Myths and Mysteries In The State Mid Year Budget Update – Part 1

By Peter Maddern

The Mid Year Budget Update delivered by then (but now sacked) Treasurer, Jack Snelling just before Christmas sustains the long term approach of this State Labor Government of delivering hope in the face of adverse reality and trusting the media won’t catch on to the smokescreen. It has certainly worked well for Labor over the past decade, especially with its dear friends at The Advertiser, and so why wouldn’t it continue in the same vein.

But the bottom line to the management of State’s finances by Labor is now, as it has been since the GFC (the start of FY2008-09) that they have clearly lost control of the situation.

Since that time (four years), the net lending of the State Government has gone up every year and the aggregate increase since that time is $4.4 billion. But notwithstanding, there is in effect precisely no effort being made to even consolidate this position as the aggregate of the next four years is projected to be a further $5.2 billion. That is, the situation not only gets worse, it is getting increasingly worse and this is after flogging off forests and buildings and whatever else can’t be nailed to the floor.

But how, given we hear so much about fiscal restraint and public service job losses?

Well, again since the GFC, the size of the Government’s expenses has gone up about 16% over the rate of inflation in four years and while in the past there were small operating surpluses that could go towards the payment of capital infrastructure, now everything contributes to greater state debt.

On the public service number front, it remains a magnificent furphy that public service numbers have been cut. The 2011 budget (Snelling’s first after the run in by his predecessor Kevin Foley with the public sector unions that brought him down) predicted FTE public service numbers by 1 July 2012 would by 79,859 but instead 12 months later he delivered 81,158 – 1,300 more than he predicted. Even in this year’s Mid Year update, total FTE in the public service will rise again this year, (albeit by just 77) and remain around 2,000 more than forecast around 18 months ago. No wonder we hear nothing from PSA Chief Janet Giles as despite the big talk public service numbers have gone up every year of this Labor government and now stand at around 10,000 more than could be justified on the basis of population growth over the past decade.

Another of the other great con jobs of this Labor Government is to produce growth in revenue numbers that superbly cover the unrestrained nature of its spending at the end of the forward estimates. It is a true reflection on how bad this State’s economy is going that revenue generated by state taxes (payroll, gambling, conveyancing etc) has grown a total of just 9% in the past four years. Yet, again the Government projects growth in the next four years of 26%. How?

Even its own estimates of growth in the State’s economy in the next four years are only 9.75%, just above the growth in revenue of the past four years and only about one-third of the growth needed to meet revenue expectations in this period. While employment growth is projected to be around a very miserable aggregate of 3.75%, the Government projects payroll tax revenues will increase by around 30%. Again how?

But the prize winning con trotted out by Foley and Snelling in equal measures (and always lapped up by the media) is the ruse about the Commonwealth GST. In the projected four years ahead, GST revenues are estimated to increase by a total of about 20%, that is double the projected growth by the Government for the State economy as a whole and double the increase in the CPI over that time. Sure, these finish at levels not expected a few years back but they are not ‘plummeting’ as the local press likes to regurgitate from the SA Government.

That means, you know, we aren’t doing too badly when it comes to the Federal Government and the GST take.

Which also means, the problem is not the making of other people outside of our control (ie the Federal Government) as the Labor spin doctors love portraying but rather the complete inability of this State Government to rein in its spending and generate growth.

The Government, of course, can’t also own up to the fact that it is spending away borrowed money on unproductive things – but more on that next time.

It all seems rather similar to the State Bank debacle of 20 years ago – only worse and with no end in sight.

(Note: All numbers and calculations used in this article derive from the State Budget papers.)

IN PART 2            Where did all the money go and where is it going now?

For previous articles on the problems with SA State Government finances, just search for ‘State Budget’ in this blog.