SA budget: stimulus continues but government keeps powder dry for election

The South Australian (SA) Government’s major areas of focus in its 2021-22 budget include infrastructure and delivering the remainder of its 2020 COVID-19 stimulus package.

For business, the budget doesn’t yield many new announcements. However, it does continue to deliver previously announced COVID-19 stimulus. 

This includes funding for training places supporting skills for in-demand jobs like IT. 

Unspent components of the stimulus package have been redirected to the Jobs and Economic Growth Fund, which is intended to be invested in proposals that have a significant impact on the South Australian economy.

CPA Australia’s General Manager External Affairs Dr Jane Rennie says, “Last year’s budget included $4 billion of economic stimulus over two years. The government is clearly comfortable with its economic street cred and doesn’t feel the need for major new stimulus measures now. 

“On the other hand, the government isn’t seeking to recoup the state’s pandemic debt yet through new taxes and other revenue-raising measures.” 

The 2021-22 budget includes a smaller-than-expected deficit of $1.4 billion and general government net debt of $18.2 billion. The government is forecasting a return to surplus in 2022-23, a year earlier than previously expected. 

State taxation revenue in 2020-21 is $257 million higher than previously forecast. The major contributor is a bonus $215 million in stamp duty receipts due to rising property prices. GST revenues were also $926 million more than expected, although they’re still well below pre-pandemic estimates. 

“The government has more in its back pocket due to better-than-expected economic conditions. There’s a sense it’s keeping its economic powder dry, so it can make new spending announcements in the lead-up to the election,” Rennie says. 

“Ideally, we’d prefer to see further support for economically vulnerable sectors, such as small businesses and international tourism and education operators, given ongoing COVID impacts and uncertainty.” 

The big-ticket item in the budget is infrastructure spending. $17.9 billion over four years (consisting of new and previously announced funding) will go towards roads and public transport, health and schools. Several of these are of sufficient combined scale to have a material impact on both employment and investment.

“A recent rise in the state’s unemployment rate is a temporary set-back given otherwise strong economic indicators,” explains Rennie.

The economic and fiscal outlook

According to the budget papers, the SA Government’s financial position has improved from its previous forecasts. 

In the 2020-21 budget, the state government forecast a deficit of $2.6 billion for 2020-21. The government is now forecasting a deficit of $1.8 billion for that fiscal year.

Steady improvements in the state’s economy and a wind down in stimulus spending is expected to lead to a lower deficit of $1.4 billion in 2021-22. The government is forecasting a return to surplus in 2022-23, with a small surplus of $48 million. 

The SA economy is forecast to grow by 3.5 per cent in 2021-22, lower than the government’s previous forecast of 4.25 per cent growth. The pace of the recovery is forecast to slow to 2.25 per cent in 2022-23.

The state’s general government sector net debt is forecast to reach $18.2 billion in 2021-22, compared with Victoria’s projected net debt of $102.1 billion. 

By 2024-25, SA’s general government sector net debt is expected to reach $24.9 billion, compared with Victoria’s estimated net debt of $156.3 billion.

According to Rennie, “Given the cost of borrowing at present, we don’t consider the size of SA’s debt concerning.”

Major announcements in the SA Budget 

General business announcements

• the Economic and Business Growth Fund will be renamed the Jobs and Economic Growth Fund from 1 July 2021. It will have funding capacity of $200 million over four years and will focus on supporting initiatives that create long-term sustainable jobs and economic growth
• the payroll tax exemption for wages paid to eligible new apprentices and trainees has been extended 12 months until 30 June 2022
• the payroll tax exemption and associated ex-gratia relief for film production will be abolished
• $5 million to support South Australian wine exports and market diversification
• $5 million to increase the take up of technology by farmers
• $2.6 million over four years to support small business in developing digital and cybersecurity capabilities as well as other more traditional capabilities. It includes funding for improvements to the digital resources available to small business.
• $2.2 million will be spent on ensuring the continuation of rural financial counselling services and business support mentors

Support for different industries

The arts sector will receive additional support through a post-production, digital and visual effects rebate, and a $7 million to boost screen production funding for the South Australian Film Commission. $3 million will also be spent on the refurbishment of the Adelaide Festival Centre. 

Infrastructure announcements

• funding will continue to support the planning and construction of the North-South Corridor, which is expected to be completed by 2029-30
• funding will continue to support the planning and construction of the new Women’s and Children’s Hospital, which is expected to be completed in 2026-27
• funding will continue to support the construction of the Aboriginal Art and Cultures Centre. The Centre is expected to open in 2025
• $202 million to construct the Sturt Highway bypass of Truro
• $180 million to complete duplication of the Augusta Highway from Nantawarra to Lochiel
• $107 million in grant funding to support local government infrastructure projects
• $105 million to improve road safety across South Australia
• $100 million to complete works on the Gawler Line Electrification project
• $99 million over 10 years to refresh railway stations in the metropolitan rail network
• $80 million for the Strzelecki Track upgrade
• $79 million for the period to 2024-25 to finalise planning and preparation works for the construction of a new multipurpose arena within Adelaide’s Riverbank Precinct
• $60 million to undertake upgrades on the Heysen Tunnels 
• $48.5 million to construct a new multi-storey car park at Tea Tree Plaza for Park ‘n’ Ride services to provide 400 additional car parks
• $45 million to upgrade the Marion Road and Sir Donald Bradman Drive intersection near Adelaide Airport
• $40 million for improvements to key Kangaroo Island road corridors

Education and training announcements

• $84 million to construct a new high school on the Norwood Morialta High School Rostrevor campus
• JobTrainer fund will be extended until 2022-23, with a $69 million funding injection. JobTrainer funds training places supporting skills for in-demand jobs like IT.
• TAFE SA will receive $49 million in additional funding in response to lower forecast revenue growth and a reassessment of what can be achieved through efficiency measures
• $50 million to increase the identification of developmentally vulnerable children and enable early intervention and support to reduce undiagnosed developmental delays in children entering the education system
• $42 million over three years for urgent capital works at government schools and preschools
• $12 million will be provided to the non-government school sectors for projects focused on growing enrolments, including improving school facilities

Health

The State Government will allocate $7.4 billion in spending on health in 2021-22. Budget highlights include: 

• 140 new treatment spaces at emergency departments and Emergency Extended Care Units
• $86 million for the rollout of COVID-19 vaccines
• $78 million to support the continuing public health response to the COVID-19 pandemic, including increased resourcing for contact tracing capacity, continuing a state control centre and emergency information call centre, supporting SA Pathology’s increased testing capacity, and the operation of the medi-hotel quarantine system
• the recruitment of an additional 74 emergency operational staff to the South Australian Ambulance Service
• $48 million to construct a new 20-bed older person’s acute mental health unit at Modbury Hospital
• $20 million for a new 16-bed mental health crisis stabilisation facility in the northern suburbs
• $20 million for additional elective surgery and colonoscopy procedures.

Other major announcements

• 50 per cent land tax discount will be introduced for eligible new build-to-rent projects. The land tax reduction will apply for eligible new projects where construction commences from 1 July 2021. The reduction is designed to support investment in residential rental housing.
• the land tax transition relief for taxpayers negatively impacted by changes to land tax aggregation rules will be increased to 70 per cent of the relevant land tax increase from the original 30 per cent relief for 2021-22
• $22 million will be allocated to cover South Australia Police’s costs in managing the state’s response to COVID-19, including border patrols and hotel quarantine security
• $21 million for improving the government’s own cyber security
• Renewal SA will receive $21 million to transform Lot Fourteen to support future industries and jobs
• $16 million for fruit fly response activities following outbreaks in metropolitan Adelaide and the Riverland
• $7 million for the restoration and revitalisation of Ayers House
• $1.7 million to contain, treat and prove freedom from Lens Snail, which could impact grain exports. The cost will be recovered through an 11 cent per tonne increase in contributions to the Grain Industry Fund

For more information visit www.statebudget.sa.gov.au