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Legislative Council - Fifty-Fourth Parliament, Second Session (54-2)
2020-11-11 Daily Xml
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State Budget

The Hon. D.G.E. HOOD (15:10): My question is to the Treasurer. Will the Treasurer outline to the chamber the interest savings on government borrowings as a result of yesterday's budget?

The Hon. R.I. LUCAS (Treasurer) (15:10): One of the more intriguing and newsworthy aspects of the very, very generous budget that the government issued yesterday to the people of South Australia has been the juxtaposition of a significant increase in debt—as has been urged on all governments by the Reserve Bank and the federal Treasury Secretary—with the fact that the budget papers reveal that we will actually be paying less in interest costs throughout the forward estimates by a significant amount.

For 2022-23, last year we were estimating that interest costs would be $814 million on our debt. This year's budget paper is indicating that we are estimating that we will actually be spending $200 million a year less on interest expense—$614 million—in that particular year, yet we will have massively increased our debt. That seems paradoxical, but the reality is that over the last 10 months this government has borrowed $6½ billion dollars at an interest rate of 1.3 per cent. Our borrowing costs have varied at the short end of the market, two-year bonds, from 0.69 per cent through to a 20-year bond at 2.29 per cent. Our average cost, as I have said, was 1.3 per cent.

What the government has been doing through SAFA (South Australian Government Financing Authority) is replacing more expensive debt and replacing it with much, much cheaper debt. Even though the debt figure has been massively increased, our actual interest expense has been significantly reduced.

The Governor of the Reserve Bank, Dr Philip Lowe, has urged us all, Labor and Liberal governments, state and federal, to borrow more to do the heavy lifting to finance public sector spending in infrastructure to try to save the economy from a deep and calamitous recession. That is the clear and unambiguous advice from the independent Governor of the Reserve Bank and many, many other commentators as well.

Over the next 12 days, three other state governments—Tasmania, New South Wales and Victoria, so Labor and Liberal governments—will release their budget estimates. From my discussions with both Labor and Liberal treasurers in those jurisdictions, they, too, will be drowning in red ink, as we have revealed yesterday. There will be significant increase in debt. There will be significant increase in deficits. My colleague-comrade, Tim Pallas, the Labor Treasurer from Victoria, I know will be going through a world of pain because of the second wave lockdown, the impact on the economy in Victoria and the impact on their particular budget.

It is what it is, but the reality is that, for as long as the Reserve Bank continues to intervene in the market to support low interest rates, whilst we have significant increases in debt, in the immediate future we are seeing reduced interest expenses. Even if interest rates modestly increase, we have the capacity, in terms of the $200 million estimated savings in 2022-23, in the immediate years after that to be able to absorb in a sustainable way those increased interest expenses, should they occur at that particular time.

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