[For Part 1 of this series, visit – Myths and Mysteries Part 1

By Peter Maddern

One of the mysteries of this State Labor government is working out where all the money has gone and what we got for it. When Labor came to power in 2002, we were headed for a AAA rating, debts were being reduced (thanks to the inevitable asset sales after Labor’s State Bank fiasco of a decade earlier) and the State was about to enjoy massive windfalls from the GST and the housing boom. Now we are in a worse position than even the last time we had the duties of a Premier and Treasurer managed by the same man.

But where has the money gone?

Since the GFC, the Government has already incurred or now projects to rack up $6.9 billion in extra debt to the end of the 2014 financial year. Premier and Treasurer Jay Weatherill likes to talk about the need to continually invest in the state’s infrastructure and economists agree this is a good idea but only where that investment is going to produce economic returns – that is, it makes us more productive and delivers better services to the community. (Please note: None of the costs of the new RAH are included in the $6.9b.)

But as respected economists like Darryl Gobbett have noted the reality is, all of that $6.9b (and more) has either been or will be pissed up against a wall on things that advance us, economically, nowhere. Here’s how:

Excess Public Servants

As noted in Part 1, this State employs around 10,000 excess public servants relative to where we were when Labor came to power after adjusting for the growth of the population. Each full time equivalent costs around $82,000pa so that means we are paying out over $800m per year on public servants we don’t need. If they were delivering us better services, may be that would be okay but as we shall see in Part 3 of this series, they aren’t.

As Christopher Pearson in this week’s Weekend Australian notes, Labor Governments love employing public servants in order that their union dues can help fund election campaigns and the mass of them, spurred by self interest, establish a wall of resistance in the community to cuts to their flock. But $800m a year is a massive price for the rest of us to pay for the Labor Party’s electoral gain. TOTAL UNECONOMIC BURDEN OVER SIX YEARS – $4.9 BILLION

Desalination Plant

We now have a huge desalination plant that is not needed. TOTAL INDULGENCE – $2.25 BILLION

Adelaide Oval

There are no new economic benefits arising from the Adelaide Oval development. As we know a good portion is going to bail out mismanagement at two sporting codes run by good mates of the Labor Government. Most of the heralded benefits that the media, especially The Advertiser and The Sunday Mail, liked to talk up came from switching expenditures at West Lakes to the city itself. They are not gains to the State. Even then there was piffle presented about increased crowds from all manner of events. If there are benefits, they will be consumed by the annual interest expense. TOTAL INDULGENCE – $530 MILLION

Southern Expressway Duplication

While the original of this project has been widely castigated as a failure, the fact was it delivered, with 80% of all traffic being catered for by its alternating one way configuration. The duplication, supported by both Labor and Liberal (as of course were the Adelaide Oval and desalination debacles during the disastrous Invisobel ‘let’s do nothing and coast to power’ days) as electoral carrots will produce nothing relative to its cost and what benefits there are may be considered consumed by its on-going interest cost to finance each year. TOTAL INDULGENCE – $400 MILLION

Throw in things like the proposed footbridge ($40m) and Rann’s ‘Paramount Studios’ at Glenside ($50m) as just two more examples of uneconomic waste and you can see how all the debt accrued over the six year period from the GFC to the end of next financial year has and will have been totally avoidable. Indeed, all these together add up to $8.18 billion against the debt increases of $6.9 billion. That’s right, this State could have been beautifully placed even with the GFC and no mining boom.

To be clear, this article does not suggest no infrastructure spending occur. Rather, what is invested needs to be better justified on economic development grounds not electoral ones. For example, the Desalination plant and Southern Expressway money could have gone a long way to deal with a myriad of other issues in this state which would have returned far more than these two projects have or will.

For example, how does a government supposedly guided by Labor values, spend $530m on a sports stadium for those who can afford SACA and AFL club memberships while there are catastrophic levels of youth unemployment in its heartland of the northern suburbs?

But under the successive regimes of Rann and Foley and now Weatherill and Snelling, that simply did not happen and now we have a fiscal problem that is out of control and debt build up without solution.

PART 3  – The Myth of Weatherill Not ‘Withdrawing’ From The Economy