very worst, perhaps the subject for some senior officers to go and look at in another context.

Of course, it was not just many years ago that the Treasurer handed down his last budget; the former treasurer is wanting to wipe the slate clean on that past record of four budgets in the late 1990s and at the very beginning of the 2000s. They were a very different time back then for most members; indeed, it is difficult for me to recall what the times of the period were like. If you cast your mind back, we had a minister who was responsible for Y2K compliance, such was the lack of sophistication of governments at the time—not just this government but governments around the country and around the Western world—about how to deal with these sorts of things.

Australia—South Australia, as well other state jurisdictions—had been emerging from what had been the last recession the Australian economy had experienced. In South Australia and Victoria in particular, terrific burdens were placed on the community as a result of that recession. It was the first treasurer of the former Liberal government, Stephen Baker, whose task it was in the first four years of that administration to try to plot a course out of that.

If those of you who are, perhaps, at least of my vintage, if not a little older, recall one of the key issues around the 1997 state election campaign (and it was not the extremely regrettable result of the AFL grand final that year). It was a promise that was made around whether the state's electricity trust would be privatised. Certainly, the premier of the day and the incoming treasurer of the next term of the Liberal administration used the term 'never ever'. It would never ever be privatised and, of course, after just scraping back in by the skin of their teeth in the 1997 election, the work began in earnest to commence the privatisation of that.

A common perception of history and the financial management of that time would be that that privatisation was necessary to alleviate the debt burden on the government. That is, I think, a generally accepted version of events, and it is true—the first tranche of those electricity assets were privatised for $3.4 billion. However, what is not added in, as the very necessary next chapter of that story, is what occurred in the financial management of the last four years of that Liberal administration under the Olsen government. That was when the current Treasurer was also the treasurer back then, back in those cash accounting days.

The four budgets which were delivered can still be found in the most recent budget papers. You select Budget Paper 3 and go to the appendices—off the top of my head, I think it is table B3—and it will show you the financial outcomes for the state budgets spreading back into the 1990s. If you look at those four years, those last four years of that former Liberal administration, it will tell you what the net operating balance and the net lending balance of those four budgets were. Cumulatively, over those four years, the net operating deficits totalled $1 billion. On a net lending basis, those four deficits totalled $1.3 billion.

So, while some may hang their hat on the privatisation of an asset like the Electricity Trust of South Australia to raise $3.4 billion, what does not go with it is the racking up of another $1.3 billion of general government sector debt while that privatisation was occurring. That is, by any measure, extraordinary financial management. To sell one of the highest valued assets this state has ever had and receive those revenues, ostensibly to pay down general government sector debt, and at the same time to rack up more than one-third of those sale proceeds in debt is a dreadful legacy.

In that context, I can understand why there is perhaps a deep-seated need of this new Liberal administration and the Treasurer to try to wipe the slate clean of that financial record and try to start afresh. That might provide some window into the psyche of needing to paint a deficit in the 2017-18 financial year and then move quite quickly into a surplus in the 2018-19 financial year, helped of course by those record GST revenues coming in from Canberra. That might be politically amenable and attractive to the Treasurer and to this government and, on face value, I can understand the base level attraction to that, but it would be disingenuous.

If you then take into context the intervening years between the current financial year and the end of that former Liberal administration, there is a further financial story to tell. On coming to government, the former Labor administration set about the task of recalibrating its priorities of no longer funding those former Liberal Party priorities which the former Liberal government had funded and of setting about pursuing its own priorities.

During the period of 2002 to 2007-08, the remaining budget debt, which, off the top of my head was about $1.5 billion, was paid off with strong surpluses in the general government sector. In fact, there were net financial assets in the general government sector in those years of 2007-08 and 2008-09. That enabled the government of the day to do several things, each of which has a strong bearing on the situation we find ourselves in today.

First of all, the beginning of the record, unfettered and unbroken commitment to infrastructure investment started from that time. Those who can remember the 2006 election campaign would have noted that the biggest infrastructure investment that was going around at that time was the substantial investment in the Techport facility for the benefit of ASC to place them in the box seat to win the air warfare destroyer contract, which was out for tender by the then Howard government.

It is a salutary lesson and perhaps the best one we can think of in recent times—by no means the only one but perhaps the best one—of what targeted government investment alongside a company in a key industry can provide for the state economy. That was a difficult fight to win. There was tremendous pressure from the Bracks government for that to go to Victoria. There was tremendous competition, although perhaps not quite of the same intensity, from Western Australia for that contract to go over there. But South Australia was the only state that was investing such a vast sum in a precinct to benefit one company, ASC, so that they were in the box seat to win that contract, and win that contract they did.

I think it ended up being something in the order of $350-odd million for the infrastructure as well as some operating expenses to administer the investment and to run the common user facility over the course of time as well. When you think that that had been at the time the biggest investment that we had made in infrastructure as a state for quite some time, then getting back into the business of investing in infrastructure more seriously and more heavily in terms of financial dollars was important.

It came at a time, perhaps a little bit unhelpfully in retrospect, when things were ticking over pretty nicely in the Australian economy and indeed in the South Australian economy. We were going through those early to middle stages of the mining investment boom around Australia, and so the projects—not that there was any question over whether they were worthy projects; of course they were—were relatively expensive to deliver. We had high escalation costs year on year due to the price of labour, of materials because we were in competition with other projects in other states in other industries.

But those investments commenced. I am thinking of one which was servicing the electorate of Lee before the boundary changes: the Port River Expressway, the opening road and rail bridges over the Inner Harbour but also the Northern Expressway between Port Wakefield Road and Tanunda. There was the investment in the ANZAC Underpass and the Bakewell Bridge. These were the early investments in infrastructure that were made to try to take advantage of the improved financial position of the government.

Of course, there were then some extraordinary scenes of avarice many miles away in the United States. We had a domino effect of financial institutions, which fell over and precipitated the global financial crisis. South Australia, many other states and indeed the commonwealth were in a very strong financial position to react with fiscal stimulus, as well as what the Reserve Bank was doing with monetary stimulus, in responding to the global financial crisis. In South Australia, we chose a twofold strategy: one was to double down in infrastructure investment and the other was largely to stay the course in maintaining the level of service delivery and provision in the Public Service.

While there was expected to be a recession in Australia—and a recession that would affect all states like South Australia—the last thing a state like South Australia wanted to do during that period was retrench many thousands of workers out of the Public Service and exacerbate an employment problem. Coming off that virtually zero net general government debt position, which had been long achieved and fought for by running budget surpluses, meant that we had the capacity to do that.

That financial strategy has been maintained, although I should say with the caveat of largely maintaining the size of the Public Service from that level of six to eight years ago. Of course it fluctuates as rounds of efficiencies are made in some departments, but more resources are put into agencies such as health, police, education and other areas of service delivery, including child protection.

It meant that we could support a floor of economic activity in the South Australian economy and ensure that the government was supporting not only its own public sector service delivery efforts, maintaining employment and services to the South Australian community, but also be supporting a cohort of the private sector in delivering these important projects. That, largely, is the position in which we find ourselves at the moment.

Economists work extremely hard to place themselves in the middle of public policy debates. It is vitally important for economists to feel like they get the first, the middle and the last word when it comes to public policy debates. They all have an opinion on how different states fared through the period of September 2008, which is when Lehman Brothers fell over and precipitated the global financial crisis, and how they fare today. Since then, states have moved at different levels of growth.

Some pundits would say that by and large South Australia, over the last few decades, has tended to be the last in to economic trends and the last out. We certainly saw gross state product levels and employment levels remain quite buoyant beyond that September 2008 level into the early months of 2010, suggesting that we were last in to the negative economic trends that affected state government revenues as well as fortunes across the broader state economy in other states like New South Wales and Victoria.

Certainly, rather than Australia or the states of Australia being plunged into recession, which was the fear with the global financial crisis, Australia and South Australia, like other states, instead experienced an avoidance of a recession but a prolonged period of below-trend economic growth. It is that trend that South Australia has been emerging from over the last period. It has been exacerbated by I think one of the most regrettable public policy decisions we have seen in the last 10 years of Australian politics, and that is the removal of direct industry assistance to the automotive manufacturing sector.

Certainly, when the Abbott government was elected at the federal level in late 2013, the dries were in charge of the economic agenda. There was no question about that. There was the big last gasp of free-marketeering, economic rationalism and neoliberalism when it came to fiscal policy at the federal level. We saw the two greatest expressions of that in the early months of that government, that is, the end of the automotive industry assistance and the intention to send overseas the contract to construct the next generation of submarines. It looked, at one point, very definitely like that was going to the Japanese.

There is another entire parliamentary debate that I am sure we could all engage in about how that was prevented. But certainly, in the end, it seems that the right decision was made, although it was a decision made far too late for the benefit of South Australia in keeping that submarine contract. However, the early industry assistance for the automotive sector was not maintained, and it was not just the 2,000 or so workers—and I know it sounds callous to put such an imprecise figure—at General Motors Holden at Elizabeth who were ultimately lost through that, but also many more thousands in the automotive component manufacturers. That placed a drag effect on the state economy, which meant that we struggled for many months to come out of that.

However, I am very pleased to say that, despite those challenges and despite those headwinds—some imposed by global forces and some imposed by federal government—the state as we see it today is in pretty good economic shape. In the last financial year reported, 2016-17, the gross state product, or the state's economic growth, outperformed the national average, which is a terrific achievement. We have had commentary from Deloitte Access Economics that says that it expects South Australia to perform similarly strongly in the current 2017-18 financial year. We have had more than 30 months of consecutive employment growth—nearly three years of improving jobs figures across the South Australian economy—albeit a fluctuating unemployment rate.

We see record levels of business confidence and business conditions across a number of surveys. The South Australian figures for consumption at the household level, particularly expressed through retail trade figures, have been strong, particularly for the last 18 months. That is good news. It means that one of the biggest inhibitors for economic activity in the Australian context—that is, people's reluctance to make spending decisions, either at the household level or at the business level—seems to be thawing, and that is good news.

Of course, there are several areas across the economy where we would like to see improvement. While we have had fantastic tourism figures for an important part of the South Australian economy, particularly on the back of the concerted additional efforts to publicise South Australia as a location for international tourists to visit, there is more that can be done. I am sure that there are benefits from those visitors that can be spread more evenly across the state. We even heard the Premier wax lyrical about how South Australia needs to improve its share of international students, and I am sure that everyone would agree that is important. Indeed, it was an economic priority of the former Labor government.

We would like to see much more activity in the housing sector, which has remained at softer than trend levels for quite some time, particularly in terms of new home starts. That has been particularly concerning on a number of levels. One level, of course, is that housing, like most property transactions, facilitates a great deal of revenue into South Australian government coffers through conveyance duty. Also, when people buy a house, let alone build a house, they tend to engage in high levels of retail spending which, through a roundabout process, finds its way back to South Australia through GST revenue.

So it is a very positive state that we find ourselves in at the moment: a budget in surplus, strong employment figures (although, of course, we can do better), strong state growth economic figures and forecasts that we will continue that trend. The foundation is there for this government to step off further into the future and continue to do well.

I mentioned a few of those projects that the former Labor government had invested in—the Port River Expressway, the opening road and rail bridges, the Northern Expressway project—but of course there have been many more, including the Southern Expressway, the Goodwood junction rail project, the first two stages (and now we see the third stage) of tram extensions, the Seaford railway extension and electrification of that line, and I mentioned the Anzac Highway underpass. Of course, one of the things I was particularly proud to be involved in early on in my time as minister for transport and infrastructure was securing $2.5 billion of funding, shared between the federal and state governments, to upgrade three different sections of the north-south corridor.

Four years ago, we would find ourselves in May 2014, a little after the time that the then assistant minister for infrastructure, the South Australian former member for Mayo, and I reached agreement to fund the Darlington upgrade project as well as the Torrens to Torrens project. Several months on from that, in 2015, we agreed to fund the Northern Connector project. Those last two projects—the Darlington project and the Northern Connector project—were funded on an 80:20 basis, with the federal government picking up 80 per cent of the funds and the state picking up 20 per cent.

It was fantastic that that money started flowing straightaway so that those projects that were ready to begin could begin. They did not have to wait for budget appropriations to come into the forward estimates. That is a salutary lesson, which I am hoping the new infrastructure minister is learning in his first foray into negotiations with the federal government: when it comes to securing money for the state budget to invest in road infrastructure upgrades, it is important to ask when the money is coming and it is important to ask how much will be received in the forward estimates. With no guarantee of money in the forward estimates, of course, there is no pipeline of projects that is continued and there is no opportunity for the workforce, currently busy on the Torrens to Torrens or the Darlington or the Northern Connector projects, to transition onto the next project.

The reason the former premier, the member for Cheltenham, raised with Prime Minister Malcolm Turnbull, in the beginning of 2017, the desire to co-fund the Pym Street to Regency Road upgrade of South Road was that we had an opportunity to extend the scope of works for the joint venture delivering the Torrens to Torrens project to basically continue on past the Torrens Road intersection to deal with Pym Street, to widen the road corridor and to deal with the Regency Road intersection.

That opportunity has now evaporated, given that those funds, which allegedly have been committed to South Australia, will not be received within the forward estimates. Indeed, only a small fraction of the federal government's contribution is slated to be received within the forward estimates. I will come to those projects and that discussion in a little more detail in a moment.

I also want to talk about the substantial change that the former government left the City of Adelaide in. I think it is fair to say that most governments, particularly Liberal, but historically also Labor, have been very shy in wanting to make a virtue of heavy investment in the City of Adelaide, lest they look too city-centric to regional communities around the state. However, the strong advice which was received, and continues to be received, from economists across the state and across the country is that it can be a virtue in growing your state's economy to invest heavily in your major offering to migrants, workers, tourists and visitors who are interested in coming to your state.

Your capital city is the entry portal. Indeed, it is, I guess, a finer grained version of the new state emblem, which many of us have taken to wearing. It is the gateway. The open door that we project to the world is through our capital city. The investments in the Adelaide Oval, the upgrade—almost forgotten now—of the Entertainment Centre, the two stages of the Convention Centre upgrade, the footbridge over the Torrens and the commencement and successful delivery of a new health and biomedical precinct at the west end of North Terrace have all changed the visual impact of our city and also substantially improved the economic opportunity of our city.

We now have co-located the most advanced hospital in the country, where you also have one of the most advanced research institutes in the country in the South Australian Health and Medical Research Institute. That precinct, by itself, has created substantial investments from the University of South Australia in its centre for cancer research and also an investment from the University of Adelaide with its new medical school. This is a precinct devoted to particular endeavours which is attracting activity, not just primary, secondary or tertiary health care, but research and commercialisation of health technologies. That is a relatively new economic opportunity which is now being prosecuted by South Australia.

That is not the only precinct which has been invested in and created by the former Labor government. We also have, farther to the south, near, I think, the member for Elder's electorate, the Tonsley innovation precinct. That is a former car manufacturing site that was left in 2008 when Mitsubishi announced that it could no longer compete and manufacture cars in South Australia. The $30 million of financial assistance that had been paid to Mitsubishi was returned to the government, which enabled us to complete a land transaction to purchase and begin remediating and reshaping that site into what would today, now, employ more people than were employed just before the end of car manufacturing at that Mitsubishi site. That is a terrific achievement.

There is a TAFE there; Siemens, a global company, has a presence there; the Flinders University has a presence there; as well as an increasing number of small to medium-sized enterprises engaged in innovative technologies and advanced manufacturing—the exact transition from manufacturing that we need to make in South Australia from traditional manufacturing to new manufacturing. That is another legacy that has left the state in a good situation.

Of course, those years, in particular from 2002 up until 2008, saw very extensive tax reform in South Australia. The payroll tax rate was incrementally dropped from 5.67 per cent to 4.95 per cent, as it is today. The threshold was increased to $600,000. Nationally, the states agreed to payroll tax harmonisation measures which alleviated the payroll tax burden from certain types of wages. Together, those different iterations of payroll tax relief today, cumulatively, are saving businesses over $220 million this year and every year. When you think that payroll tax raises in the order of over $1 billion a year, a more than 20 per cent reduction in the payroll tax burden on all of business operations here in South Australia is a terrific achievement.

Members who have been around or who can cast their minds back to those early years of the 2000s will remember that after a period of doldrums that the South Australian residential property market found itself in, there was a very rapid period of property price growth, a catch-up effect, if you will, of property values in South Australia. For many people, this was very welcome. For many people, it unlocked a tremendous amount of equity as houses which had been purchased very cheaply, albeit with very expensive mortgages at the time, were suddenly found to be valued at double or triple or sometimes even more their purchase value, only five or 10 or 15 years on from when they were purchased.

Those people who had invested in property were not so fortunate. They found themselves with payroll tax liabilities which had been, for an investment property, very, very low to very, very substantial. Particularly in the years 2004 and 2005, there were many stories of people who had a payroll tax bill which may have been $100 or $200 ratcheting up to $1,000. I remember a particular case where one gentleman who owned a number of investment properties had a land tax bill of $800 or $900 in one year, and the next year it was $11,000.

The reason for that was that we had a fairly unreformed land tax regime. Yes, a progressive tax structure but a very low tax-free threshold of $50,000 and an incrementally more severe taxation regime the higher the aggregated land value of held properties reached. In fact, it is interesting to note—it is not often commented on—that that payroll tax tax-free threshold used to be nearly double that. It was $90,000 in the mid-1990s but it was dropped down to $50,000 in an effort to catch more land tax payers and more revenue by the former state Liberal government.

The outcry in 2004 and 2005 of land tax payees was tremendous. There were many people for whom—and this was, of course, largely before superannuation was realistic, particularly for older generations of workers—their superannuation was the bricks and mortar they had invested in over the years. They might have had one or two or three investment properties around metropolitan Adelaide and they had managed those and managed the rental stream to provide them with a source of income in their retirement, given that they were unlikely to be eligible for pensions given their property holdings.

However, with those land tax bills escalating very quickly into the thousands, the government was forced to act. I am pleased to say that twice in the 2005 calendar year, and again in 2008, I think it was, and again in 2010, successive land tax reforms alleviated that burden to private land taxpayers by over $100 million a year. The tax-free threshold has gone from $50,000 to a factor of seven higher, over $350,000.

The payroll tax rates and the thresholds beyond that tax-free threshold have been reduced and they have been smoothed, and the top rate now does not kick in until nearly $1.2 million. This has provided very significant relief to the vast majority of landowners liable for payroll tax, and they are those people who own a small number of residential properties. We have forgone government revenues in the area of land tax to benefit households and South Australian families far more than we have for large-scale commercial property owners—and that is very deliberate.

We think providing a tax cut is better off in the pocket of South Australian families than that of corporations, who are more often than not based interstate or overseas with their large land holdings. I am thinking of those private equity firms that tend to own things like shopping centres, such as Westfields, etc. So, it is good that we have left a low tax burden when it comes to payroll tax and land tax.

We have also left a very low tax burden, comparatively speaking, in the area of stamp duties. The former treasurer, in particular, was very keen to alleviate the burden on commercial property transactions in real property and also in business property, plant and equipment, in intellectual property, in business goodwill, as well as in the suite of taxes which were known as the IGA taxes—the intergovernmental agreement taxes—those taxes that state premiers and state treasurers signed up to in 2000 in return for the goods and services tax being provided to the states. Those taxes were abolished in fits and starts.

South Australia, I am pleased to say, was very quick off the mark to abolish those taxes when it came to the bank account debits tax, when it came to share duty, when it came to lease duty, when it came to rental duty. But the one tax that was difficult for the states to consume the financial impact of in abolishing was the stamp duty on those commercial property transactions. I am very pleased to say that the member of West Torrens was the treasurer in South Australia, and I still think to this day he was the only state treasurer in Australia who managed to navigate through the abolition of those taxes. I think that is a tremendous record.

If you also consider the reform to the WorkCover regime, which alleviated the average levy rates for South Australian businesses across the board, where we have more than $220 million of payroll tax relief each and every year, more than $100 million a year of land tax relief each and every year, $250 million a year of stamp duty relief each and every year and $180 million, approaching $200 million, of relief in WorkCover levies, we are talking about three-quarters of a billion dollars a year in tax relief provided to primarily South Australian businesses. I think that is a tremendous legacy of the former Labor government.

While it was a tremendous effort for the member for Dunstan, when he was leader of the opposition, and his acolytes to try to paint South Australia as a high taxing jurisdiction, the truth was the complete opposite. South Australia is consistently assessed as the most competitive place to do business either in Australia or amongst South-East Asian and Australasian jurisdictions, and that is a tremendous achievement.

When you think about the comparative benefits that the member for Wright was talking about in his maiden speech earlier today, about the cost of housing and housing affordability, the comparative cost of living here in South Australia with housing in mind, there are tremendous advantages for people to live in South Australia, to work in South Australia, to raise families in South Australia and indeed, with those measures that I have just outlined as the legacy of the former government, to conduct a business in South Australia.

That is the platform, that is the baseline, upon which the former Labor government have left things for this new Liberal government both in an economic perspective, a micro-economic policy perspective and also in the perspective of the state of the budget.

We were very clear, based on expert economic advice over the last five years of the government, to be very careful to identify those areas of the South Australian economy where South Australia had a comparative advantage, both against its interstate peers and also globally—which are the areas of the South Australian economy which are assessed as being advantageous to us, in terms of natural resources or cost of production, and which are those on a global perspective estimated to grow in terms of highest demand over the medium term. Those are the industries that we identified to be in particular receipt of further government assistance in those industries.

I am talking about the food and wine sector; the international education sector; defence, as I mentioned earlier, with the investment in Techport; health and biomedical research; tourism; our capital city as an attractor for workers, visitors and tourists, as well as for residents; our global leadership position of renewables; and also our abundant natural wealth of minerals and resources. We not only identified those industries but we assisted those industries where possible. One of the most successful schemes of the last 20 years in South Australia, when it comes to industry assistance, has been the PACE initiative. It was an idea that had its genesis, as I understand it, in the former Liberal government, but was built on very substantially by the former Labor government.

It was not just the radical expansion of that program and providing very significant financial resources to assist in the exploration of our state's mineral and resources wealth, but it was also engaging in those sorts of regulatory reform opportunities to make exploration easier, to make exploitation of those resources much easier and also, something that flies again under the radar a bit, the minerals library, which had been in existence at Glenside but which was moved to a new bespoke facility and location at the Tonsley Innovation Precinct. It provides what South Australians are told is the best facility for prospectors to get an understanding of the mineral make-up of various regions of South Australia.

We also provided a substantial amount of resources to attract major employers to South Australia, and this is where I think we are starting to see a fundamental difference between the Labor Party and the Liberal Party. The incoming Liberal government tells us that there will be no direct financial assistance to companies or to industries and that picking winners has never worked in South Australia and is not sustainable. I think our economic history would say quite differently. In fact, I suspect that a former premier's legacy tells us quite differently about securing lower cost means of production, particularly nationalising electricity assets, or investing in industries like car manufacturing.

While perhaps not quite on that scale, with the exception of defence and Techport at Osborne, we have seen targeted investment to attract companies to bring jobs here to South Australia and to provide future employment opportunities. The Investment Attraction agency has done an extraordinary job in attracting companies to South Australia to employ South Australians, some of which are the biggest names in their fields globally. I am talking about companies like Boeing, Technicolor, Sonnen, Tic:Toc, Pirate Life, Big River Pork, Robern Menz, Sundrop Farms, Australian Global Wine Services, Strike Energy and VeroGuard.

If you think about those industry sectors that had been highlighted for support to help accelerate their growth above trend and enhance South Australia's comparative advantage in those areas, those companies fit squarely in there. Those companies have the capacity, the history and the balance sheet to make sure they can make investments, alongside government, to grow operations and sustainable employment opportunities for South Australians into the future.

The Future Jobs Fund that was established was critically important in the next tranche of companies, perhaps not quite so well known globally as some of those names that I mentioned but just as ambitious and just as able to expand business operations to become globally competitive and to employ South Australians. There was $50 million in grants and $70 million in loans, targeted investments to dozens and dozens of South Australian companies to help them grow jobs, and that is on top of the Job Accelerator grants, those grants to assist industries to continue employing more South Australians to help grow jobs at that time of the economic cycle when we needed it the most.

Of course, the Future Jobs Fund grants have now been challenged by the new Treasurer, which I think is a terrible signal to send to the business community of South Australia. Indeed, it is a conflicting signal from the one that the Premier was keen to paint on the very day that he was sworn in to his new responsibilities as Premier of this state. He said very clearly to the media on that day that his government would honour every contract entered into by the former Labor administration.

The very same week, the Treasurer emerged saying that he would reassess every contract and agreement entered into by the former Labor government in the Future Jobs Fund to see which contracts he could wangle his way out of. I think that is an appalling message to send, a completely contradictory message to—

Members interjecting:

Mr MULLIGHAN: Sorry, Deputy Speaker, if I am interrupting the gentlemen over there. I don't mean to be unparliamentary while they are interrupting me.

Mr Pederick: No, you're not. You are going well.

Mr MULLIGHAN: You're right? Is there something you want to—

The DEPUTY SPEAKER: Members, the member does need to be heard in silence. Thank you.

Mr MULLIGHAN: Thank you, gentlemen. That is most courteous of you. Where was I? I have lost—I had better start again.

Mr Pederick: You had better go back to the start!

Mr MULLIGHAN: I had better start again. I have lost my flow.

Members interjecting:

Mr MULLIGHAN: And on the fifth day, Deputy Speaker.

Members interjecting:

The DEPUTY SPEAKER: The member for Lee.

Mr MULLIGHAN: As I was saying, I think it is a terrible message to send those companies that had been given contractual commitments from the former government. Those companies, many of which had gone out and spent their own capital on buying or leasing new premises, on buying or leasing new machinery, new tools or new equipment, then heard through the media—not even directly via communication from the Treasurer or the Treasury—that their contracts may be torn up. I think that is a terrible message to send.

The Hon. D.C. van Holst Pellekaan: That's rubbish. I wasn't listening before, but now I know it's rubbish.

Mr MULLIGHAN: Despite the member for Stuart being heard in silence when he made his contribution, and despite his interruption saying it is rubbish, it is not rubbish at all. I continue to have companies contact me as shadow treasurer raising their concerns about when they are going to be definitively told when the money they had been promised to receive will in fact be received by them—or not.

The Hon. D.C. van Holst Pellekaan: What you said is that we are going to tear the contracts up. That's rubbish.

Mr GEE: Point of order, Deputy Speaker: the member should be in his seat if he has something to say.

The DEPUTY SPEAKER: Members, I know it is late in the evening, but the member for Lee does need to be heard in silence. Thank you.

Mr MULLIGHAN: It is an appalling message to be sending to those companies that had already engaged in those investment decisions on not just the promise but the contractual obligation of the government of South Australia to provide them with financial assistance. This is despite the Premier telling us that all contracts would be honoured. Then of course, we had the South Australian Tourism Commission, where a contract had been awarded to an interstate firm, and despite the initial excuse we heard that the $4.9 million roughly—

Mr Pederick: The decision was made before the election.

Mr MULLIGHAN: And we hear the member for Hammond trying to claim that the decision was made before the election.

Mr Pederick: And it was. Check the dates.

Mr MULLIGHAN: Of course, we know that is not correct. Despite the member for Hammond's interjections, the excuse that was initially offered about why the expenditure on that contract could not be withheld and not torn up was, first, that they are a statutory authority. They are beyond the reach of executive government. Well, that is just a furphy, and anyone who has practised in executive government would know that that is not correct. Then when that story was found not to hold, the excuse was that it would send a bad message to business if we were to tear up this contract or if we were to try to change the decision making about that.

Of course, there are still some unanswered questions and I know that this has been pursued in the other place. Given that Treasurer's Instructions require financial decisions of a certain magnitude only to be considered by ministers or by cabinet, the excuse that this was made by a separate statutory authority in that context does not seem to hold water, unless there has been a breach of the Treasurer's instructions.

If that is the case, we will probably hear about that in the first weeks of October when the Auditor-General tables his report. But in that instance, of course, it would send the wrong message to business to tear up that contract. But then only a couple of days later, after that excuse from the Premier, the health minister came out and said, 'I am tearing up the contract for the Repat Hospital site with ACH Group.' It is concerning that when it comes to the expenditure of government moneys—

Mr Pederick: And what did you lot say? Never sell the Repat.

The DEPUTY SPEAKER: Order, member for Hammond!

Mr Pederick: I'm happy to go home.

Mr MULLIGHAN: I thought you wanted to sit until midnight. I was just doing your bidding.

Mr Pederick: Keep going.

Mr MULLIGHAN: I'm just doing your bidding.

Mr Pederick: It's just you and I and comrade.

Mr MULLIGHAN: It's alright. We are at page 7. There is plenty more to go. It is disappointing that there is such an unresolved inconsistency with this new government when it comes to treating businesses in South Australia and their contractual agreements with the government. I hope it gets resolved, otherwise those sorts of concerns which have been expressed so far in phone calls—of course, none of them has the gumption or the courage to speak out because they do not want to lose that financial assistance in the event that it is being assessed.

But instead of just raising concerns, those concerns would be worse if they were expressed by not making investment decisions here in South Australia in the future. That is something that needs to be avoided at all costs. So, if that is a potential early casualty from this fly-by-night policy of respecting and then disrespecting contractual obligations of the government of South Australia, then that will be regrettable.

I want to come to the challenge which now faces the state budget going forward. I spoke at the outset about not just how a budget is an expression of a government's priorities and the choices it makes between the competing demands on its finite financial resources but how budget management is always a challenge for state governments given that, unlike the federal government, and I would also argue that, as most would, more so than local government we are at the coalface of service delivery.

When it comes to making sure that we are providing services in our hospitals, our schools, our police stations and our prisons, it is state governments that are in the gun not just to provide and manage those services but to finance the majority of the cost of those services. Making sure that the state budget is getting as much assistance from the federal government as possible in meeting those costs is absolutely critical.

Federal governments for many years have provided various levels of financial grants to state governments. There are the specific purpose payments, usually tied up in national agreements around health, education and other areas of service delivery. There are general revenue assistance payments, which are made to state governments. There is also, of course, specifically the GST, and it is also available for state governments to raise their own sources of revenue through some of those tax bases that I raised earlier.

The funding from the federal government is absolutely critical because of what the policy wonks would refer to as the vertical fiscal imbalance that exists between the states and the commonwealth, where the commonwealth has the vastly greater capacity to levy and raise revenue from the population, as compared to South Australia, but has a much, much smaller role in the provision of services and direct expenditures in the community as opposed to state governments. It requires that if the federal government is going to raise the vast majority of revenue in Australia, then that revenue needs to be passed through to those jurisdictions which are shouldering the load of providing those services.

That is why, particularly over the last 10 to 15 years, the subject of funding agreements between the federal government and state governments has been so important. That is why the health funding agreement has been so critical. That is why the education funding agreement has been so critical, and again, across housing and Indigenous services and funding to all of those other areas where the states rely on the federal government to pass a large proportion of the taxes they levy and raise on the communities of Australia back to the states to provide those services.

I will go through some of these major areas one by one. I mentioned earlier and, indeed, I spoke late last week in a grievance debate about why this new infrastructure funding agreement to South Australia is so problematic for our state. Yes, of course, there is the parochialism that all South Australians engage in of, 'We want to get this next project up and running. It's great that we are getting on with this and it's great that South Australia has captured the funding,' but it is far deeper and more fundamental than that.

It is critical that the federal government is shouldering its share of the burden of investing in infrastructure across our country. It is particularly critical in a state like South Australia. The members opposite who represent regional communities know at the very least, just as well as I do—but probably much better than I do—that we are a relatively small state in population but a very large state in terms of area and particularly in terms of lane kilometres. Deputy Speaker, I know the frustrations you have in your electorate of Flinders with the very large number of roads, particularly highways, and the difficulty the community has year on year in getting those roads funded. That is why it is critical that the federal government is doing all it can—not just with South Australia but with the other states—to meet the infrastructure and road funding needs of the community.

I mentioned earlier that it was a great outcome for South Australia to secure $2.5 billion of jointly funded infrastructure upgrades, but there was more beneath that which is less of a good news story. Those additional financial assistance grants, which were a legacy of the Howard government to local government to particularly assist regional councils with the upkeep of their roads, were absolutely critical. It was absolutely critical that the federal government's contribution to road maintenance was maintained at a level, but at the same time that we were receiving those funding agreements and that money flowing immediately for those three upgrades of the north-south corridor, Torrens to Torrens, Darlington and the Northern Connector, we had a $9 million a year cut in road maintenance funding from the federal government.

We had those additional assistance grants to local councils for the upkeep of their roads cut or abolished, another $18 million a year. Together, there was $27 million a year less in the 2014-15 year alone in road maintenance funding across South Australia. As a former minister for transport, I can tell you that we had to ramp up very significantly our own investment in road maintenance funding in South Australia to offset those impacts, to try to maintain where we were, and where we were was with a constantly growing backlog of road maintenance. I never hid from that fact at all.

We went through a period, particularly in the postwar years, of building new roads or sealing unsealed roads that had existed for many years. Once those roads were built, once they got towards the end of their initial build and maintenance cycles, they were not maintained, particularly throughout the sixties, seventies, eighties and nineties. You do not have to drive too far in any of the electorates I see represented opposite me right now to experience some of those roads. Yes, progress has been made, and I would be happy to wax lyrical about how much work we did. I would be happy to talk further about our road maintenance funding—

The Hon. T.J. Whetstone: Country cabinet is about as often as you get on those roads. Yes, you heard me.

Mr MULLIGHAN: You were talking to me? I thought you were talking to your phone.

The Hon. T.J. Whetstone: No.

Mr MULLIGHAN: You have to hold it to your head to make yourself heard, or haven't you figured that out yet?

The Hon. T.J. Whetstone: You are so intelligent.

Mr MULLIGHAN: You haven't figured that out yet.

The Hon. T.J. Whetstone: You are so intelligent.

The DEPUTY SPEAKER: Members, please—we will hear the member for Lee in silence. Continue, member for Lee.

Mr MULLIGHAN: As I was saying, we spend about two-thirds of our annual road maintenance budget outside the greater metropolitan area on regional roads, and we have to because that is where the lane kilometres are. We have to because the type of traffic that frequents those roads tends to be more impactful on the roads, particularly heavy vehicles and particularly heavier and larger combinations of heavy vehicles. I am glad that, in the 2017-18 financial year, we are spending $94 million on state-funded regional road maintenance and road upgrades. I think that is terrific. That is a substantial step up from where we had been in previous years.

You will remember from the 2014-15 budget that there was a step up in road maintenance funding: an additional $10 million in the first financial year, another $10 million in the next financial year, then an additional $20 million, then an additional $30 million. That $30 million is what we are experiencing now, and I think it is terrific that we are spending that amount of money. That is on top of specific project money, that is on top of what is being spent by the state and the commonwealth on the APY lands access road, that is on top of what has been spent on the national highway network upgrade projects and that is on top of what has been spent on the Sturt Highway upgrade.

That is terrific, but state governments, particularly the South Australian government, cannot continue to be expected to pick up the burden of these areas of funding when the federal government backs out. That is a relatively small example of how important it is that federal governments pick up their fair share of funding. If you turn your attention to health, we are not talking in the millions or even the tens of millions: we are talking in the hundreds of millions and the billions. This is when it becomes incredibly important and incredibly acute for governments, and particularly this state government, to make sure we are getting our fair share of funding from the federal government.

Yes, it is a state government responsibility to invest in the capital upgrade of our hospitals, and I am pleased to say that, throughout the last 16 years of the last Labor government, every major metropolitan hospital received refurbishments and upgrades. Of course, most recently we announced another $1.1 billion of hospital upgrades, in particular at the Lyell McEwin, the Flinders Medical Centre, Modbury Hospital and one I am particularly interested in, The Queen Elizabeth Hospital.

There has been a massive investment in recurrent funding in our hospitals. I think in the last budget of the former Liberal government health expenditure was a little over $2 billion a year. Now it is in the order of $6 billion a year. That is an extraordinary growth, and it is not just a growth commensurate with the size of total state government outlays; it is actually a growing proportion of the state budget.

It is a growing proportion of the state budget not just because there is an increasing demand for services in the public health system from the community and not just because, of course, with the advances in medical treatments, devices and technologies, providing a lot of those services and interventions is getting more expensive; it has become a growing proportion of the state budget because we have seen federal governments not meeting their fair share of funding. That is a big problem.

There has been an ideal that state and federal governments meet 50 per cent each of the cost of hospital services in the public healthcare system. Of course, we are nowhere near that. In fact as at its lowest and most recent ebb, I think the federal government's share of hospital funding is down to 36 per cent of that cost: almost down to one-third, with the state picking up two-thirds. This is why the issue of health funding agreements has been so important for South Australia and for the state budget.

When you are talking about a budget of approximately $6 billion, and when you are talking about hospital services comprising the major part of that, if the state government is picking up nearly two-thirds of that and the federal government only picking up one-third, then that is an unsustainable financial burden on the state's budget. It is an unsustainable financial burden on the state's budget at a time when, without jumping too far into it, I think most members would agree that there is little appetite for any further reform or radical changes in how we go about configuring or delivering our health services in the hospital system.

There was a genuine attempt to try to deal with this, and if people cast their mind back to the lead-up to the 2007 federal election campaign and also to the time after the new Rudd government was formed federally, there was a genuine attempt to come up with a new funding deal which would redress this balance. That agreement was for a 50:50 share of new growth funding in the health system.

That was not an immediate move to 50 per cent and 50 per cent of all existing funding: it was for new growth funding. The intention would be that over the years that would drag the federal government's share of health funding up towards 50 per cent and pull the states' proportion of that health funding down towards that 50 per cent level from that nearly two-thirds figure that I mentioned it was heading towards.

That is why there was such an outcry from state governments about the first budget from the Abbott-Hockey government in 2014 when across the future years, and across all the states in the country, there was a withdrawal of $80 billion of health and education funding collectively. What that means in today's terms for the South Australian budget is that the new Treasurer and the new government have their hands collectively tightly constrained in the choices they can make beyond the health portfolio, and to a lesser but still significant extent the education portfolio, because of the unfair and very large burdens that those respective federal and state funding shares place on the state budget. That is a terrible outcome.

It means that, just as it was perhaps in our cabinet (without divulging what used to go on around that table), there would be a lot of envious looks from all the rest of the ministers towards their health minister as they saw him like some sort of public sector Pac-Man gobbling up most of the financial resources available at budget time. It meant that we were able to do fewer things in our portfolio areas, as most of the financial resources were consumed in that portfolio area and, to a lesser extent, in education.

That is why these deals are so important. That is why we think, and we still argue, that the recent health deal entered into by the new health minister is bad for South Australia because it does not meet that target commitment of 50:50 of new growth funding: it is only 45 per cent for the federal government, and even then there is a cap year on year of the amount that can be given for those health funding agreements, I think of 6.2 per cent per year.

That is why the former Labor government was so angry at the prospect of the watered down Gonski funding deal put forward by the current federal Minister for Education. It was not what David Gonski identified the Australian education system needed in his initial report; it was a watered down version of that. It was not what students, classrooms and schools needed to ensure that school children, for the benefit of their future and our country's future, were better educated and better able to adapt to what would be future roles available to them in the workforce, let alone be productive members of the community in other respects.

That money was not provided for as initially promised, and the same thing then occurred with the National Disability Insurance Scheme. The NDIS, I think, is a salutary lesson on needing to keep a watch out for some of the sharp play that goes on by federal ministers when it comes to making excuses for themselves about why they have not met funding commitments they had previously adhered to.

When the NDIS agreement was reached between the then Gillard government and the states, there was a ramp-up of funding effort from both the states and the federal government, year on year, to progressively build on how much money needed to be funded into the new scheme, transition people into the new funding arrangements and, ostensibly, give many more people financial assistance. When this was debated publicly by the current federal government, the comments from the now federal education minister were that the NDIS money was never real, that it was on the never-never, that it was 'beyond the forward estimates'. That is interesting.

It is interesting that a current federal minister in the current federal government would say that money that has been promised or committed to, even if it is by a federal cabinet decision, is not real if it is beyond the four-year forward estimates period. If you cast your mind back to federal budget night, that is what we were asked to believe by Senator Birmingham and his federal colleagues about our infrastructure funding. 'No, no, that money is there. Sure, it's beyond the forward estimates, but it's there, it's a commitment, it's going to happen, it's real.' Well, which of his statements is true? That money beyond the forward estimates is not real, it is 'on the never-never, it was never there', or, 'Money beyond the forward estimates is a commitment. It will definitely happen, it definitely is real'?

I find it interesting that we have a Liberal government that is prepared to support those comments on the NDIS, on Gonski and on the health funding agreement and that, as those agreements ramped up in funding, towards the end of the forward estimates and beyond, that was all bunkum, that that was all rubbish, but, when it comes to their infrastructure funding agreement, that was real.

These are terrible arrangements for a state government, and a terrible set of arrangements for this state government and this state budget, because they mean we are receiving many hundreds of millions of dollars less into our state budget from the federal government than we should be.

If you want to know what is happening with that money—if you want to know what is happening with the hundreds of millions of dollars that we should be receiving each year for health services, for teaching our kids in schools, for looking after disabled people on the NDIS or for any of the other myriad national partnership agreements that have either been abolished or substantially cut—that is the money that the federal government is taking out of state governments and putting into their corporate tax cut. That is why this problem of, to use the policy wonk's phrase, vertical fiscal imbalance is such a challenge for South Australia and the other states.

When you have a federal government that is raising all the revenue and has a far greater revenue capacity than the states, and then it chooses not to pass that revenue on to the states but instead chooses to forgo some of that revenue through tax cuts to the corporate sector or through some other handouts that avoid assisting a state government in its service delivery responsibilities, that is a terrible outcome. That is going to be a constant challenge for this government.

It is going to be a constant challenge for the Premier in particular, given his—and I am not trying to make a mockery of this—close relationship with the federal government. He will find himself in situations where it is absolutely imperative that he stands up to the federal government on these issues and says to the them, 'No, I know what you are trying to do, but that is contrary to my state's interests. You need to stump up more money for this.'

We were grievously disappointed to see the health agreement entered into, as well as the direction we are heading in with education funding and NDIS funding. If these trends in how the federal government treats South Australia continue to happen, then all the ministers who sit around the cabinet table here in South Australia are going to find themselves fighting over a very small pile of available financial resources for their portfolios. That means that those 300-odd election commitments, which the Premier has told this house will be met and will be delivered, will be that much farther out of reach. That is something that a new government needs to come to terms with very quickly.

I have been concerned, at least in the Treasury area, about the shifting sands of some of the election commitments that have been made. Take the emergency services levy, for example, which was the focus of a question to the Premier from one of his own side, as well as a supplementary from me. The Liberal Party made a commitment to South Australia to reduce the emergency services levy in four different ways. There was a commitment to return the emergency services levy back to its previous level. There was a commitment to cut emergency services bills by 50 per cent. There was a commitment to forgo $90 million a year of revenue. There was also a commitment to deliver $600 of relief of emergency services bills over four years. Each of those four things in isolation is very different from the others.

I would like to know which of the four commitments is going to be held. Is the emergency services levy going to be returned to its original level? If that is the case, then the levy rate that was applied to households in the 2013 financial year needs to be applied for the 2018-19 financial year. If bills are going to be cut by 50 per cent, that means the amount of revenue raised by private households and other landowners in the current financial year needs to be reduced by 50 per cent, and that needs to be disaggregated across everybody's ESL bill for fixed property. If it is a $150 cut, then the Treasurer needs to explain why, several weeks ago, he told journalists that he may not be able to achieve that reduction. If it is only spending $90 million a year, that sets a remarkable precedent on how the government intends to keep its election commitments, does it not?

That says that what we promised was not an outcome; what we promised was not the delivery of a particular benefit to South Australians; what we promised was just to spend some money; what we promised was just to forgo an amount of revenue. If that is what the Liberal Party is saying, 'We only promised $90 million a year,' or, 'We promised $360 million over four years,' that is something that is completely divorced from the end result on households. That is something very different from a $150 saving or a reduction in everybody's bill by 50 per cent or a return to the emergency services levy as it was. These are the questions that will be increasingly difficult to answer for the new government in light of a constrained financial capacity due to those financial relationships with the federal government.

We also have the commitment on payroll tax. I have already outlined to the house the substantial relief which has been provided in payroll tax for South Australian employers—more than $220 million a year. We had a further commitment from this new Liberal government that they would lift the tax-free threshold to $1.5 million for small to medium-sized businesses. In itself, we think it is a commendable policy. The Leader of the Opposition, the member for Croydon, has already announced the opposition's intention to support that measure. I think that is welcome news not just for the government but, of course, more importantly, for business.

When it was pointed out that the impact of that policy meant that there would be a massive step up in payroll tax liability once liable payrolls increased from $1.5 million to $1,500,001, then there was a look of initial incomprehension from the Premier and the Treasurer, followed very quickly with a promise from the Treasurer that that massive jump in payroll tax liability, instead of proving a disincentive for people to take on either new workers and lift their taxable payrolls from below $1.5 million to above $1.5 million or a massive disincentive for that company to pay their workers more money so that their taxable payroll went from less than $1.5 million to more than $1.5 million, they would promise to smooth that transition in.

What is the smoothing? I think the Treasurer has attempted to leave everybody with the impression that the tax-free threshold will be maintained at $1.5 million and that, above that, the transition to full payroll tax liability of 4.95 per cent for taxable wages will be gradually smoothed in above and beyond that $1.5 million taxable payroll level. But I have to say that is not the word that we are getting from the business community. That is not the impression that those people who have spoken with the Treasurer or the Premier or their staff are being given about how this payroll tax cut is going to be implemented.

Given those financial constraints on the state budget from an increasingly dwindling contribution from the federal government for key areas of service delivery, when they take those hundreds of millions of dollars out of a state's health budget, out of a state's education budget, out of a state's housing budget, out of a state's homelessness national partnership agreement and they instead offer it up for a corporate tax cut, including to the big four banks, when those financial straits are being visited on the state you can understand the motivation for the Treasurer and the Premier to start reinterpreting what their election commitment was.

The smoothing will not be above $1.5 million in taxable payrolls. The smoothing will start well before. So the true tax-free threshold might not be anything like $1.5 million, it might not actually be $1 million. It might be less. What a dreadful broken promise that would be to the small to medium-sized enterprises here in South Australia.

That would be another poor message to send to the business community of South Australia about how they can expect to be treated by their Premier. They are told one thing and something completely different happens. They are told that all contracts will be honoured, and the opposite happens. They are told that they will receive a payroll tax cut of a certain quantum and magnitude, and then they do not. This is the difficult task ahead of this new government when it comes to framing this budget.

Of course, it is not just the emergency services levy and payroll tax that find themselves in consideration for the coming state budget, but there are other measures that will also impact on the state budget. We have heard much from new ministers about not just how much they are looking forward to enjoying the spoils of office. In fact, I think it was only the member for Stuart who used the word 'humble' or 'humility'. I am looking forward to a demonstration of that from some of the other ministers. For some of them, it certainly was not evident in the Address in Reply contributions to date. They are very proud to say that they will have a single chief executive and a single agency reporting to a single minister. Well, that is not an end in itself.

There already are substantial changes in the machinery of government in the organisation of government departments, and that is not cheap. We have also already heard about that really high priority, which was taken as a key election platform to the people of South Australia by the South Australian Liberal Party to make radical change in our public health system and change the name of SA Health. Is this really the priority? When we were all out doorknocking, how many people raised with us the issue of machinery of government or whether chief executives in the public sector were incapable of working in a situation with multiple reports? Some of them we will not know because they were summarily sacked from the Public Service with little more than an explanation of—

The Hon. R. Sanderson: What about Rod Hook?

Mr MULLIGHAN: —'I love your work, I love what you did, but we're heading in a different direction.' Well, that is an exit interview if you—

The Hon. R. Sanderson: Poor Rod.

Mr MULLIGHAN: Don't worry, member for Adelaide, I am sure we will see his return, won't we? I am sure we will see his return.

The SPEAKER: Members will not interject, and the member will also not respond to interjections. Let's not stop his flow.

Mr MULLIGHAN: No, I would not want to have to start again. Of course, these machinery of government changes will necessitate substantial changes in the appropriations within government—two different agencies—and the organisations of those agencies. I am looking forward to hearing from each minister which beneficial outcome members of the public will experience from those machinery of government changes. I have not heard one since, but we will wait to hear, with bated breath, whether all that expense has been worth it.

We have the policy of rate capping, which was a campaign run over the lead-up to and during the course of the election campaign. That was ably helped, I think we can admit, by the City of Onkaparinga in their endeavour and by the chief executive. Even the member for Schubert was derisive late last week, pointing to the need for golf memberships to be paid for by ratepayers for that council. Trust me, member for Adelaide, that is a local government issue only. It is important that those changes to local government revenue-raising capacities are considered in the state budget context already.

For many years in South Australia we have had a local government sector that has staunchly refused to borrow money to invest in public works and infrastructure. All of them have been very nervous about the prospect of availing themselves of debt-raising facilities with the Local Government Finance Authority and investing in infrastructure. Indeed, it has only been in the last four or five years that we have seen councils start to feel comfortable with taking on debt to invest in infrastructure.

I know I am biased, but perhaps the two best examples I can think of are, firstly, the City of Adelaide and the current Lord Mayor, Martin Haese. He has driven his council very hard to invest money in public works for the benefit of his council area and for the city itself and, as I outlined earlier, for the state's general economic strategy of using our capital city as an attractor for residents, visitors, tourists and workers. The other example is the City of Charles Sturt, which my electorate of Lee now falls completely within.

When people ask me at election forums before election day, 'What do you think about rate capping, Stephen?' I like to say, 'I've lived through it.' Half of my electorate was in the City of Port Adelaide Enfield, where the mayor used to boast about annual increases in rating bills in the order of 1 per cent, and half was in the City of Charles Sturt, where you had more significant increases, and it was like walking from the Bronx into Manhattan in terms of public infrastructure.

I am pleased to say that that has changed ever since the change in council administration at the City of Port Adelaide Enfield. For the first time in many years they have a decent city manager in the City of Port Adelaide Enfield, and he is doing a terrific job despite the distractions of his mayor. The City of Port Adelaide Enfield is now starting to catch up, spend some money and have rate increases more in line with inflation so that ratepayers can take advantage of better community facilities.

You only have to look at the investments that the government has made at Port Adelaide, now increasingly matched by the City of Port Adelaide Enfield, to see the change in perspective and policy. I can tell you that I would happily put my little boy in the car seat and drive for 10 minutes to get to a playground in Grange in the City of Charles Sturt, rather than walk down to the end of the street and go to the playground on the foreshore at Largs or Semaphore, because the quality of the public infrastructure—how enjoyable it is for the children but also how safe it is—is vastly better. That is a very small vignette of what you can expect with council rate capping. But why is it important for a supply debate?

We need to consider how those councils will go about servicing their debt arrangements under a constrained revenue environment if rate capping succeeds in making its way through parliament. These fees are not particularly real at the moment. We have already heard from the Mayor of the City of Norwood Payneham and St Peters, and also the Mayor of the City of Burnside, I think—two council areas taking in the local constituencies of the Premier and the Deputy Premier—that under the rate capping regime that seems to be foreshadowed by the member for Schubert, their ratepayers would have experienced higher rate increases in recent years than those they actually experienced.

So maybe all the palaver about rate capping is not going to amount to much at all. Maybe we will just see the sorts of rate increases continuing as we have for the past 10 years. That is because, despite talking about it for two or three years, the Liberal government still does not know what the cap will be, how it will be set, how it will be monitored and how it will be enforced. We are waiting to see that detail, and I suspect that the minister is waiting to contrive that detail so that he can get a bill drafted and brought before the house. However, there is still an impact on the government and its debt raising on behalf of local government. That is something important that needs to be considered in the context of the rate capping debate.

Earlier, I touched on the policy that has been announced by the Treasurer and the Premier when it comes to investment attraction. Not only have they committed to not providing direct financial assistance to individual companies or industries but they have also said they will wind up the Investment Attraction agency. To be honest, I do not believe the government will follow through in either respect.

Firstly, on the issue of direct financial assistance to companies or to industries, they have already committed to spending $60 million for Le Cordon Bleu to move to the old Royal Adelaide Hospital site. Despite saying that they would not provide financial assistance to a company, there are 60 million big ones going straight to a company to set up a cooking school at the old Royal Adelaide Hospital. We will be interested to hear the explanation of what market process or sounding the Premier went to before arriving at that policy position.

We are also told that there is a two-pronged approach to regional funding in the new government. There will be the Royalties for Regions funding arrangement, which will see 25 per cent of the state's royalties being directed into regional road funding, and I spoke at length before—and despite the efforts of the member for Chaffey, I thought reasonably magnanimously—about the true state of road maintenance funding and how that money is spent. I articulated that as the federal government has pulled out of special assistance road funding grants to local government in regional South Australia to the tune of $18 million a year, and pulled out of road maintenance to the South Australia government to the tune of $9 million a year, the vast majority of which was to be spent regionally, the state government had to step in, over the last four years and ramp up its road funding efforts. I outlined that figure of $94 million a year.

If you think about what 25 per cent of royalties would be on average, we are talking about $75 million a year. This was the issue we raised at the time the policy was announced. It was actually a policy advocating for a real funding cut for regional roads this financial year of $19 million. That is a lot, more than 20 per cent. That is a drastic reduction in the amount of lane kilometres which are either resurfaced or rebuilt, or have their shoulders sealed or the number of intersections improved with risk mitigation measures. That is a drastic reduction in funds.

We are also told that this fund, this $75 million a year, will pay not just for roads but for other things as well. We are told it will also pay for things like mobile phone towers, a federal responsibility. Once again the federal government is withdrawing from an area of its own responsibility and expecting the state government to step in. That further diminishes the amount of rural road funding available for these regional communities.

We are then told that the second prong of regional funding will be a 10-year $150 million regional growth fund. Let's assume $15 million a year each year over 10 years. How do we honestly expect $15 million to be spent in regional communities to facilitate economic growth or jobs growth? Is it going to be spent at the council? Not if the member for Schubert has his way. The only other option is to spend it in local businesses, to help regional businesses grow and expand their operations and employ more people—direct financial assistance to companies, directly contravening a policy held out by the Treasurer and the Premier.

There we have two examples of why clearly this policy of not providing direct financial assistance to companies will stand. The other element is the investment attraction fund and winding up that effort. It is easy, I think, from the conservative side of politics to bemoan direct financial intervention to facilitate economic outcomes. That is regarded as being contrary to the small 'l' libertarianism of economic policy: everybody should have the same opportunity to sink or swim on their economic merits.

The task of the Investment Attraction agency was to seek out individual companies to try to encourage them to either locate operations in South Australia for the first time and employ South Australians or to grow the footprint that they already have here and expand their operations and job opportunities. This was the task of the Investment Attraction agency. As I outlined earlier, it was an extraordinary set of achievements that that agency, along with the future jobs fund, had secured for South Australia. Only quoting a small number of them, but those global companies, like Boeing and Technicolour, show what can be achieved when there is a focused effort of attracting these companies.

This is an area of economic endeavour that every jurisdiction in Australia is heavily engaged and invested in. This is why you see jurisdictions like South Australia, like Victoria, like Queensland and like New South Wales, having a strong presence, particularly around Austrade footprints overseas—because these states are competing to attract international companies to expand or to create operations in their own jurisdictions. That is absolutely critical. That is something that has been, as I mentioned earlier, crucial for South Australia.

I am a little concerned I have to say, in a budgetary context, when the state budget relies, particularly in terms of own-source revenues, so much on direct economic activity that we have a policy to thwart future efforts to grow operations of these companies and to employ South Australians and beyond that silence. Perhaps that is a little uncharitable. The one policy that exists is to establish a state-based productivity commission. That is a remarkable commitment not just because it represents one of the first tranches of broken election promises by this government.

They committed, along with Infrastructure South Australia, that the membership would be settled, determined and announced within 30 days of both the state-based productivity commission and also of Infrastructure South Australia. You have to cast your mind to the rationale of why there would be a desire by this new government for a state-based productivity commission. I think it is a de facto body to create the illusion of this government having an economic strategy or policy beyond the same old policies that have been trotted out at the 2002, 2006, 2010, 2014 and 2018 elections of tweaks to state-based taxation regimes. There is no other economic policy other than this state-based productivity commission. What is the attraction?

We are all of an age and an era where our formative years were spent, in the early 1990s, watching Paul Keating develop competition policy, where states were incentivised with financial payments to start removing the cloying red tape and regulation which had gone so unreformed and unresolved for decades. This might be breaking news to the opposition, but those days are past. That competition reform regime has run its race; it was conducted and concluded more than 10 years ago.

What is the regulatory reform, other than the big sop to Coles and Woolworths in shop trading hours, that this government seeks? We know what their approach was going to be for passenger transport services: let's welcome in an unregulated additional service provider like Uber without driver checks, without police checks, without vehicle checks and let them compete. Is that what the basis of the productivity commission's reform regime will be? We do not know.

All we have to go on is the greatest hits, I guess, of the national Productivity Commission. You might remember them from such episodes as abolishing penalty rates. You might remember them from building submarines in Japan. You might remember them from lowering or abolishing the minimum wage. Is this the economic reform agenda of this new state Liberal government: to start picking and choosing from the library of rejected economic reform at the national level?

It is confusing, isn't it, because we also have a commitment that there will be a review of water prices, which—you have to hand it to the Liberal government—is basically an admission to voters and talkback radio that 'We don't actually know what we will do about water prices, but we will have a think about it after the election and we will have a review.'

Members interjecting:

Mr MULLIGHAN: Yes, but it is instructive, isn't it—

The SPEAKER Order!

Mr MULLIGHAN: —that on both the development of the state-based productivity commission, Infrastructure South Australia, and even with a review of water prices, let alone the litany of other reviews that they have committed to, that they would seek to outsource their policy making to those outside of executive government. What little faith they have in their own policy chops to come up with decent ideas to deal with these issues.

The Hon. J.A.W. Gardner interjecting:

The SPEAKER Order!

Mr MULLIGHAN: I am trying to cast my mind back: that is right, Techport and the air warfare destroyers; that is right, the expansion of the PACE initiative; that is right, economic policy; that is right—gee, I really regret intervening with this now.

The Hon. J.A.W. Gardner interjecting:

The SPEAKER: Members will not interject. The Minister for Education will not interject.

Mr MULLIGHAN: Mr Speaker, I remind you that he is on two warnings.

Members interjecting:

The SPEAKER Order!

Mr MULLIGHAN: Two warnings.

Members interjecting:

The SPEAKER: Member for Waite, be quiet.

Members interjecting:

The SPEAKER: Order!

Mr MULLIGHAN: Sorry, Mr Speaker, given that I have only just begun my comments on the Supply Bill, I seek leave to continue my remarks on the next sitting day.

Leave granted; debate adjourned.


At 00:00 the house adjourned until Wednesday 16 May 2018 at 10:30.


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