Current Issue #488

State Budget Banks on an Electoral Winner

State Budget Banks on an Electoral Winner

With the State Budget, the Labor Government leaves little room for the Opposition to manoeuvre.

If you are looking for a popular way of raising revenue, target the banks. If you want to wrong foot the opposition, follow the lead of the Federal Government. The SA Government did both by announcing a Major Bank Levy in last June’s State Budget. Steven Marshall and the Liberal Opposition were snookered.

The Bank Levy was always going to send the banks into a spin. It did much more than that, they came out swinging. Bank SA said it would put scheduled investment, delivering 150 new jobs, on hold. Ironically, this investment was for establishment of a business process automation team, a group that would have been tasked with delivering a substantial reduction in the 3800-strong Bank SA workforce. Bank SA won’t put that measure on hold for very long.

The politics of the Bank Levy are fascinating. A more popular measure would be hard to think of. The more the banks push back on it, the more the community will believe the State Government has done the right thing. A protracted campaign by the banks against the levy can only work in the State Government’s favor.

The boldness of the Bank Levy sets the tone for the state election campaign. The Premier and his Treasurer have taken on the banks and few will criticise them for that. They are on solid political ground. While the levy loomed large in the post-budget reporting there were plenty of other measures to focus on. One of the most important of these was the $9.5 billion infrastructure spend over four years. This was urgently needed with the closure of the automotive industry later this year. Few areas of expenditure have the capacity to generate large numbers of jobs quickly, as investments in large capital works programs.

state-budget-banks-electoral-winner-adelaide-review-2Example of SA Labor bank attacks rolling out on social media (image: Facebook)

The scale of the infrastructure spend is impressive and would be more so if the Federal Government matched the State Government’s commitment to some of the key projects. The focus on health and transport is smart given the obvious need to modernise more of our ageing infrastructure.

The State Budget was all about accelerating jobs growth at a time when it is urgently needed. The timing of this is all important. New projects need to come on stream in the second half of this year to provide realistic employment and training opportunities for the thousands of workers who lose their jobs in GMH and the automotive supply chain. The good news is that much of the new expenditure will kick in at the right time, helping to prevent unemployment rising above eight per cent as it would in the absence of new State and Federal Government investment.

Alongside the infrastructure investment package sits a number of measures that will also play an important role in accelerating jobs growth. This includes the Job Accelerator Grant program, which is designed to encourage employers to take on new workers and the $200m Future Jobs Growth Fund that focuses on industry attraction and support for local SMEs in sectors with relatively strong growth prospects. While these measures are important we can’t expect them to be the strong driver of jobs growth that well-chosen capital works projects often are.

The State Budget always had to be about jobs and fortunately it is. On the revenue side it has been aided by the sale of the Motor Accident Commission (MAC). We are now running out of assets to privatise, a reality that will force future governments either to increase taxes or cut services. The State Government has done a little of both this time around. Agency budgets remain constrained with job losses likely to flow as they struggle to accommodate even the most modest outcomes of future rounds of enterprise bargaining.

While it is less obvious and less debated, privatisation, as the sale of the MAC demonstrates, is alive and well in South Australia. The public-private partnership model used to build the Royal Adelaide Hospital will be extended to the construction and operation of two new ‘super’ schools. We need to know more about what the implications of this might be over the medium term because British experience suggests it can act to undermine the public schooling system as private service providers come to dominate the service culture of schools and lobby to extend their reach into educational provision. The purported financial benefits also require close scrutiny as they are rarely delivered without a significant reduction in service quality.

The State Government continues to leave little room for the Opposition to manoeuvre. In the State Budget prior to this one it offered substantial reductions in business costs, imploring the business community to invest and create jobs. This time around it has forced the Liberal Party to compete with it on revenue measures that it has difficulty opposing and stimulus measures it will find difficult to match.

With just nine months to go before the state election, you would be foolhardy to pick the winner right now.

John Spoehr is Director of the Australian Industrial Transformation Institute at Flinders University.


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