South Australian Economic and Budget Outlook
Research Report:
The South Australian Economic and Budget Outlook
Prepared for the Public Service Association of South Australia by Associate Professor John Spoehr and Eric Pamis
July 2010
Key Findings
The economic assumptions driving the State Government's decision to pursue public sector expenditure and employment reductions over the next three years have been subject to considerable revision over the last 12 months. The Australian and South Australian economies have proved resilient in the face of the Global Financial Crisis. This has led to significant upward revisions in economic, employment and revenue growth that were not anticipated in framing the 2009‐10 State Budget.
Despite global economic instability the South Australian economic and budget outlook is positive, providing a foundation for growth rather than contraction in output, employment and budget revenue over the medium term. The State Government is well positioned globally and nationally to pursue a strategy of prudent fiscal expansion and public sector borrowing targeted at productivity enhancement and social inclusion.
We conclude that:
1. The State Government's most recent estimates (January 2010) show that the net operating balance position for the State Budget is expected to have improved by $110 million in total over the period 2009‐10 to 2012‐13.
2. The most recent Commonwealth Government projections (July 2010) for GST payments and general revenue assistance to South Australia have been revised upwards by $898.5 million over the period to 2012‐13 compared with the estimates published in its 2009‐10 Mid‐Year Economic and Fiscal Outlook produced in late 2009. This does not include the amount of Commonwealth payments to the States in
the form of Specific Purpose Payments.
3. South Australia is receiving around $1.77 billion in economic stimulus funding from the Australian government which has enabled a much higher level of capital expenditure to be achieved in the State than has been possible in the recent past.
4. The combination of the Mid‐Year Budget Review net revenue improvement, the increase in GST and general assistance revenue, and the economic stimulus contribution to South Australia leads to an estimate of $2.8 billion extra net revenue for (or extra payments to) South Australia to 2012‐13.
5. The risk of a credit downgrade has been significantly reduced by the improved economic and financial outlook. There is no realistic prospect of a credit downgrade given current economic and budgetary conditions.
6. There is a medium to high risk of a negative impact on public service delivery of a rapidly accelerating retirement flowing from the combination of public sector workforce ageing and the proposed public sector employment reductions. This could deny elements of the public service the skills and capabilities that are required to sustain existing service levels.
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