Mid-Year Budget Review
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Mid-Year Budget Review Department of Treasury and Finance State Administration Centre 200 Victoria Square, Adelaide South Australia, 5000 GPO Box 1045, Adelaide South Australia, 5001 Telephone: +61 (08) 8226 9500 www.treasury.sa.gov.au 2017-18 Acknowledgements Content from this publication may be reproduced with appropriate acknowledgement, as permitted under the Copyright Act 1968. © Government of South Australia 2017 Mid-Year Budget Review 2017–18 Presented by the Honourable Tom Koutsantonis MP Treasurer of South Australia General enquiries regarding financial information papers should be directed to: Chief Executive Department of Treasury and Finance State Administration Centre 200 Victoria Square ADELAIDE SA 5000 Copies may be obtained from: SERVICE SA Government Legislation Outlet Ground Floor EDS Building 108 North Terrace ADELAIDE SA 5000 Website: www.treasury.sa.gov.au © Government of South Australia 2017 ISSN 1838-711X Public–I3–AI Table of contents Chapter 1: 2017–18 budget position and fiscal outlook Overview ......................................................................................................................................................... 3 Fiscal targets .................................................................................................................................................... 4 Fiscal outlook .................................................................................................................................................. 5 Operating revenue ........................................................................................................................................... 9 Expenditure ................................................................................................................................................... 12 Financial position .......................................................................................................................................... 19 Chapter 2: The economic context Overview ....................................................................................................................................................... 21 Appendix A: Policy measures by agency Overview ....................................................................................................................................................... 23 Policy measures by agency ........................................................................................................................... 24 Appendix B: Uniform presentation framework Overview ....................................................................................................................................................... 39 Uniform presentation framework tables ........................................................................................................ 40 Appendix C: General government and non-financial public sector financial statistics time series General government sector ............................................................................................................................ 57 Non-financial public sector ........................................................................................................................... 62 Mid-Year Budget Review 2017–18 1 2 Mid-Year Budget Review 2017–18 Chapter 1: 2017–18 budget position and fiscal outlook Overview The 2017–18 Mid-Year Budget Review (MYBR) continues the government’s focus on investing in the state’s future. The government has recently announced a significant additional commitment to the state’s education system, funding both an upgrade to government school infrastructure as well as increased funding for non-government schools. The government will also build on its significant recent investment in the health system providing additional resources for hospital services, and a major upgrade of the Modbury Hospital. Further funding is provided for a number of road infrastructure projects. This has been possible as the proceeds from the Land Services commercialisation transaction were $855 million higher than that included in the 2017–18 Budget (actual proceeds of $1.605 billion compared to $750 million estimated at the time of the Budget). The MYBR contains net operating and investing expenditure initiatives in the general government sector of $1.1 billion over four years. The major initiatives are summarised later in this chapter, with details of all initiatives by agency provided in Appendix A. Infrastructure investment continues to be a priority of this government. The general government infrastructure program grows from $1.7 billion in 2016–17 (excluding the finance lease for the new Royal Adelaide Hospital) to $1.9 billion in 2017–18, a record $2.3 billion in 2018–19 and over $1.8 billion in each of 2019–20 and 2020–21. In total this is $836 million more over the four year period 2017–18 to 2020–21 compared to budget. While the South Australian Parliament did not support the introduction of the major bank levy, the government has continued to manage its fiscal position to provide net operating balance surpluses over the forward estimates on the back of returning the budget to surplus in both 2015–16 and 2016–17. Debt levels remain within the government’s fiscal targets, and are lower than at budget time notwithstanding the new initiatives funded in the MYBR. The maintenance of budget surpluses is an important element of the government’s fiscal strategy and the major bank levy not progressing has required the adoption of new budget improvement measures. The government has already announced an increase to the stamp duty surcharge on foreign buyers purchasing residential property from the 4 per cent announced at the time of the last budget to 7 per cent. This is estimated to raise an additional $10 million in revenue per annum. The government will also require agencies to find efficiency savings over the forward estimates of $370 million. The efficiency measure has been allocated to agencies in a manner that ensures key frontline services are not directly impacted. Further details on these measures can be found in Appendix A. The MYBR incorporates revised revenue estimates across the forward estimates period. State taxation estimates have been revised down across the forward estimates by $564 million, predominantly as a result of not proceeding with the major bank levy. Conveyance duty and gambling revenues are expected to be lower than estimated at budget time, but payroll tax revenues are expected to be higher. The overall reduction in state taxation estimates has been partially offset by GST grant revenue which has been revised up by $348 million over the forward estimates mainly due to an expected increase in South Australia's share of the national pool. Mid-Year Budget Review 2017–18 3 Chapter 1: 2017–18 budget position and fiscal outlook The MYBR financial position is consistent with the government’s fiscal targets to deliver budget surpluses, and maintain spending growth and debt levels within affordable limits. Fiscal targets The government remains committed to the fiscal targets set out in table 1.1. Table 1.1: Fiscal targets Target 1 Achieve a net operating surplus in the general government sector every year Target 2 Limit operating expenditure growth to trend growth in household income Target 3 Achieve a level of general government net debt that remains affordable over the forward estimates — a maximum ratio of net debt to revenue of 35 per cent Underpinning the general government sector debt target, the government continues its commitment that: • the operations of public corporations that cannot be paid for from their own revenue streams will be funded from the budget (consistent with the government’s obligations under the Competition Principles Agreement) • the defined benefit unfunded superannuation liability will be fully funded by 2034. Table 1.2 provides the outcome of the fiscal targets based on 2017–18 MYBR estimates. Table 1.2: Fiscal targets outcomes — 2017–18 MYBR estimates 2017–18 2018–19 2019–20 2020–21 MYBR Estimate Estimate Estimate Target 1: net operating balance surplus Target Achieve a net operating surplus every year 2017–18 MYBR estimate ($m) 12 14 110 334 Target 2: operating expenditure growth Target (%) Limit to trend growth in household income (4.5% per annum) 2017–18 MYBR estimate (%) – Annual (%) 6.2% 0.5% 1.0% 2.1% – Average (%) Average growth of 2.5% per annum Target 3: net debt to revenue ratio Target (%) Less than 35% 2017–18 MYBR estimate (%) 25.6% 30.5% 32.3% 32.9% The government’s fiscal targets are met across the forward estimates. As was the case at the 2017–18 Budget, operating expenditure growth for 2017–18 is above trend growth in household income, reflecting the impact of one-off items such as the commencement of service payments (including associated interest charges and amortisation) for the new Royal Adelaide Hospital and additional resources provided for child protection in response to the Child Protection Systems Royal Commission. The 2017–18 MYBR includes additional resources for health services and for children in care. Over the course of the forward estimates period, projected average growth in operating expenditure is 2.5 per cent, keeping spending well below the 4.5 per cent per annum growth target. 4 Mid-Year Budget Review 2017–18 Chapter 1: 2017–18 budget position and fiscal outlook Fiscal outlook Table 1.3 shows the movement in the key fiscal indicators for the general government