Covid-19 fightback creates record South Australian state budget deficit of $1.8bn for 2020/21

South Australia has plunged to a record state budget deficit because of the costs of fighting the Covid-19 pandemic.

Fighting the Covid-19 health and economic emergency has plunged the state to a history-making budget deficit of $1.8bn.

Revealing the record shortfall for this financial year ahead of Tuesday’s budget, Treasurer Rob Lucas declared the financial bleeding was partially stanched by a bigger-than-expected influx of GST and stamp duty revenue.

This staved off a $2.59bn deficit forecast for 2020-21 last November, when Mr Lucas unleashed a $4bn, two-year stimulus program aimed at kickstarting the economy out of the nation’s first recession in almost 30 years.

Mr Lucas said health spending had blown out by about $200m, while border and security duties had contributed to police expenditure growing by $64m.

Battling multiple fruit fly outbreaks in Adelaide and the Riverland had triggered between $20m and $30m in unexpected spending.

Mr Lucas signalled the better-than-forecast budget shortfall would trigger marginal reductions in state debt, which last November was forecast to balloon to $33.17bn over forward estimates.

“It’s good news in that it is not as big a deficit (as forecast) but what it indicates is that we’re still having to spend a lot more than we earn,” he said.

“(A deficit of this scale) has never occurred in the state’s history, but neither has the Covid-19 pandemic.

“So the reality is, it was a necessary result, or implication, of the Covid-19 pandemic.”

Tuesday’s budget will include a plan to tackle hospital overcrowding by improving mental health services, with job creation and education declared by Mr Lucas as the other central planks.

State Treasurer Rob Lucas in his office preparing for the state budget. Picture: Tom Huntley

As revealed by The Advertiser last week, a booming property market harvested a stamp duty windfall of $214m.

Budget coffers also were boosted by a $926m GST influx, but Mr Lucas pointed out this eased a forecast reduction of $1.3bn in the tax revenue.

Instead, the $926m boost had resulted in a loss of just under $400m in GST receipts.

Mr Lucas said the GST and stamp duty boost showed the state’s economy was “on the road to recovery” from the pandemic.

“There’s still obviously impacted areas like travel, international education and tourism that rely on international borders … but there’s no doubting we’re much further advanced in terms of economic recovery than expected.”

However, stamp duty receipts are expected to wane by $75m next financial year, because of property transactions that had been brought forward by the boom.

Mr Lucas defended jobless figures released on Thursday showing SA had the nation’s highest unemployment rate of 5.8 per cent, saying they also showed the highest number of people in work in the state’s history.

“It also shows there’s been 60,000 jobs created in the past 12 months. What the unemployment number shows is all of them (state unemployment rates) are coming down – we’re still the highest and we’ve, therefore, still got work to be done,” he said.

Labor treasury spokesman Stephen Mullighan said SA had the nation’s worst unemployment rate, the worst-performing emergency departments of any state and ambulance ramping was worse than ever.

“The state budget presents a real opportunity for Steven Marshall to address the tragic consequences of his cuts to our health system and his sorry record on unemployment,” Mr Mullighan said.