South Australia’s budgetary position is among the weakest in Australia, says international ratings agency Standard & Poors.
The agency released its updated analysis of the state economy today.
“This is because of sluggish growth in the goods and services tax (GST) pool as well as own-source revenues, combined with expenditure growth,” the agency update says.
“Consequently, South Australia’s budgetary performance is among the weakest in Australia; we expect its adjusted cash operating balance will be in deficit in our base-case scenario until the end of fiscal 2015.
“We also expect its capital expenditure to moderate to about 10 per cent of total expenditure in the coming years, as South Australia completes some large projects and adjusts its program to manage its debt growth.”
The agency assessment’s outlook for the State is downbeat, citing previous failures to reach expected targets.
“Risks to the outlook for the after-capital balance include a failure to achieve anticipated budgetary performance, and/or a rise in capital expenditure.
You might like
“Weak budgetary performance and debt-funded capital expenditure are spiking debt levels rapidly.
“We expect that the state’s gross non-financial public sector debt will increase to about 100 per cent of revenues in fiscal 2016, and remain elevated.
“Our view of South Australia’s debt burden incorporates its large unfunded superannuation obligations as well as the obligations of its mortgage lending business, HomeStart.”
The agency maintained a stable ratings outlook based on the continued arrangements between the federal and state governments to provide GST revenue and special grants.
“The stable outlook reflects our view that the strong institutional framework and financial management settings in Australia help to offset–to an extent–South Australia’s weak budgetary performance and rising debt burden.
“Upside rating potential within the next two years is unlikely, in our view, but may occur with a significant and sustained improvement in South Australia’s budgetary performance.”
The agency also pointed to the negative impact of the State Government’s public service employment policies.
“The government’s policy of no forced redundancies of public servants for the current term of parliament, which finishes in March 2014, has somewhat inhibited expenditure flexibility.
Stay informed, daily
“Our base case assumes some underachievement of planned operating savings given the prior track record. However, it also incorporates our view
that savings may be easier to achieve given the greater policy tools available from fiscal year 2015.”
Premier and Treasurer Jay Weatherill said the latest review confirms his government’s timetable to return to surplus.
“The Standard and Poor’s report confirms the state’s credit rating as stable, it confirms the Budget’s prediction to return to surplus in 2015/16, and contradicts claims from the Liberal opposition that the state was in recession in 2012/13 by estimating growth at 1.25 per cent,” the Premier said.
Opposition Leader Steven Marshall was in Sydney yesterday for a meeting with Standard and Poor’s and when he returned today he focussed on debt.
“This report from Standard and Poor’s is a damning assessment of South Australia’s economy on Premier Weatherill’s watch,” said Mr Marshall.
“From 2016-17, South Australians will be paying $952 million in interest payments on state debt – that’s $2.6 million interest a day.
“In fact, if Mr Weatherill’s $952 million annual interest bill was a department, it would be South Australia’s fifth largest in 2016-17.
“One of the priorities of a Marshall Liberal Government is restoring the budget back to surplus and regaining our State’s prized AAA credit rating by cutting government waste, budget discipline and growing the economy.”
The Premier took those comments as an indication of job cuts.
“We now have the clearest possible indication that Mr Marshall has plans to cut more deeply and more rapidly into public services.
“The 25,000 job cut that was meant to be a secret plan looks horribly real following Mr Marshall’s comments.”
Want to see more stories from InDaily SA in your Google search results?
- Click here to set InDaily SA as a preferred source.
- Tick the box next to "InDaily SA". That's it.
