News Flash

The State government's much awaited Mid Year Budget Review was released on December 16 by Treasurer, Jack Snelling. This Brief provides further analysis to those issued on Friday.

The MYBR has taken place against a backdrop of deteriorating economic conditions in Europe and slower economic growth in Australia and South Australia. This has resulted in falling taxation receipts and lower GST payments from the Commonwealth government. More particularly, a softer property market is expected to reduce receipts from property tax by $679 million while GST receipts are expected to fall by $260 million over the course of the forward estimates period.

The main features of the MYBR include:

• No announcement of further public sector job losses.

• Increased agency expenditure of $98.8 million between 2011-12 and 2014-15, most of which is scheduled for 2012-13.

• Among the initiatives announced are the creation of a Resources Unit in the Department of Health and Ageing costing $2.5 million a year to improve the its financial management, funding of $32 million for the establishment of ICAC, the reinstatement of $5.1 million for the Family and Community Development Program and further support of $4.5 million a year for the Adelaide Zoo.

• This is offset by further agency cuts of $105.1million over the forward estimates period.

• The decision not to establish the Southern Community Justice Court will save $16.7 million. The ICT component of Shared Services will not proceed, saving $6.3 million.

• Increased Budget deficits over the forward estimates period of $367 million in 2011-12, $453 million in 2012-13 before falling to $348 million by 2013-14.

• A revised date of 2014-15 for the return to a Budget surplus, expected to be. of $334 million.

• A higher, but still modest, net state debt, which is now estimated to be $5 billion by 2014-15.

No further public sector job losses is a welcome development. This is, particularly so in light of the New South Wales Government's decision in September to slash 5000 public sector jobs, Tasmanian cuts and the more recent move by Victoria to cut public sector jobs by 3,600.

In addition the MYBR appears to reflect a shift away from the approach that was the hallmark of earlier Labor budgets. This MYBR has included measures that acknowledge poorly considered decisions from previous Budgets and initiatives to remedy these mistakes. These include the move to not add ICT to the discredited Shared Services project and the decision to reintroduce the Family and Community Development Program.

Finally, it looks like the MYBR also marks a departure from Labor's previous preoccupation with the AAA credit rating at any cost to a more nuanced budgetary approach. While long overdue this too is a welcome development.

(Peter Christopher, Chief Industrial Officer pgc@cpsu.asn.au)

19 December 2011