The Economic News Thread

[frank1]

NSW has a deficit forecast of $712 million. A deficit isn't a bad thing if the government has gone into a deficit for the right reasons and responsibly, particularly if it is the stimulate the economy. It's similar to how using debt for the right reasons can be good over a longer term, yet most people see deficit and debt as dirty words, particularly now.

while i agree, it is a bit silly to compare SA's deficit to NSW as they have like 5 times the population, so 94mil is still a fair bit for SA.

[Norman]

NSW has a deficit forecast of $712 million. A deficit isn't a bad thing if the government has gone into a deficit for the right reasons and responsibly, particularly if it is the stimulate the economy. It's similar to how using debt for the right reasons can be good over a longer term, yet most people see deficit and debt as dirty words, particularly now.

while i agree, it is a bit silly to compare SA's deficit to NSW as they have like 5 times the population, so 94mil is still a fair bit for SA.

But NSW have cut a lot of services and projects.

[muzzamo]

I guess the worrying thing about this deficit is hat it has happened well in advance of the recession. Some economists are saying a government deficit (I would assume that meant combined state and federal) of 6-7% of GDP may be what we find this time around.

[frank1]

December 18, 2008 12:30am

TREASURER Kevin Foley warns of "surprises" for taxpayers as the state goes from a record surplus to losing more than $1 billion in revenue over the next four years.
While the planned $1.5 billion rail electrification and tram extensions will be protected from cuts, other major infrastructure programs will face "revision".

It has been revealed for the first time that SA finished the 2007–08 financial year with a Budget surplus of $464 million – $91 million more than predicted. It would have been the biggest surplus since 2002–03 when it was $446 million.

That surplus has now been wiped out by the global financial crisis and the state is facing huge cutbacks in spending and some infrastructure projects being deferred.

The $464 million surplus – and the projected $160 million surplus for the current year – will become a deficit when Mr Foley releases full details of his Mid-Year Budget Review tomorrow morning.

"As a result, Cabinet has had to consider making some tough decisions, the details of which will be given on Friday," Mr Foley told The Advertiser yesterday.

"Cabinet will be unveiling a raft of decisions. There will be surprises."

Mr Foley said while the electrification and the proposed new tram line extensions would go ahead, there would be "a revision of some other programs".

New financial details which have emerged in the past 24 hours are:

ESTIMATES of GST revenue are down by $845 million over the next four years.

STATE taxation revenues – especially stamp duties – are down by $245 million over the same period.

STATE superannuation liabilities have increased by $2.3 billion because of "international market turmoil".

The SA figures come only days after Victoria, Queensland and Tasmania announced huge cuts in government spending and significant changes to their budgets because of the financial crisis.

"This is a defining moment for the Government," Mr Foley said.

"Stamp duty and GST losses alone have hit the state's financial position to the tune of more than $1 billion over the next four years.

"It is the most challenging time I have faced as Treasurer. But we are up to it."

Mr Foley said a record surplus in the state's history had gone to a deficit in the matter of six months.

"That is the reality of having the financial crisis hitting home," he said.

"The financial crisis means that businesses and consumers are spending less. That means the state is getting substantially less in GST revenue."

Mr Foley said the Government had been accused of not putting aside money for the hard times but "I don't know how much bigger a surplus you could have".

"It has now evaporated," he said. "We have eliminated all state debt and we have cut taxes and are building infrastructure."

Mr Foley said now the Government was going to have to put more money into superannuation liabilities which at June 30 this year were $19.3 billion.

Opposition Leader Martin Hamilton-Smith said on ABC Radio the financial situation sounded "pretty grim".

"I don't think (Premier) Mr Rann and Mr Foley can blame all of that on the world financial crisis," he said.

"To be perfectly frank it was worse than this for SA in 1994 after the State Bank, we had $11.5 billion of debt, unemployment was up at around 11 per cent, interest rates were 17 to 18 per cent and we had a $300 million deficit."

[skyliner]

Depsite the 'subtle' opposition bias in that article, I have the say that a $94million isn't that bad in the greater scheme of things considering what some of the eastern states are saddled with (I think Queensland has a $806 million deficit predicted).

QLD's debt is a reflection of the collapsing of the coal industry (from dramating drops in demand overseas coupled with no 'clean' coal in the face of Rudd's climate policy and the extreme costs of infrastructure arising from bad planning and the pop. growth.

The news showed yesterday a number of mines aleady sacking empolyees.

Put this in proportion with QLD's pop of about 4m and SA's pop of 1.6m and you get the idea of big picture.

SA - ON THE MOVE

[Prince George]

... coupled with no 'clean' coal in the face of Rudd's climate policy ...

No clean coal on the face of the earth. In fact, just today we're starting to see adverts on the TV over here aiming to burst the "clean coal" bubble ("clean coal" became a kind of mantra during the election). See them for yourself at http://thisisreality.org

[Will]

I don't fully understand. Why is the government talking about cutting spending? I always thought that during times of economic decline it was good for governments to increase spending?

[monotonehell]

I don't fully understand. Why is the government talking about cutting spending? I always thought that during times of economic decline it was good for governments to increase spending?

It is, but only to a point. That point being not bankrupting the state.

It's been going on since Roman times, if the economy is going bad put on a few public works. It employs a load of people who then spend some of their earnings keeping the wheels turning while you get over the hill.

(Nb I tried fitting some more metaphors in there, but I'm not a sports person.)
Who said this?
"If we don't fly right, the wheels will come off and we'll sink the ship."

[Prince George]

Who said this?
"If we don't fly right, the wheels will come off and we'll sink the ship."

I'm going to guess Yogi Berra, Mr "It's deja-vu all over again" himself.

[UrbanSG]

Worrying economic times nation-wide (and globally). We have problems here in SA that will be further revealed today. However it is a nation-wide problem and we are not in as much trouble as we were in with the State Bank collapse. This is an interesting read. WA was the big-boom state, interesting to see how times are changing so rapidly.

Happy days to budget blowout
Michael Stutchbury, Economics editor | December 19, 2008
The Australian

JUST as its huge resources boom has bust, Western Australia has locked itself into an unaffordable government spending spree that is threatening to turn into a budget crisis.

Like basket-case NSW, the nation's boom state is now flagging emergency budget cuts to rein in a government debt blowout. The west's financial strategy aims to maintain the state's triple-A credit rating by keeping net public sector debt to no more than 47per cent of revenue.

But this government debt burden is now projected to rise to more than 60per cent by 2011-12 because of a revenue slump and a spending blowout.

Western Australia's main problem is that the collapse of the China boom will soon reverse the big contract price increases screwed out of the Chinese and Japanese by BHP Billiton and Rio Tinto for the state's iron ore.

The budget review assumes iron ore contract prices will drop 25per cent next financial year, and by a further 10per cent in both the following two years.

While much of this royalty hit will be cushioned by the sharply lower Australian dollar, Western Australia is the extreme version of the national dilemma.

As the state's mid-year review puts the situation: "If the global recession is prolonged, the features of the state's economy that served it so well during the resources boom - its commodity endowment and export focus - could turn into points of comparative vulnerability."

The second blow is self-inflicted, as the west has saddled itself with a heap of extra government spending justified by the boom that has now bust.

This includes $2.4billion of handouts to the bush - the price demanded by the balance-of-power Nationals to support the Liberals' Colin Barnett after the September 6 state election.

Never mind that the global financial crisis exploded less than a fortnight later.

The state's general government spending will still increase 12per cent this financial year.

If Perth were Canberra, this would be touted as a decisive fiscal stimulus. But as NSW has shown, the states can't be as cavalier as the feds about their budget bottom lines.

That's especially the case given the west's double GST hit. Not only has the national consumer recession mauled GST revenue, the formula for doling this money to the states penalises Western Australia for its recent resources-based revenue boom. The state's share of the GST pie is projected to be clipped from 9.4per cent last year to 5.7per cent by 2011-12.

All this adds up to the need for "significant corrective action to ensure the state remains in a financially sustainable position".

[joshzxzx]

All i can do is laugh about the above artice.

COME ON SA.. we are in a prime position to change Australias veiew on us as we are fearing quite well from this financial crissis..

[Norman]

SA Treasurer Kevin Foley slashes jobs and sells off assets

GREG KELTON, STATE EDITOR

More than 1000 public sector jobs will go, buildings will be sold and projects deferred as Treasurer Kevin Foley wields the axe on state finances.

The state's Budget will also be plunged into deficit – $112 million this year and $81 million next year – because of the global economic crisis.

As a result, only New South Wales with a $712 million deficit, will have a bigger deficit than South Australia.

While jobs will go, police, health workers and teachers involved in "frontline services" will be excluded from the job cuts.

Mr Foley announced the wide-ranging cuts today as part of the Government's mid-year economic review.

Among the projects to be deferred will be a raft of hospital, health and transport projects, as well as the $100 million upgrade of AAMI Stadium.

In the sell-offs planned because of the huge $1 billion shortfall in state tax revenues, the Government's own "head office", the State Administration Centre will be sold, along with future timber sales of Forestry SA.

About 600 government-owned houses for employees will also be sold.

Mr Foley said 1200 jobs would go by the end of 2009-10, with 200 more in 2010-11 and 2011-12.

But he said there would be no forced redundancies.

Premier Mike Rann said that despite the changes, there would still be the biggest infrastructure spend in the state's history over the next 12 months.

"Every single project will be started on time," he said.

Mr Foley said he had spoken to the ratings agencies this morning, and SA was likely to retain its Triple-A credit rating.

Doesn't seem all TOO bad I guess... but I await MHS's :wank: "response"

[AtD]

It sounds like Rudd should be appropriating more funds to the states. It's very common for state and federal fiscal policies to contradict each other.

[frank1]

December 29, 2008 08:30pm

SOUTH Australian businesses are the second-highest taxed in the nation, a report from the Institute of Public Affairs shows.

The free-market think tank's Business Bearing the Burden report shows state taxes levied on a medium-sized business this year came to $219,067, compared with $195,621 in Western Australia.

Only New South Wales businesses fared worse, paying $222,356 in state taxes.

Deputy Opposition leader Vickie Chapman said the report was "all bad news for South Australia".

"If you strangle business with tax, you suffocate people's jobs. That is the real consequence for South Australia," she said.

Ms Chapman said there would be tax reform under a liberal government but would not guarantee businesses would pay less tax.

Premier Mike Rann said SA had the equal-lowest payroll tax in the nation and had worked to make WorkCover competitive.

Mr Rann said groups such as the IPA, while criticising the tax system, were also calling for more spending on infrastructure.

"My message to the IPA is this: You can't keep asking for more and more tax cuts for business at the same time that you want more and more expenditure in terms of supporting business, or in terms of rolling out more infrastructure."

Treasurer Kevin Foley announced in his mid-year Budget Review this month that the phase-out of two stamp duties for business, scheduled for July, 2010, would be deferred, saving the Government $144.3 million.

The IPA report said SA should reduce its above-average tax take to encourage economic growth, with land tax coming in for special attention.

"Any competitive advantage in these areas is significantly diluted by very high property taxes, especially land tax – 62 per cent above the average," the report said.

South Australian businesses pay seven times more land tax than equivalent businesses in WA, the report found.

Business SA chief executive Peter Vaughan said stamp duty and land tax needed attention.

"It doesn't encourage businesses to come here and it may lead to some businesses leaving South Australia," Mr Vaughan said

[monotonehell]

December 29, 2008 08:30pm

SOUTH Australian businesses are the second-highest taxed in the nation, a report from the Institute of Public Affairs shows.

The free-market think tank's Business Bearing the Burden report shows state taxes levied on a medium-sized business this year came to $219,067, compared with $195,621 in Western Australia.

Only New South Wales businesses fared worse, paying $222,356 in state taxes.

Deputy Opposition leader Vickie Chapman said the report was "all bad news for South Australia".

"If you strangle business with tax, you suffocate people's jobs. That is the real consequence for South Australia," she said.

Ms Chapman said there would be tax reform under a liberal government but would not guarantee businesses would pay less tax.

Premier Mike Rann said SA had the equal-lowest payroll tax in the nation and had worked to make WorkCover competitive.

Mr Rann said groups such as the IPA, while criticising the tax system, were also calling for more spending on infrastructure.

"My message to the IPA is this: You can't keep asking for more and more tax cuts for business at the same time that you want more and more expenditure in terms of supporting business, or in terms of rolling out more infrastructure."

Treasurer Kevin Foley announced in his mid-year Budget Review this month that the phase-out of two stamp duties for business, scheduled for July, 2010, would be deferred, saving the Government $144.3 million.

The IPA report said SA should reduce its above-average tax take to encourage economic growth, with land tax coming in for special attention.

"Any competitive advantage in these areas is significantly diluted by very high property taxes, especially land tax – 62 per cent above the average," the report said.

South Australian businesses pay seven times more land tax than equivalent businesses in WA, the report found.

Business SA chief executive Peter Vaughan said stamp duty and land tax needed attention.

"It doesn't encourage businesses to come here and it may lead to some businesses leaving South Australia," Mr Vaughan said

The IPA is a well known right-wing, corporate funded body with close links to the Libs (not that there's anything wrong with that, you just need to know whose mouthpiece they are). Amazing promise that -- tax reform where no one is better off. How about a policy that outlines WHAT reforms and who would benefit?