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Economic growth to remain slow despite stimulus

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Despite a major housing stimulus package and more infrastructure spending funded by a huge increase in state debt, Treasury is forecasting continued sluggish economic growth for South Australia.

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Today’s budget papers forecast 2.5 per cent growth in the state’s economy over the next financial year, and 2.25 per cent in each of the three following years.

By comparison, Australia’s GDP is forecast to grow by 2.75 per cent in FY 2019 and FY 2020 and 3 per cent in FY 2021 and FY 2022.

The slower SA growth forecasts come despite the delivery of today’s state budget, which Treasurer Rob Lucas described as a “building” budget, draped in high-vis clothing and a hard hat.

The Marshall Government’s second budget contains a $105 million housing stimulus package –  benefiting low-income earners – and a steadily growing infrastructure spend over the next three years (that falls slightly in 2022).

To fund it, the Government will oversee a 57 per cent increase in net debt over the forward estimates.

The Marshall Government will take on $7.72 billion more debt between FY 2019 and FY 2021 than Lucas forecast in its first state budget.

The budget papers also indicate slow jobs growth this financial year – estimated to reach 1.25 per cent – and forecasts slower growth – 1 per cent – for each of the next four financial years.

“We’ve got to do better than that,” Lucas conceded during a question and answer session with reporters in the budget lockup this afternoon.

He will tell parliament this afternoon that the international economy faces a series of challenges, including global trade wars, and that the State Government faces a $2.1 billion reduction in GST revenue over the forward estimates.

However, he argues that the Government will take on debt rather than risk undermining economic and jobs growth by heavily cutting spending.

The housing stimulus package includes an Affordable Housing Fund of $2 million – offering interest-free deposit gap loans of up to $10,000 to low income households – a $21.4 million housing construction program over the next two years and a $21.1 million maintenance and upgrade program for the state’s public housing stock.

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