State budgets impossible to manage without GST shake-up, SA Treasurer Stephen Mullighan says

Delivering his first state budget, Stephen Mullighan blasts his WA Labor colleagues, calling the current arrangements ‘outrageous’.

SA Premier Peter Malinauskas and Treasurer Stephen Mullighan. Picture: NCA NewsWire / David Mariuz

Every state budget in Australia will become impossible to manage without the complete overhaul of a GST distribution system that unfairly favours Western Australia, SA’s new Treasurer Stephen Mullighan warned on delivering his first state budget.

Mr Mullighan abandoned any sense of party loyalty in taking aim at his Labor colleagues in WA, saying every other state and territory also regarded the current GST arrangements as “outrageous”.

He said it was “simply unfair” that WA enjoyed increased GST revenues while reaping the benefits of a resources boom and that every other state and territory wanted reform.

“It goes from being unsustainable to absolutely outrageous when billions of dollars of GST revenue is being given to WA while they are in the middle of a mining boom,” Mr Mullighan told The Australian.

“It is simply unfair and it is not what our federation was designed for. We saw in their last budget that thanks to billions in GST and the benefits from the mining boom WA has a $5 billion surplus. I think Mark McGowan has got some questions to answer.”

Mr Mullighan said he was not advocating a return to the old GST distribution model which left WA exposed to the “peaks and troughs” of its reliance on mining.

But he said that SA and every other state would face huge shortfalls upon the expiry of the Morrison government’s “no worse off” commitment.

Under those arrangements SA is benefiting from around $900 million of additional GST revenues over the next four years, but Mr Mullighan said the “no worse off” commitment was masking what would otherwise be a $289 million shortfall.

Barely two months since its landslide victory, the Malinauskas Labor government used its first budget to show it intends to govern from the centre, promising sustained surpluses over its first four years in office with no new taxes or tax increases.

It has also honoured and bettered the previous Liberal government’s promise to return SA to surplus by 2022-2023.

In the final year of its four years in office, Steven Marshall’s Liberal government forecast a surplus of $102 million in 2022-23 in last year’s state budget.

Mr Mullighan said the new government would improve on that figure by $131 million, with a $233 million surplus now forecast for 2022-2023.

 

But the Treasurer admitted that SA’s good economic fortune has been underpinned by a booming property market and increased GST receipts, and is urging restrained spending and wages growth as both inflation and interest rates increase.

And he said it was vital that the government rein in spending with a post-Covid state debt of $33.8 billion projected by 2026, a slight increase from the previous government’s forecast.

“This budget delivers on all of the government’s election commitments, returns the budget to surplus and introduces no new taxes,” Mr Mullighan told SA parliament on Thursday.

“It begins the hard work of restoring the state’s finances, ensuring that while we provide extra funding for priority areas and frontline services, we reduce our spending elsewhere.

“We took an ambitious agenda to the community at the last election. We did it identifying the right priorities for our state. We did it for the future.”

Easily the biggest outlay in the budget is health, the centrepiece of Labor’s hugely successful election campaign where it attacked the Liberals over ambulance ramping and hospital funding.

Labor framed its campaign around an attack on the Liberals’ proposed new Adelaide Entertainment Centre, and said if elected it would channel that money into hospital upgrades, new doctor and nurse positions and the creation of a new ambulance headquarters in the CBD.

All these measures are part of a record $2.4 billion injection into the public hospital system over the next four years.

“We are in a position to fund these measures not only because this is the highest priority for the South Australian community, but also because we chose not to proceed with a $662 million basketball stadium,” Mr Mullighan said.

One of the big unknowns in the budget is the proposed new Womens and Children’s Hospital, which was also supported by the previous Liberal government with an estimated $2 billion price tag.

Mr Mullighan said on Thursday he was not convinced that that figure was realistic with rising building supply and construction costs and that more work needed to be done on the scope of the project.

The State Opposition questioned the figures underpinning the forecast budget surplus and accused Labor of only achieving that target by delaying work on the $9 billion South Road upgrade.

“The more than $1 billion which the Malinauskas Labor government has pushed out from the North-South Corridor project coincidentally matches up to a $1.1 billion budget blackhole predicted by former Treasurer Rob Lucas before the election,” Opposition Leader David Spiers said.