Health spending pain in Treasurer’s cost of living budget

Treasurer Stephen Mullighan says the state government can’t continue spending billions on health every year without more help from the Commonwealth, as he handed down a State Budget defined by ballooning state debt and new cost of living measures.

Jun 06, 2024, updated Nov 01, 2024
Treasurer Stephen Mullighan handing down the state budget today. Photo: Tony Lewis/InDaily.
Treasurer Stephen Mullighan handing down the state budget today. Photo: Tony Lewis/InDaily.

The Labor Treasurer’s third budget is – like his previous two – dominated by spending on health, with an extra $2.5 billion to be poured into the state’s hospital system over the next five years.

The extra funding, which will cover increased service delivery costs and prepare the system for another forecast surge in demand, brings Labor’s total health spend to $7.1 billion since coming to office.

It follows $2.4 billion in additional health expenditure in the 2022 budget and $2.3 billion in 2023.

“We’re not going to be able to do that in perpetuity, clearly,” Mullighan told InDaily.

“We’ve been able to do it to date because we’ve had a strongly growing economy and that’s given us more revenues to invest. But the national economy is going to slow, our state’s economy will slow, and our revenue growth will slow as a result.

“So, we’re not going to have the capacity to do that every single year, year-on-year, into the future – so we’ve got to improve the system.”

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The demand for public health services is estimated to grow by 4.3 per cent in 2023-24, according to the budget papers – well above the historical average growth of around 2 per cent.

Mullighan said the state government needed to invest to respond to health system demand, but also needs help from the federal government on GPs, aged care and the NDIS.

“We’ve got a broader issue in healthcare in Australia: we’ve got a national GP shortage, which the feds are starting to tackle but certainly haven’t resolved,” he said.

“And then at the other end, we’ve got people languishing in hospital beds who should be in aged care facilities or in NDIS-funded places.

“We would say that’s another failure of the Commonwealth that’s impacting us.”

But the big unannounced measure revealed at Thursday’s Budget media lockup was a $266.2 million cost of living package targeting families and low-income earners.

A one-off $243 cost-of-living concession payment will be delivered this month to around 210,000 South Australian households.

The payment, costing the budget bottom line $51.5 million, will be available to all those who received the concession last year as well as tenants and seniors health card holders.

Treasurer Stephen Mullighan said the state government was “unapologetic” about providing cost of living relief for families. Photo: Tony Lewis/InDaily.

Those tenants and health card holders will also benefit from a doubled concession over the next four years, with the payment increasing from $127.8 to $255.69.

Mullighan said the payments would be delivered “right at the beginning of winter to help people on low and fixed incomes”.

The cost of living package also extends to regular families, who are set to benefit from a permanent doubling of the state government’s $100 sports voucher program.

The $54.6 million measure means families can get two $100 vouchers or deduct $200 off the cost of an activity. The program has also been extended to school music lessons for the first time.

“This will provide a significant boost for the affordability of families getting their kids involved in organised activities,” Mullighan said.

Public school parents will also get a $200 reduction on the materials and services charge for the next school year.

The government estimates a family with two school-aged children will be $600 better off under its suite of measures.

The Treasurer said an upward revision in South Australia’s GST share has given the state “significantly greater capacity” to fund its health investments and cost of living package.

GST grant revenue has been revised up by $162 million since December’s mid-year budget review, and by $635 million over the period from 2024/25 to 2026/26.

Total GST grant revenue in this budget is $8.9 billion and will rise to $9.6 billion by 2028.

State taxation revenues have also been revised up by $357 million in 2023/24, reflecting higher payroll tax, conveyance duty and land tax revenues.

The increased tax take has seen the government forecast net operating surpluses across the forward estimates starting with a $306 million surplus this financial year – close to double what it expected at the mid-year Budget review last December.

It expects surpluses upon surpluses over the forward estimates too. A $248 million surplus is budgeted to June 30, 2025, followed by a $458 million surplus in 2025/26 and a $568 million surplus in 2026/27.

Treasurer Stephen Mullighan at today’s budget lock up. Photo: Tony Lewis/InDaily.

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But debts will also mount. Net debt at June 30 this year will be $27.9 billion, and that will balloon to $44.2 billion by 2028.

Anticipated debts are “serviceable”, “sustainable” and “affordable”, according to the Treasurer, who said the Malinauskas Government was “comfortable” with the predictions.

“We have a growing state budget with a growing capacity to take on and service that debt,” he said.

The Treasurer said the “key debt metric” was the net debt to revenue ratio, which is the government’s net debt position compared to total annual revenues.

Currently, that ratio is 96.8 per cent and expected to grow to 131.8 per cent by 2028.

“As debt increases across the forward estimates, the budget has a greater capacity to take on and service that debt,” he said.

The state government will also spend $1.9 billion over the next nine years on early childhood education, with $339.7 million to deliver three-year-old preschool access from 2026.

A 43 per cent increase in skills and training funding has also been budgeted, providing $692 million to fund around 160,000 training places in areas including defence, health, construction and early childhood education.

But the government continues to kick the can down the road on the stalled Tarrkarri Aboriginal cultural centre on North Terrace.

The state budget contains no new funding for the estimated $400 to $600 million project, with an existing $200 million allocation remaining in the forward estimates.

The design concept for Tarrkarri – Centre for First Nations Cultures, by Diller Scofidio + Renfro and Woods Bagot – there is no additional money promised for the project in the 2024–25 state budget.

Mullighan said the state government was still “passionate” about delivering the centre and was in negotiations with the Commonwealth for extra funding.

“They’re interested in the project, but they’ve made it clear that they need to be confident they’ve got the capacity to make a contribution towards it before they give us a final answer,” he said.

Mullighan indicated the state government wanted to land on a position before the end of the year.

“We’ve got a significant site on our premier cultural boulevard in our state which is lying dormant at the moment,” he said.

“We can’t let that continue on forevermore. We want to get this resolved.

“We’re still passionate about delivering the project, but if it’s not going to happen – if we can’t get Commonwealth funding for it – we want to get on with an alternative use of the site.”

Meanwhile, after allocating nearly $40 million dollars last year to bring Adelaide’s passenger trains and trams back into public hands, this year’s budget is the first to canvass the possibility of extending Adelaide’s rail network.

The government has allocated $10 million towards feasibility studies for “outer metropolitan and regional passenger rail service extensions”.

$10 million will go towards investigating extensions to Adelaide’s passenger rail network. Photo: Tony Lewis/InDaily

A further $10 million will go towards planning transport network improvements in Adelaide’s northern growth areas, and $2 million to plan a transition to a zero-emissions public transport rail fleet.

But a major rail line extension to the southern or northern suburbs will likely not occur until the 2030s as the state government grapples with the cost of the $15.4 billion North-South Corridor and the $3.2 billion new Women’s and Children’s Hospital.

Asked whether the government has the capacity to fund a major rail extension, Mullighan said: “Not at the same time that we’re doing tunnels and the hospital.”

“But once we get beyond the major expenditures of those two projects, we’ll have more capacity, and we’ll have more capacity if the Commonwealth is part funding.”

Both the North-South Corridor and the Women’s and Children’s Hospital are due for completion in 2031.

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