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House of Assembly - Fifty-Fourth Parliament, First Session (54-1)
2019-11-27 Daily Xml
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Auditor-General's Report

Auditor-General's Report

In committee.

The CHAIR: I declare the examination of the report of the Auditor-General 2018-19 to be open. I remind members that the committee is in normal session. Any questions have to be asked by members on their feet and all questions must be directly referenced to the Auditor-General's 2018-19 Report. I welcome the Premier and now call for questions.

Mr MALINAUSKAS: Referring to Report 8 of 2019, State finances and related matters, pages 1 and 2, and also page 19, the Auditor-General's overall assessment of state finances makes specific reference to debt. He says, as follows:

1.2.1 Significant increases in the State’s net debt to fund the general government sector’s investing program increase the risk the SA Government will have less capacity and flexibility for expenditure on services.

It also notes:

South Australia’s non‐financial public sector net debt to revenue ratio is expected to be higher than all other States by 2022‐23. Growth in net debt over the four years of the Budget is also well in excess of estimated growth in the State’s gross state product and revenue base. As a result, there is an increased risk the SA Government will have less capacity and flexibility for expenditure on services after meeting higher borrowing costs moving towards 2022‐23.

My question, Premier, is: have you prioritised which services you will be cutting first and when?

The Hon. S.S. MARSHALL: I just do not see any correlation between those two statements that the Leader of the Opposition is putting to us today.

Mr MALINAUSKAS: The Auditor-General specifically foreshadows that, as a result, there is an increased risk that the South Australian government will have less capacity and flexibility for expenditure on services after meeting higher borrowing costs moving forward. Now that we have clarified there is a direct correlation, I ask again: what has the Premier determined the government's strategy will be regarding that risk—namely, cutting various services, as obviously the government has already started doing?

The CHAIR: Before I call the Premier, could you reference that please, leader.

Mr MALINAUSKAS: I read all the quotes. I am more than happy to read them again. It is Report 8 of 2019, State finances and related matters, pages 1 and 2 and also page 19.

The Hon. S.S. MARSHALL: I hope those sitting next to the leader have some other questions because these seem to be going absolutely nowhere. We have made it very clear in our budget, which comes out every June, exactly and precisely what the budgets for the individual departments are.

The CHAIR: Leader, this is Report 8; is that what you are referring to?

Mr MALINAUSKAS: Yes, that is right.

The CHAIR: So it is not the Annual Report?

Mr MALINAUSKAS: Yes. Can I carry on?

The CHAIR: Continue.

Mr MALINAUSKAS: Thank you. If growth were to slow or revenue to decline, what are your preferred options? Are you going to cut investing into programs, or are there any other anticipated potential privatisations, like the train and tram privatisation?

The Hon. S.S. MARSHALL: We have presented our budget, and of course we need to remain nimble, but the reality is we will address those issues as and when they become clear to us.

Mr MALINAUSKAS: The posture of the government remaining nimble, does that mean that there is a prospect of further privatisations, like the trains and trams or correctional services and so forth?

Mr PATTERSON: Point of order: standing order 97, 'Such questions not to involve argument'.

Members interjecting:

The CHAIR: Member for Morphett and leader! I will address this, Premier, before I speak to this. I will take the point of order and rule against it. I am prepared to accept that question, given that the house is in committee.

The Hon. S.S. MARSHALL: I know that privatisation was a key program of the previous government. I can reflect very easily on their massive privatisation agenda over their 16 years in government. That was very clear, really, almost from day one when the government was flogging off just about everything that was not nailed down, but that is not our agenda whatsoever.

Mr MALINAUSKAS: For the sake of clarity, is the Premier conveying to the house that he still has no privatisation agenda despite the trains and trams, despite the correctional services facilities, the hospital patient transfers and SA Pathology? Does that not constitute a privatisation agenda?

The Hon. S.S. MARSHALL: I am happy to answer any questions which relate to the Auditor-General's Report.

The CHAIR: I remind the leader that he does need to reference each and every time, for my benefit as much as anyone's, where his questions are coming from.

Mr MALINAUSKAS: I will continue on the same reference that I made earlier, pages 1, 2 and 19. Does the Premier take any responsibility for gross state product growth declining, from 2.3 per cent in 2017-18 to 1.4 per cent in 2018-19?

The Hon. S.S. MARSHALL: The gross state product is not something that the government is completely responsible for. Obviously we operate in an environment where we try to maximise the attractiveness of South Australia as an investment destination. We want to maximise our performance as a state, but we do not operate in isolation; we operate in a country.

There are some economic headwinds at the moment. I think the Leader of the Opposition would be more than aware of those: the slowing gross domestic product at the national level and, of course, issues relating to slowing trade and investment globally. We are committed to doing everything we possibly can whilst we are in government to optimise the performance of our state whilst we are on the treasury bench.

Mr MALINAUSKAS: On the same reference, does the government expect to collect less revenue as a result of gross state product growth declining in comparison to your budget forecast of 2 per cent?

The Hon. S.S. MARSHALL: Revenue expectations are in the budget.

Mr MALINAUSKAS: Again on the same references, given the concerns about the increase referred to by the Auditor-General, has it been irresponsible to put a handbrake on commercial property transfers and associated revenue for the state by delivering over 160 days of uncertainty on the land tax measures?

The Hon. S.S. MARSHALL: I do not accept that, no.

Mr MALINAUSKAS: On the same reference, is the Premier concerned or can the Premier say with any degree of confidence that the uncertainty within the commercial property market, and also the residential property market regarding land tax, is likely to have any implications on revenue for the state government?

The Hon. S.S. MARSHALL: All our projections are in the budget. I think the South Australian property market has performed well relative to the rest of the Australian market both in terms of residential and commercial/industrial. I think the land tax issue will be clarified tomorrow.

Mr MALINAUSKAS: Will that clarity from the land tax issue mean there are no further changes to the land tax proposition from the government?

The Hon. S.S. MARSHALL: What part of the Auditor-General's Report are you referring to?

The CHAIR: We just need to confirm your reference, leader.

Members interjecting:

The CHAIR: Enough, member for West Torrens and member for Lee. My understanding—

Members interjecting:

The CHAIR: Order! Member for Lee, that is enough. We are wasting time. We just need to clarify what we are actually examining here.

Members interjecting:

The CHAIR: Member for West Torrens and member for Lee, I am speaking. We just need to clarify what we are examining here. My understanding is that we were examining the Annual Report of the Auditor-General, which is Report 6. You have been referencing Report 8, which we are having a little bit of difficulty finding here. We are actually examining the Annual Report today, not the state finances report.

The Hon. S.C. MULLIGHAN: Are all the reports tabled as part of the Annual Report?

The CHAIR: They were tabled separately.

The Hon. S.C. MULLIGHAN: Perhaps you could ask the Clerk: does that mean that we cannot ask any questions about the financial statements relating to the Annual Report, given they were not tabled together?

The CHAIR: My apologies. We stopped the clock while we had that discussion. I just needed to clarify in my own mind whether we were accepting questions from Report 8. Given that it also deals with the 2018-19 year—it is not the annual report, but it does deal with the financial year in question—I am happy to accept those questions. Leader, the clock has started again.

Mr MALINAUSKAS: I was just asking for some clarity from the Premier regarding the implications of the land tax changes on government revenue.

The Hon. S.S. MARSHALL: As I stated previously, our revenue projections are in the budget. If there is a need to update them, that can be done at the time of the Mid-Year Budget Review or in the budget next year.

Mr MALINAUSKAS: Have any of the various changes that the government has made to their land tax policy—we are up to the eighth version, from memory—provided some modelling or some expectations or estimations on the implications of various revenues to the state government, particularly around stamp duty?

The Hon. S.S. MARSHALL: This matter is currently before the parliament. Let's just wait to see what actually transpires when that debate is concluded.

The Hon. S.C. MULLIGHAN: Could I draw the Premier's attention to page 20 of Report 8, revenue parameter variations. Could you explain why the national partnership profile of payments has changed?

The Hon. S.S. MARSHALL: I do not have that detailed information, but I am happy to find out and come back to the committee.

The Hon. S.C. MULLIGHAN: Perhaps I could provide some further information for the benefit of the Premier, who seems not to have the report with him. The report states:

Commonwealth Government national partnership grants were revised up in 2018‐19 ($855 million) and down in all future years ($1.183 billion…mainly reflecting the outcome of negotiations with the Commonwealth Government to pull forward existing infrastructure funding into 2018‐19 for several projects and updated estimates of future Commonwealth funding.

Which projects attracted the pull forward of funding, and why has the government reduced the remaining funding years for infrastructure in South Australia?

The Hon. S.S. MARSHALL: I refer the member to my previous answer.

The Hon. S.C. MULLIGHAN: Were you involved at all in these negotiations?

The Hon. S.S. MARSHALL: That is a good question to ask the Treasurer, who negotiates the detailed questions that you are asking. Of course, we are in close contact with the federal government. We have a good working relationship with the federal government, which we have had to renegotiate. We have stopped the fake fights that existed under the previous regime, and I have since been very satisfied with the arrangements between ourselves and the commonwealth.

The Hon. S.C. MULLIGHAN: Can the Premier explain why he would be satisfied with a relationship that has reduced capital grants by more than $330 million over the next four years?

The Hon. S.S. MARSHALL: I gave an answer earlier, which was that I am happy to find the details of that and come back to you. Of course, many of the issues that we encountered upon coming into government were that the previous government did not have an adequate pipeline of work going forward. We have established Infrastructure SA. That was established here as an act of this parliament. That group is working on a long-range, 20-year productive infrastructure plan for South Australia, with five-year capital intention statements due early next year. We have worked very diligently since coming into government to pull forward as many projects as possible, but, suffice to say, there was not much in the cupboard when we came to government.

The Hon. S.C. MULLIGHAN: Can I draw the Premier's attention to page 28 of Report 6 of the Annual Report. Given the relationship that the Premier purports to have with the federal government, can he now clarify whether he has had an indication from the federal Treasurer whether the additional moneys coming from the commonwealth for the operation of the desal plant have been made exempt from the Commonwealth Grants Commission's calculations of GST grants to be distributed?

The CHAIR: Member for Lee, there are three parts to Report 6. In which part is page 28?

The Hon. S.C. MULLIGHAN: Sorry, it is in Part A: Executive Summary.

The Hon. S.S. MARSHALL: That is a matter on which I think we are seeking some clarification, but my understanding is that, because it is a purchase rather than a national partnership agreement or a specific purpose payment, as is usual practice, it will not be included in the HFE arrangements or consideration.

The Hon. S.C. MULLIGHAN: Has the South Australian government been provided a commitment from the federal government that it will not be included in those assessments?

The Hon. S.S. MARSHALL: We made it clear that we would not be worse off under the arrangements that were put in place. That was confirmed by the Prime Minister, so that is our expectation.

The Hon. S.C. MULLIGHAN: Has the government received specific advice from the federal government that the payments regarding the operation of the desalination plant will not be included in the calculation by the Commonwealth Grants Commission for the distribution of GST grants to South Australia? Is that correct?

The Hon. S.S. MARSHALL: I refer you to my previous answers.

The Hon. S.C. MULLIGHAN: Has this matter been considered by cabinet?

The Hon. S.S. MARSHALL: To which matter are you referring?

The Hon. S.C. MULLIGHAN: The matter we have been discussing. It is not rocket science.

The Hon. S.S. MARSHALL: Of course the cabinet has been discussing the desal issue. I thought that would have been pretty obvious to anybody who had been following it, even at a cursory level. If it is beyond the wit of the opposition to understand what has actually transpired in recent times, I am happy to go through it.

The Hon. S.C. Mullighan interjecting:

The CHAIR: Order, member for Lee! You have asked your question.

The Hon. A. Koutsantonis interjecting:

The CHAIR: Member for West Torrens, you will have an opportunity soon. The Premier has the call.

The Hon. S.S. MARSHALL: The member for Lee has asked a question. I am happy—

The Hon. A. Koutsantonis interjecting:

The CHAIR: The Premier has the call. Member for West Torrens, you will have an opportunity to ask a question in a moment. The member for Lee has asked his and the Premier is answering.

The Hon. S.S. MARSHALL: It is reasonably clear, I would have thought, because we have answered questions on this issue in the parliament, and the cabinet considered the request that came from the Prime Minister to enable us to switch on the desal plant in South Australia to provide 100 gigalitres of water. This would be purchased from South Australia. It would then be provided to farmers who are producing fodder at a subsidised rate to those farmers along the Murray-Darling Basin. South Australian farmers with that capacity and that expertise would be able to purchase this subsidised water. We committed to 40 gigalitres this financial year, with a review in April next year.

There is a very significant drought and dry conditions right along the Murray-Darling Basin. We want to be doing our part. We made it very clear, though, that cabinet was not prepared to consider this if there was going to be any cost to the people of South Australia. We received assurances from the commonwealth that they would meet all the costs associated with the production of this water, the pumping of this water and that this 100 gigalitres would be a once-off agreement.

These were the considerations that cabinet reviewed before making a decision to support this. We are very proud to be supporting the efforts right along the Murray-Darling Basin at the moment. These are very difficult conditions for many people and we are very pleased that we are playing our part. One of the reasons we were very pleased to play a part was to see the capability of the desal plant.

It has never really been put through its full paces before. Yes, it has been operational, but it has not produced 100 gigalitres of water in a condensed time frame, so we are very pleased to see how it will perform. Of course, as I said, we are very happy that all the costs associated with that will be met by the commonwealth.

Mr MALINAUSKAS: Regarding the Auditor-General's Report 6, Part C, page 509 relates to the status of major development projects, including Lot Fourteen. Can the Premier outline exactly what his responsibility extends to, given that last year he was unable to advise this committee of details regarding tenancies, business cases for the gallery and also rental returns in the facility. I am particularly interested in how Lot Fourteen responsibilities are managed between the Premier, the minister responsible for Renewal SA and the minister responsible for innovation and skills.

The Hon. S.S. MARSHALL: This is a very important project for our state. As members would be aware, the previous government had entered into an arrangement to essentially turn this into 1,300 apartments on the site of the old Royal Adelaide Hospital. We formed a different opinion. We thought it would be more useful to look at alternative uses because we thought there were plenty of places available within the private sector to put apartments up on the other side of the road and we did not want to be competitive with the private sector. We wanted to turn this seven hectares in the centre of the city, between the university and the Botanic Garden, into a genuine innovation precinct.

Members interjecting:

The CHAIR: Has the Premier finished? Another question, leader?

Mr MALINAUSKAS: Can I provide an example in the context of the question that the Premier did not want to answer, clearly. Last year, we saw the landing pad launched and a subsidised look-and-see arrangement for businesses thinking about setting up in South Australia. It features in Defence SA materials and also the Defence and Space Landing Pad and Trade and Investment materials as the South Australian landing pad, and I assume in the Innovation and Skills promotional materials as well. The brochure states on page 6 that the application to the South Australian landing pad is by invitation only. Between DPC, Defence SA and other portfolios, how specifically is that program managed?

The Hon. S.S. MARSHALL: This was a program that was launched at Euronaval in approximately October 2018. The Leader of the Opposition was invited, with one of his staff members at the taxpayers' cost, to be present at that launch. Obviously he was not paying much attention; maybe it was because it was in another time zone or maybe another hemisphere, but this is something we are very proud of. This is something that has already worked well.

Only a few months after this was launched at Euronaval in France we had our first company through the landing pad, which was L3Harris. It was originally L3, and subsequent to L3 being there it merged with Harris to form the sixth largest US defence company and the 10th largest in the world. They have been through the Defence Landing Pad, and earlier this week it was a great honour to officially launch their new facility at Mawson Lakes.

That is one example of a company that has been through the Defence Landing Pad, and there are more. Of course, some of those arrangements are commercial-in-confidence, but the Leader of the Opposition can be assured that this is a program that is up and running, that has had success and that is very much valued by people who receive an opportunity to be located in the centre of the city.

It might be a few weeks, it might be a few months, but we provide a concierge service to connect those companies with the opportunities that exist in the defence sector in South Australia. We are happy to extend that to other sectors as well, such as space, but it needs to be related to those sectors.

Mr MALINAUSKAS: I need to be more specific for the Premier. What agency or minister is responsible for the invitations? Specifically, who issues the invitations and what are the criteria for the invitations? Since it has started—and it is almost over a year now—how many businesses have been invited?

The Hon. S.S. MARSHALL: Well, Defence SA, which sits within the Department of the Premier and Cabinet. I do not have exact numbers, but I am happy to find out and come back.

Mr MALINAUSKAS: How many have been successful in making the transition through to a permanent establishment in South Australia as a result of those invitations?

The Hon. S.S. MARSHALL: Again, I will be happy to find out the details but, as a couple of examples, I have been through L3Harris and I also know that Squad, the largest French cyber company, is in South Australia because of the relationships formed at Euronaval and through our Defence Landing Pad. I am happy to find other examples and provide them to the leader.

Obviously this is now fully hitting its straps. It has only been in place for just over a year, but we are satisfied that not only has it already been successful—attracting one of the largest defence companies in the world to South Australia is, as far as I am concerned, a coup—but they are providing integrated platform management system services now to the OPV build. They are very keen to roll that out further to the new Future Frigates program in South Australia, and there may be other examples I can provide.

The good news is that the construction work adjacent to the Australian Institute for Machine Learning and the upgrade of the Allied Health Building is almost at completion. I think this will provide much greater amenity for the Defence Landing Pad that has been a somewhat messy scenario right in the middle of a construction area. However, as I said, we are satisfied with the results to date, but we are looking forward to future results.

Mr MALINAUSKAS: I appreciate and understand the Premier taking some of those questions on notice and that he will come back with some specific answers that were sought for the questions. On this subject, I have one final question in regard to the landing pad. The Premier may not be able to answer this now, but could he provide specific information to the committee regarding what consultants were engaged in the process of establishing the landing pad and operating the landing pad?

The Hon. S.S. MARSHALL: If I understand the question correctly, the leader is asking what consultants were engaged with the development of the landing pad, coming up with the idea?

Mr MALINAUSKAS: The management of it.

The Hon. S.S. MARSHALL: I will take that question on notice. My understanding is that Defence SA does that work, but if there are consultants involved in that, or if there were consultants involved in advising the government in establishing the Defence Landing Pad, then I am happy to provide that.

Mr MALINAUSKAS: In regard to the same reference, moving to a different part of that particular site, namely, the proposed Aboriginal Art and Cultures Gallery, last year the Premier confirmed that $200,000 had been set aside for a business case on the national Aboriginal Art and Cultures Gallery. Has that business case been completed and is the gallery proposal still on track as first announced, or is there ongoing consultation in and around that project? If so, what groups are involved?

The Hon. S.S. MARSHALL: I think there are two issues here: first, we had engaged PwC to look at the governance arrangements with regard to the new Aboriginal Art and Cultures Centre. That work has been completed. It was received in cabinet early this week. If it has not been released already—we are just checking at the moment whether it has been. That has been put up onto the DPC website, so you can take a look at that.

I think what the leader was then referring to was the business case. I think you got the dollar value for one and the title of the other. The dollar value of $200,000 was for the PwC, which is more of the governance model, and then a full detailed business case was included in last year's budget for this current financial year to look at the detailed business case for that project. As the leader would be aware—and I am hoping that the parliament would be aware—this is an incredible opportunity for our state. We have already put $150 million into the forward estimates, but of course work cannot begin on this for some time.

We still have more than a year of demolition work to be done on that site and that buys some time to make sure that we do the preparation that is required. I would much rather have a fully resolved plan that is going to be a great long-term productive asset for our state as well as showcasing our incredible collections, rather than a rushed concept. I am satisfied that the progress made to date keeps us on track with our proposal for when the Aboriginal Art and Cultures Centre will be open.

The CHAIR: That concludes the allocated time for the Premier and we now proceed to the examination of the Auditor-General's 2018-19 Report in relation to the Attorney-General. Once again, I remind members that the committee is in normal session. Questions have to be asked by members on their feet and all questions must be directly referenced to the Auditor-General's 2018-19 Report.

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