Australian Economy

SA state budget spends big on health, while Treasurer warns ‘budget repair’ is needed

South Australia’s new Labor government is predicting a recovering national economy and booming property market will help it deliver key election promises in health and education, without driving up debt, taxes or cutting hard into the public sector.

Elected in March with a mandate to “fix the state’s ramping crisis,” the government’s first budget is unsurprisingly all about health, with $2.4 billion in new health spending over the next five years.

Treasurer Stephen Mullighan declared his first budget delivered on “every single one of the election commitments we made”.

“We are returning the budget to surplus, improving our debt metrics, and making sure we stay true to the commitment of no new taxes or increases,” he said.

“We are providing an absolutely extraordinary investment in health … and we are maintaining a very large infrastructure program.”

Three copies of the state budget papers fanned out on a black background
The budget forecasts inflation in SA is set to grow from 4 to 5 per cent in the next finanical year.(ABC News: Che Chorley)

The government is delivering a worse-than-expected deficit of $1.73 billion this financial year, but has forecast better-than-expected surpluses over the next four years, starting with $233 million next financial year.

That’s partly due to an unexpected $1.65 billion boost to government coffers thanks to stamp duty from a booming property market and an increase in the state’s GST revenue.

Despite that, the Treasurer took aim at WA’s growing share of the GST, which he said cost South Australia $290 million in a single year.

“It’s imperative we get on with this task of negotiating with the Federal Government a change to this distribution arrangements,” he said.

“Because in a couple of years we’re going to see our budget figures massively impacted.”

Government debt is set to continue on its record growth trajectory, from $24.7 billion this financial year to $33.9 billion in 2025-26, but the Treasurer said that rate was slower than it would have been under the previous Liberal government.

Cost of living set to continue soaring

The budget forecasts inflation in South Australia is set to grow from 4 to 5 per cent in the next financial year, putting additional pressure on households.

The government has already announced a one-off doubling of cost-of-living concessions for almost 185,000 South Australians next financial year.

The government has also promised a modest $177.5 million over four years to address housing affordability, with a pledge to build 400 new public houses.

It will continue the former government’s pledge to work with lending service HomeStart to provide a 3 per cent low-deposit home loan scheme for first home buyers.

Homelessness support services will see an additional $10 million over the forward estimates.

But the rising cost of living will also create budget pressures with the government set to open wage negotiations with doctors, nurses, teachers and other public servants in the next year.

A smiling man wearing a blue suit and red tie stands in front of a window holding a booklet
South Australian Premier Peter Malinauskas described his government’s first budget as the moment “policy becomes reality.”(ABC News: Che Chorley)

The budget warns those salaries make up 40 per cent of general government spending and that wage increases would need to be modest.

But Mr Mullighan said it was unrealistic to expect that the government could limit wage rises to 1.5 per cent each year when inflation was rising at 5 per cent.

The Treasurer will impose so-called “efficiency targets” to government departments that no longer reflected the government’s “priorities” including the department of energy and mining, premier and cabinet, trade, and SA Water.

The government will also save $15.5 million over three years by discontinuing a traineeship program for public sector employees.

Immediate relief for state’s health system

The government has promised immediate relief for the state’s health system, with 99 extra paramedics and ambulance workers promised this year.

By the end of its first term, the government aims to deliver 350 new paramedics and ambulance officers, 100 doctors and 300 nurses, as well as 326 extra hospital beds which is 24 more than previously promised.

The Women’s and Children’s Hospital will receive an extra $100 million for the new hospital to provide another 50 beds “to deal with the capacity of the future”.

SA Health has also been given a $400 million savings relief as the agency deals with increased costs due to the pandemic, but funding for the state’s COVID-19 response will drop from $448 million this financial year to $200 million next year.

A woman and two men sit at a desk talking. Behind them are people standing, out of focus
ABC journalists Leah MacLennan and Rory McLaren talk to Stephen Mullighan.(ABC News: Che Chorley)

Cuts to solar and batteries as hydrogen paves the renewable way

The government’s key infrastructure pledge will see it spend $593 million over the next four years to build a hydrogen facility at Whyalla.

The plant will use renewable energy to produce hydrogen for storage and export, and convert some of it into electricity to feed the grid.

But that new renewable energy spending will be offset by cuts to battery and solar programs.

Labor will save $19 million over three years by scrapping the previous government’s Home Battery Scheme, $20 million by scrapping a grid-scale storage fund, and $11.2 million by discontinuing an electric vehicle charging subsidy.

Mr Mullighan denied the cuts would impact the government’s environmental credibility.

“It’s worth bearing in mind that we are investing more in renewable energy initiatives than what we are cutting,” Mr Mullighan said.

The government will also save $1.1 billion by delaying the final section of the North South Corridor, and $662 million by scrapping the Liberal government’s Riverbank Arena.

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