Mid Year Budget Review: State government debt set to balloon as government spends big on infrastructure

The state government has released its mid-year budget review, with estimates showing the state’s debt is set to balloon.

State government debt in South Australia is set to blow out by an extra $625m over the next few years, the Mid-Year Budget Review shows.

By June 30 2027, net debt will reach $38.2bn – or $20,629.69 for each of the 1.85 million people currently living in South Australia.

Treasurer Stephen Mullighan, who delivered the review on Thursday, said the government was taking on more debt to deliver vital new infrastructure.

Asked whether South Australian households dealing with a record surge in interest rates should feel comfortable with the debt level, Mr Mullighan said “they should feel comfortable if they can be confident it is being used for productive purposes”.

“It’s important that if we’re going to borrow more money on the state balance sheet, we do that to invest in productive infrastructure which will deliver benefits for the community in the decades to come — rather than borrowing more money to offset those continued operating deficits as we’ve seen in the previous three financial years,” he said.

The government has taken on debt to fund projects including $15.4bn for the Torrens to Darlington motorway and $3.2bn for the new Women’s and Children’s Hospital.

But Mr Mullighan said the net debt-to-revenue ratio was lower than had been originally forecast, indicating that the budget has a greater capacity to service debt.

New investments included in the review included $689m for the National Skills Agreement, which will be delivered in partnership with the Commonwealth government, funding about 150,000 new training places over five years.

Treasurer Stephen Mullighan. Picture: NCA NewsWire/Naomi Jellicoe

The government has also committed $464.5m over four years for the creation of the new Adelaide University, as well as $168m for a new road safety program.

Opposition treasury spokesman Matt Cowdrey said South Australia had recorded a $2bn increase in revenue since the first budget delivered by the current Labor government last year.

“We’ve seen the government effectively spend that money, plus more, and commit that money across the forward estimates as well,” he said.

He said ramping has worsened despite significant investments in the health system, and South Australians were still struggling with high inflation rates and electricity prices.

“The average South Australian family has not been afforded any sort of relief by this government,” Mr Cowdrey said.

Also in the budget review, Mr Mullighan said the government would follow the approach of New South Wales and Victoria in scrapping the $3000 electric vehicle subsidy early.

The subsidy had been due to continue until the 7000 budgeted subsidies were exhausted, however only 2500 have been paid out so far.

The move is expected to save the budget $12m over two years.

Mr Mullighan said the state government’s subsidy was no longer effectively incentivising the sale of electric cars.

“The subsidies for electric vehicles that have been offered by the states and territories have been completely and utterly subsumed by the new incentives which have been put in place by the new Albanese federal Labor government,” he said.

“Commonwealth incentives are in the order of four times the level of state government incentives in Australia.”

The state subsidy, put in place by the prior Liberal government, had been available on the sale of electric cars up to the value of $68,000.

Motor Trade Association SA/NT chief executive Darrell Jacobs said it was disappointing to see the incentives abandoned, and electric vehicles were still “out of reach for most South Australians”.

“The MTA urges governments to favour the carrot over the stick in the transition to zero and low emission vehicles,” he said.

“With the federal government’s proposed fuel efficiency standard looming large, we do not want to see ordinary South Australians punished if they cannot afford an electric vehicle.”