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SA budget back in deficit and will stay in debt, says Treasurer

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It would be “impossible” to maintain a state budget surplus for the current financial year, Treasurer Rob Lucas says, but he’s still promising to hand down a budget in the black come September.

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To achieve that will entail wholesale cuts to a raft of as-yet unidentified projects and programs funded by the previous Labor Government, with the Liberals maintaining their promised public sector efficiency dividend of 1.7 per cent for all agencies besides Health, which has a lower target of 0.75 per cent.

However, those targets come on top of Labor’s existing efficiency measures announced in December, which total $370 million across the public sector over the next four years.

And, despite a well-worn mantra criticising Labor’s “debt and deficit”, the Liberals says they expect to maintain state debt at current projections for the foreseeable future.

Former Labor Treasurer Tom Koutsantonis’s mini-budget predicted a $12 million surplus for 2017-18 – down from an anticipated $72 million last July – rising slightly to $14 million in 2018-19 before increasing exponentially thereafter.

But his Liberal successor says further blowouts in Health, along with a Labor pre-election “spending spree” and softer than anticipated revenue are “certainly going to more than wipe out a $12 million projected surplus”.

“I don’t think you’d have to be a rocket scientist to work that one out,” he told InDaily.

He said the Mid Year Budget Review had “whittled the surplus back to the princely sum of $12 million” before various “pressure points” became publicly known.

“The general problems in health remained unresolved as we arrived in March, and you add to that the continuing challenge of child protection and an additional challenge in relation to TAFE, because of a catastrophe that befell TAFE in the last 12 to 18 months, plus significant revenue improvements which were advertised are highly unlikely to be met this year,” Lucas said.

He said there was “enough information I’ve been given in relation to those three ‘biggies’ that there’s no way the Government’s left us with a $12 million surplus”.

However, Lucas maintains he will hand down a budget in the black when he details the first Liberal state budget since the turn of the century, in September.

“We’re not using it as an excuse to say we’re not going to deliver on the promises we made [but] it will make the challenge more significant,” he said.

“We committed to the budget being in surplus… they’re not going to be super large surpluses.”

He said there would be no short-term strategy to reduce state debt, which is set to total around $15 billion by the end of the forward estimates.

The MYBR identifies net debt at $4.9 billion, but total government debt – including government businesses and enterprises – is currently $12.7 billion, and projected to rise to $14.9 billion by 2022.

“We’re not going to be able to reduce Labor’s $15 billion debt … our first task is having a balanced budget, to grow the economy and lower costs,” he said.

Asked if he was therefore comfortable with the level of debt – against which the Liberals frequently railed in Opposition, Lucas said: “That’s not a word I’d use.”

“We accept the fact there’s nothing we’re going to be able to do whilst we’re addressing our other priorities to reduce Labor’s debt,” he said.

The budget papers maintain the level of net debt “remains affordable over the forward estimates [with] a maximum ratio of net debt to revenue of 35 per cent”.

Lucas rejected that he was engaging in a “standard political playbook” or pinning economic travails on the previous regime, saying “it’s a bit hard to talk about standard playbooks because it’s been nearly 20 years since there was a change of government”.

He said projected health savings hadn’t eventuated, and “that’s what underpinned the razor thin $12 million surplus”.

“The books are in a pretty parlous state, and it’s going to need significant corrective action,” he said.

“We’re going to have to sit down with ministers and say to ministers and departments: ‘There might be laudable schemes or projects that the former government had in your portfolio, but they’ll have to be a lower priority.’

“Difficult choices are going to have to be made, but that’s the challenge for the new Government.

“We understand the enormity of the problem that’s been left with us [but] people want us to suck it up.”

Shadow Treasurer Stephen Mullighan said Lucas had been briefed on the state of the budget immediately after the March election, “yet more than seven weeks later, he has now revealed that under the Liberals the budget will be in deficit”.

“Mr Lucas needs to explain the decisions he has made since being sworn in as Treasurer which have led to such a deterioration of the budget position,” he said.

“This is his deficit.”

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