South Australian Treasurer Tom Koutsantonis delivered his second budget today and the first since the Weatherill Government rebooted its policy agenda at the February opening of Parliament.
At the core of the budget is a suite of tax reforms aimed at promoting business activity, increases in funding for tourism and international education promotion, and a modest government stimulus package centred on maintenance programs and which does not include any major infrastructure projects.
The document forecasts a budget surplus in 2015-16 of $43 million rising to $961 million in 2018-19. This figures relies on Government expenditure declining 0.9% over the Forward Estimates.
The State’s economy is forecast to grow by 2% per annum for the years 2015-16 to 2017-18, rising to 2.25% by 2018-19. Employment growth is forecast to be 1% per annum in 2015-16, rising to 1.25% by the end of the forward estimates.
Net debt in this period will climb from $4.1 billion in 2015-16 (25% net debt to revenue) to $5.7 billion (30% net debt to revenue) in 2018-19, peaking at $6.5 billion (36% net debt to revenue) in 2016-17 when the New Royal Adelaide Hospital comes online and lands on the Government’s balance sheet.
In February the Government launched a State Tax Review which solicited business and community submissions. The Treasurer today unveiled a range of primarily business-facing reforms arising from that process.
Taxes to be abolished:
- Stamp Duty on:
- Non-real property transfers (18 June 2015)
- Non-residential real property transfers (decreasing by a third each year from 1 July 2016 until abolished 1 July 2018)
- Genuine corporate reconstructions (18 June 2015)
- Share Duty
- Save the River Murray Levy
- Conveyance Duty and land tax on principal residences transferred into Special Disability Trusts
- Hindmarsh Island Bridge Levy
The budget also provides a range of tax relief and simplification measures including:
- Extending payroll tax rebate for small businesses through 2015-16
- Lowering then abolishing stamp duty on mining tenements
- Increasing and indexing land tax thresholds
- Providing series of exemptions for certain forms of property and asset transfers
The Treasurer further flagged continuing discussions with the Federal Government over future reforms to payroll tax and online gambling as part of a National Tax Reform process.
The Treasurer emphasised there would be no counterbalancing increases in other taxes or charges to offset the impact to revenue of the proposed reforms.
The reform package would produce a $83 million decrease in revenues in 2015-16 rising to $268 million in 2018-19.
Accompanying the tax measures is a modest stimulus package based around infrastructure and maintenance projects. The modesty of the package is, according to the Treasurer, deliberate in that its smaller scale will provide a quick fillip to local contractors and help generate employment.
- 30% increase in funding to the South Australian Tourism Commission (SATC) to $75 million
- $15 million Industry Attraction Fund
- $65 million for refurbishment and construction of public housing stock ($20 million of new money and bringing forward $45 million in allocated funding)
- $50 million for school and child care facilities
- $165 million for road projects, including a shoulder sealing program and a new connector road in Gawler
Other items include:
- $12 million for signalling and communication upgrades on the metropolitan passenger train network
- Specific community projects for Northern Adelaide (affected worst by Holden’s closing)
- $260 million across the Health sector on a range of upgrades and building projects
- $85 million for improved Police equipment and prison extensions
- A series of wastewater treatment plant upgrades through SA Water
Developing the narrative from last year’s attack on the Federal Government’s cuts, the State Government has produced a budget it claims provides support to South Australia to make its own luck. To this end, the tax reform in this budget, described as a “generational change” by the Treasurer, is aimed at improving South Australia’s attractiveness to inbound investment as well as those local businesses trying to grow in a challenging economic environment.
The modest surplus – projected to grow to nearly a billion dollars by the end of the decade – is married with the taxation reform and modest stimulus package as a demonstration of the Government’s prudent financial management and receptivity to the needs of business as the driver of growth and employment.
As with budgets past, the reliability of the figures as they stretch into the future will remain a matter of debate but the plain appeal to business is consistent with the Government’s rhetoric about being open for business and should be met with some approval.
The extent to which the budget does not deal with “cost of living” matters, other than to say no taxes are increasing and re-stating already announced measures like the Cost of Living Concession for pensioners, is somewhat of a political risk but the Government is banking on its appeal to employment growth as the hook upon which the State’s hopes can be hung. With the most recent unemployment figures putting South Australia – with 7.6% - as having the worst jobless rate in the nation it needs to be a strong hook.
Treasurer’s Media Release