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Legislative Council - Fifty-Second Parliament, Second Session (52-2)
2013-03-06 Daily Xml
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PUBLIC FINANCE AND AUDIT (DEBT CEILING) AMENDMENT BILL

Introduction and First Reading

The Hon. R.L. BROKENSHIRE (16:19): Obtained leave and introduced a bill for an act to amend the Public Finance and Audit Act 1987. Read a first time.

Second Reading

The Hon. R.L. BROKENSHIRE (16:20): I move:

That this bill be now read a second time.

This bill seeks to amend the Public Finance and Audit Act, to impose a debt ceiling on the state government—the present one or any future one—of $14 billion, indexed from this year. That allows the government to go out to its present forward estimates position of net debt in the non-financial public sector to $14.023 billion.

Family First does not accept that $14 billion across all of government is an acceptable level of debt, but that is the level which this government has forecast it will reach in the forward estimates out years and it will have budgetary, financial and even legal liabilities arising if we were to try to bring them back inside $14 billion. I seek leave to table information of a purely statistical nature that appears otherwise on page 22 of the Mid-Year Budget Review, indicating the latest available figures on where net debt in the non-financial public sector will go.

The ACTING PRESIDENT (Hon. R.P. Wortley): The Hon. Mr Brokenshire, if it is only statistical, do you want to insert it into Hansard?

The Hon. R.L. BROKENSHIRE: Yes, sir.

The ACTING PRESIDENT (Hon. R.P. Wortley): Do you want to seek leave?

The Hon. R.L. BROKENSHIRE: I seek leave, sir.

Leave granted.

Table 1.19: Key balance sheet indicators—non-financial public sector

As at 30 June 2012 Outcome 2013 Budget 2013 MYBR 2014 Estimate 2015 Estimate 2016 Estimate
Net debt
$m 7,996 9,684 9,432 11,046 11,309 14,023
% of total revenue 47.4 59.9 59.7 66.9 63.9 74.5
Unfunded superannuation
$m 13,523 11,821 12,804 12,662 12,489 12,284
% of total revenue 80.2 73.1 81.0 76.6 70.6 65.3
Net financial liabilities
$m 24,500 24,312 25,331 27,014 27,308 29,951
% of total revenue 145.3 150.4 160.2 163.5 154.3 159.2
Net financial worth
$m -25,123 -24,658 -25,909 -27,626 -27,974 -30,625
% of total revenue -149.0 -152.5 -163.9 -167.2 -158.1 -162.8
Net worth
$m 37,199 37,933 37,360 36,911 37,329 38,277
% of total revenue 220.6 234.6 236.3 223.4 210.9 203.4


The Hon. R.L. BROKENSHIRE: For the benefit of honourable members, I advise that the net debt position went from an outcome of basically $8 billion last year to $9.6 billion this budget year. The review indicated it was now slightly under that at $9.4 billion, but then, in 2013-14, it will go to $11 billion, in 2014-15 to $11.3 billion and, at the edge of forward estimates, to $14 billion, as I have said.

Why net debt across the whole non-financial public sector and not just the general government sector? Before going further, I want to address one question that is bound to come up, as the government will claim its net debt is far lower by pointing to the general government sector. Here is why we are looking at the larger figure. First, look at the agencies we are talking about in that non-financial public sector:

SA Water, which, I remind members, made no net contribution to government in 2011-12 but are budgeted to deliver a $150 million benefit to government this financial year thanks to the astronomical water price increases;

the Urban Renewal Authority, which, I note, has directly benefited in its bottom line from a handover of swathes of former Housing Trust properties;

SA Housing Trust itself;

ForestrySA, or what is left of it, and, again, why would the government not be held financially responsible for that organisation when it has gutted its income-generating capability with the privatisation of the profit-making bulk of the forests?; and

SA Lotteries, which, again, has been privatised by this government but, as with ForestrySA, because they have their 'no privatisation' pledge under former premier Rann when his government was elected, they will have to retain it in this section of the budget so they can claim it was not privatised.

So, why do we include that total figure? Firstly, and importantly, because both core government departments and public trading enterprises engage in borrowing activities, net debt levels are best analysed at the non-financial public sector level, not just general government. Secondly, government ministers are responsible for the whole public sector and the decisions they have made in relation to those instrumentalities of the Crown. It is also to avoid cost shifting and because the commentary on the budget is always looking at the headline figure for an indicator of how the government is travelling. The bulk of the growth in the net debt is in what is called the general government sector, with some growth of $4.6 billion in the current budget papers to the end of forward estimates, whilst in the non-financial public corporations, the net debt is steady at about $4.3 billion.

For the sake of completeness, the agencies that are not captured by this definition are the public financial corporations, which include HomeStart Finance, South Australian Asset Management Corporation, South Australian Government Financing Authority, Motor Accident Commission, Funds SA and WorkCover Corporation. These are not included as they never are in the discussion of net debt in the budget papers.

Why is net debt such a concern? Again, I table page 79 of Budget Paper 3 of the state budget, which is table 4.8 and purely of a statistical nature.

The ACTING PRESIDENT (Hon. R.P. Wortley): Do you seek leave to have that inserted in Hansard?

The Hon. R.L. BROKENSHIRE: Yes, sir.

Leave granted.

Table 4.8: Key balance sheet indicators—non-financial public sector

As at 30 June 2011 Actual 2012 Estimated Result 2013 Estimate 2014 Estimate 2015 Estimate 2016 Estimate
Net debt
$m 6 541 8 410 9 684 10 781 10 849 13 011
% of total revenue 41.0 50.0 59.9 64.8 60.8 68.4
Net financial liabilities
$m 18 273 23 009 24 312 25 489 25 635 27 756
% of total revenue 114.5 136.7 150.4 153.3 143.6 146.0
Net financial worth
$m -18 402 -23 292 -24 658 -25 875 -26 080 -28 215
% of total revenue -115.3 -138.4 -152.5 -155.6 -146.1 -148.4
Net worth
$m 40 958 38 158 37 933 37 582 37 993 38 981
% of total revenue 256.6 226.8 234.6 226.0 212.8 205.0


The Hon. R.L. BROKENSHIRE: What this shows is that net debt as a percentage of total revenue was projected to rise from 41 per cent in 2010-11 to a massive 68.4 per cent by 2015-16. That ratio was based on a net debt of $13 billion, not $14 billion, as the Mid-Year Budget Review revealed.

When the now former treasurer told the parliament that he was setting a goal of having net debt at 50 per cent of total revenue, I think that he was referring only to the general government sector. But the Mid-Year Budget Review showed that, in 2015-16, they were going to blow it, and we were told that there was in that year going to be an additional $1 billion in net debt. Family First knew it was time to act. We talk often in this place about numbers and arbitrary figures, but the overwhelming feedback from our constituents is that they want action now to rein in state government debt.

With respect to State Bank parallels, first, the Hon. Mr Bannon, the former premier and treasurer, appointed retired Supreme Court Justice Jacobs to review the State Bank situation. In his first report, the former judge made such damning findings about the then dual premier and treasurer's lack of oversight and control over Mr Tim Marcus-Clarke that Mr Bannon had to resign. I believe that the resulting electing outcome was forever burned into the Australian Labor Party psyche.

Secondly, we are now at those levels again, as I will reveal in a moment with my third and final table from the budget papers, and, thirdly, this is about preventing a third. We need to focus in this place on the second State Bank disaster in front of us right now. This measure is about, if the parliament agrees with us, curtailing the damage of the second State Bank disaster and preventing a third and subsequent one.

The following two tables are the last I seek to insert into Hansard but bring home the point in a powerful way. The first shows this government's major spending problem, and the last is a relative comparison of our net debt position. The first is table C.3, from page 85 of the Mid-Year Budget Review. I seek leave to insert that table in Hansard.

Leave granted.

Table C.3: General government sector receipts, payments and surplus ($million)(a)

Receipts Payments ABS Cash Surplus
1979–80 1,891 1,671 220
1980–81 2,065 1,917 148
1981–82 2,210 2,122 87
1982–83 2,664 2,507 156
1983–84 2,988 2,734 255
1984–85 3,380 3,057 324
1985–86 3,634 3,161 474
1986–87 3,956 3,416 540
1987–88 4,307 3,858 449
1988–89 4,630 3,977 653
1989–90 4,973 4,370 603
1990–91 5,260 4,796 463
1991–92 5,387 5,396 -10
1992–93 5,967 5,456 512
1993–94 6,087 6,024 63
1994–95 6,155 6,220 -66
1995–96 6,405 6,164 241
1996–97 6,379 6,282 97
1997–98 6,988 6,724 264
1998–99 7,165 7,041 123
1999–2000 7,676 7,915 -239
2000–01 8,278 8,387 -108
2001–02 8,698 8,748 -50
2002–03 9,522 8,864 658
2003–04 10,023 9,502 522
2004–05 11,252 11,059 193
2005–06 11,480 11,293 187
2006–07 12,090 12,116 -26
2007–08 12,932 12,552 379
2008–09 13,579 14,299 -721
2009–10 15,837 16,991 -1,154
2010–11 15,331 16,851 -1,520
2011–12 16,556 17,594 -1,038
2012–13 16,391 17,385 -994
2013–14 15,749 17,346 -1,597
2014–15 16,599 16,851 -252
2015–16 17,697 20,502 -2,805

Note: Totals may not add due to rounding.

(a) There is a break in the series between 1998–99 and 1999−2000. Data for the years before 1999-2000 are sourced from the Australian Bureau of Statistics (ABS) and are consistent with ABS GFS reporting requirements on a cash basis. Capital receipts and payments, including payments associated with the provision of financial support for state owned financial institutions (which were treated by the ABS as an 'investment in financial assets for policy purposes') are not included in the series before 1999–2000. After 1998–99, data are derived from an accrual ABS GFS reporting framework, with receipts proxied by receipts from operating activities and sales of non-financial assets, and payments proxied by payments for operating activities, purchases of non-financial assets and net acquisition of assets under finance leases and similar arrangements. Due to the associated methodological and data-source changes, time series data that encompass measures derived under both cash and accrual accounting should be used with caution.


The Hon. R.L. BROKENSHIRE: It is a remarkable table. For the benefit of honourable members, it shows that general government sector receipts have gone from $1.9 billion in 1979-80 to a whopping $17.7 billion in 2015-16. However, importantly, the trend line shows that up to 2008-09, in 23 out of 29 years the state government lived within its means; it spent less than it earned. On those six occasions when it went over, it is in the proportion of most of the 3 per cent of income that is barely worth mentioning compared with what I will outline in a second. The horizontal line you will see at 1998-99 is important. The government might complain that the comparison is unfair because different accounting methods applied before 1999-2000.

But let's look at this government's record. To their credit, they earned more than they spent for their first four years and for five out of their first six years, but for every year since then and into the forward estimates the government has spent more than it earned. In 2010-11, the government spent $1.5 billion more than it earned, another $1.5 billion more than they earned in next year's budget and a whopping $2.8 billion more than they expect to earn in 2015-16. That is a 15.8 per cent overspend on the $17.7 billion the government expects to receive that year. Anyone who runs a household budget or a business budget knows that, when you spend more than you earn, it goes onto your debt, on which you pay interest.

I urge honourable members to have a close look at those figures when they read the Hansard with these tables incorporated. They are frightening, sobering, and illustrate the need for this reform. I seek leave to conclude my remarks.

Leave granted; debate adjourned.

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