Don’t use SA’s $1.3 billion drop in expected GST as an excuse to tighten the belt, State Opposition says
SA’s predicted $1.3 billion GST shortfall isn’t as bad as is being claimed and shouldn’t be used as an excuse to lower spending on economic stimulus projects, the State Opposition says.
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The State Government must not use South Australia’s GST shortfall as an excuse to decrease spending on much-needed economic stimulus projects, the Opposition says.
State Labor treasury spokesman Stephen Mullighan said the impact of the GST payment, revealed during the Federal Budget on Tuesday evening, is “nowhere near as bad as (Treasurer) Rob Lucas claims”.
He disputed the reported $1.3 billion drop in GST take, saying it was based on the State Government’s own artificially inflated revenue predictions.
Mr Mullighan said when compared with the Federal Government’s figures, the decrease in SA’s GST amounted to $653 million.
He said this was offset by increases in other Federal revenue, such as an extra $244 million in specific purpose payments, which is funding for specific areas such as health or education, as well as an additional $421 million in national partnership payments, which is used for projects funded by both the State and Federal Governments.
Mr Mullighan acknowledged that these extra payment were tied funds, leaving less discretion than the untied GST funds.
However, he said Mr Lucas was talking down finances to lower expectations ahead of November’s State Budget.
“(Treasurer Rob Lucas is) talking down the budget as an excuse not to do as much,” he said.
Mr Mullighan also said SA will also miss out on thousands of jobs because the Budget short-changed the state on infrastructure funding.
He said by 2022/23, the state’s share of infrastructure funding will crash to just 3.93 per cent – about half of SA’s population share.
Mr Mullighan said if SA had received its population share, it would have pocketed an extra $580 million over four years, on top of the recently announced $625 million stimulus package.
“With the worst unemployment rate in the nation, SA desperately needed a serious boost in infrastructure funding from last night’s budget – but we didn’t get it,” he said.
“Steven Marshall spends a lot of time talking about his ‘special relationship’ with Canberra but once again, South Australian has missed out on his watch.”
Mr Mullighan also said a number of State Government projects, including the final stage of the North-South corridor, the new Women’s and Children’s Hospital and the Port Wakefield overpass, had stalled.
SA faces massive GST cut
Mr Lucas said GST payments to South Australia would fall off a cliff this year with the massive $1.3bn drop, compared with what the State Government had late last year been expecting.
The fall would usually put a huge handbrake on the State Government’s capacity to spend in its own budget, scheduled to be handed down on November 10.
However State Treasurer Rob Lucas said late Tuesday night the government was committed to spending to support the economy, rather than increasing taxes or deep cost-cutting.
As such the new figures released yesterday would not change the approach to his own spending plans.
“Clearly it’s a significant impact to the State Budget but it was not unexpected,” Mr Lucas said.
“We’re intent on doing whatever we can to save as many jobs as we can, even if it means significant increases in deficit and debt.
“The State Budget next month will be in a similar vein.”
The GST rivers of gold underpin the health of the state budget, and traditionally deliver about a third of state government revenues per year.
Once other federal grants are factored in, the contribution is well over half.
But the federal budget papers show that SA’s GST take is expected to come in at just $5.606bn in 2020-21, compared with the State Government’s own estimate of $6.907bn in the mid-year budget review, delivered on December 9.
Other payments tied to specific projects will come in at $4.35bn, down $612m from what Mr Lucas had been expecting, however, the federal papers caution that these figures may not include all federal money going to the state.
With the State Government’s own tax take making up less than a quarter of our annual budget revenues, Mr Lucas has little room to move on the revenue front in order to make up this shortfall.
The Federal Government does not provide GST forecasts beyond the current financial year. However, the State Government had been factoring in an increase in the GST take from $6.728bn (actual $6bn) in 2019-20 to $7.379bn by 2022-23.
Those projections, which predate the COVID-19 pandemic, now appear wildly optimistic.
While the total GST take is expected to increase across the forward estimates, driven in part by changes to the tax such as the application of GST on digital products, spending is expected to remain weak.
“The COVID-19 pandemic has had a significant impact on GST revenue,’’ the budget papers say.
“This is due to record falls in consumption of services, with the portions of discretionary consumption that are subject to GST particularly affected.
“Consumption that is subject to GST is expected to fall in 2020-21 due to ongoing health and travel restrictions, before rebounding from 2021-22.’’
Mr Lucas had previously told The Advertiser this year’s state budget would be the most unique and challenging in his four decades in politics, and the usual rules did not necessarily apply. At the time he had already forecast a $2bn deficit, and debt headed toward $30bn.