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Paul Starick: SA state budget 2023 cost-of-living challenge for Treasurer Stephen Mullighan

Can we expect significant help with soaring living costs in Thursday’s state budget? Not without the RBA just taking it away, writes Paul Starick.

‘Our patience has a limit’: Lowe defends RBA’s actions

A wicked conundrum faces Treasurer Stephen Mullighan as he prepares to deliver his second state budget on Thursday.

On the one hand, he’d doubtless love to offer significant relief to people shuddering under the worsening cost-of-living crisis engulfing the state – indeed, much of the world.

But even if Treasury coffers had not been depleted by staving off the worst of the Covid-19 pandemic’s health and economic hits, splashing about cash now is the last thing on Mr Mullighan’s mind.

Instead, he faces the tricky challenge of providing living cost relief without putting a flamethrower to the fire of inflation. Put simply, what’s the point of putting money back into voters’ pockets only for the Reserve Bank to grab it back with even more crushing interest rate rises?

The middle class mortgage holders who usually decide state and federal elections are missing out on much of the government help that has targeted the needy. The social welfare net does not extend to many of those variously labelled battlers, working families or “postcode povvos”.

Households have been battered by an unprecedented surge in interest rates, rents and other living costs since Mr Mullighan’s debut budget last June, as he acknowledged on Tuesday.

“Households have been tasked to do an enormous amount of heavy lifting for the Australian economy and it is causing many households a great deal of pain. And not just households, of course – we’ve got small businesses and sole operators who have got their own financing arrangements … who are also experiencing pain because of these escalating interest rates,” Mr Mullighan said.

Treasurer Stephen Mullighan delivers his debut budget on June 2, 2022. NCA NewsWire / David Mariuz
Treasurer Stephen Mullighan delivers his debut budget on June 2, 2022. NCA NewsWire / David Mariuz

The economic storm clouds of 2022 have turned into a downpour. The path to avoiding a recession is getting much narrower. Latest GDP figures show growth at just 0.2 per cent in the March quarter.

South Australian budgets typically estimate the state’s economic growth at 50 to 75 basis points below federal budget documents, which in May estimated real GDP growth at 1.5 per cent in 2023-24. This would put SA growth at a measly 0.75 per cent to one per cent.

This prompts the question of where Mr Mullighan will find money from, without sinking further into debt – forecast in the mid-year budget review to reach $33.458bn by mid-2026. There can be no new taxes without breaking the pre-election pledge delivered by the-then Opposition Leader Peter Malinauskas in November, 2021.

Having delivered a surplus in his debut budget and forecast them across the four-year forward estimates, Mr Mullighan has already conceded this has evaporated – at least for now. He told parliament on May 18 that his $200m surplus had been lost to a $95m GST revenue downturn, more than $100m allocated to River Murray flood recovery and tipping more money into health and child protection.

Treasurer Stephen Mullighan in his office ahead of his first state budget. Picture: Keryn Stevens
Treasurer Stephen Mullighan in his office ahead of his first state budget. Picture: Keryn Stevens

Ahead of his first budget last June, Mr Mullighan sent a clear message to public servants to avoid excessive wage claims, declaring it was not a case of “the brakes are off and these guys can have whatever they want”. Nurses and midwives last year got annual 3 per cent pay increases and two extra one-off payments up to $1500. Ambulance officers, who backed Labor to election victory, last July got annual pay rises of 2.5 per cent until 2024, backdated to 2018.

There is still more pressure on Thursday’s budget. Credit Union SA Chair of Economics at UniSA Dr Susan Stone says economic priorities the state government needs to address are: housing availability and affordability; cost of living; skills shortages; energy costs; infrastructure delivery and health access.

May’s federal budget promised hundreds of dollars in energy bill relief for about 420,000 South Australian households and 86,000 small businesses, in a scheme jointly funded with states.

It’s a tricky time to be Treasurer. The economy is souring and demands are rising from people under huge pressure. The tide might turn on the Malinauskas government if it cannot deliver empathy and relief.

Originally published as Paul Starick: SA state budget 2023 cost-of-living challenge for Treasurer Stephen Mullighan

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Original URL: https://www.couriermail.com.au/news/south-australia/paul-starick-sa-state-budget-2023-costofliving-challenge-for-treasurer-stephen-mullighan/news-story/18d5d9755c2f20b9f4246955d7ac5bf5