Flaws in key assumptions made in South Australia’s December 2013 Mid Year Budget Review (MYBR) have been formally acknowledged by Premier Jay Weatherill.
Seven weeks after InDaily reported that the State Government’s economic assumptions had lasted just one day before being shot down by official economic growth figures, an updated MYBR shows a $376 million hole in revenue.
“Since the MYBR was released in on 3 December 2013 there has been a weakening in the state’s economic outlook,” the State Government’s update document confirmed yesterday.
It went on to detail how the Commonwealth Government’s mid-year economic and fiscal outlook of 17 December had downgraded GST revenue off the back of the slower than expected economic growth figures released by the Australian Bureau of Statistics on December 4.
The document changes the economic assumptions made in Weatherill’s MYBR, cutting estimates for gross state product, state final demand and employment.
It showed a $303 million deterioration in the state’s GST receipts, a $68.1 million write down in payroll tax revenues and reduced estimates for revenue from gambling tax receipts.
Today, the Premier and Treasurer was maintaining a brave face.
“We are projecting modest growth in the economy,” he told ABC radio.
“The fundamentals are still sound.”
It’s an optimistic view, given the trend evident in recent official figures: South Australia’s economy recorded another quarter of negative movement in December, retreating by -0.5 per cent.
That figure from the ABS was the fourth negative result in the last six quarters.
The MYBR document had estimated annual growth of 2.25 per cent for this financial year; yesterday’s update adjusts that figure to 2.0 per cent.
That number still appears optimistic given the annual growth rate for the 2012-13 year was 0.8 per cent.
Yesterday’s Budget update had a political impact with a Cabinet briefing detailing the decline in revenue leaked to the media several hours before its planned official release.
Adelaide University’s head of politics Clem Macintyre said the leak, added to the bad news in the Budget update, made for a tough day.
“It’s a bad look,” he told FIVEaa this morning.
“When documents start coming out of political parties at election time, it’s a sign of dissent.
“Premier Weatherill should be very concerned.”
Of most concern, however, is the impact of the economic reality on South Australians who are tipped to lose jobs at an even greater rate.
“The MYBR forecasts had built in a significant bounce-back in reported employment on the assumption that data volatility had contributed to the reported decline,” the updated briefing states.
“The bounce-back has not yet occurred – average employment in the first 5 months of 2013-14 is 1.4 per cent below average employment in 2012-13.
“This necessitated a downgrading in the forecast 2013-14 SA employment growth.”
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