Growth Underpins Budget

South Australia has enjoyed a year of strong economic and employment growth. This has led to strong revenue growth. For example the State Budget shows that property taxes are up by around 6.9 percent or $200 million. State debt is negligible and our AAA credit rating is secure. While future revenue and employment growth is not forecast to match recent years the foundations for boosting spending are solid. The bottom line is that State finances are the strongest they have been in the post-war period. The State Government could not wish for a better economic climate. The long boom will not go on forever however. The pace of growth over the next few years will be more subdued, primarily because of the drought, rising interest rates and high household debt. There is also a threat that the troubled US economy might slowdown, dampening demand for our commodities.

The boost in infrastructure spending in the Budget, particularly through increased public sector borrowings is welcome, but it does not go far enough. The good news is that the additional spending is timely as it will generate hundreds of jobs in the construction industry at a time when the sector faces a slowdown.

The plan to build new super schools is sensible but these like the proposed new prisons should be and can be funded entirely from public borrowings. International experience shows that using private funding to build new schools and prisons risks locking the State government into expensive and inflexible lease arrangements. Let the private sector build the new schools but lets keep ownership and control of the assets in the public sector to ensure that they are democratically accountable institutions rather than appendages of global facilities management corporations that have shareholder rather than voter interests at heart.

Let's not forget that the State Government can borrow more cheaply than the private sector can. In this context the business case for private financing of our schools and prisons appears a flimsy one. The case for public funding and management of our schools and prisons is strong, particularly given the growing number of failures of Public Private Partnership projects here and overseas. The State Budget papers remind us of that allocating around $18m to bring the Modbury hospital back under public sector management.