Financial markets are already charging higher interest rates on government debt consistent with a loss of South Australia’s AAA credit rating, Under Treasurer Brett Rowse confirmed today.
Mr Rowse told the Legislative Council Budget and Finance Committee that, since late last year, financial markets had made decisions on the assumption South Australia’s AAA rating would be downgraded to AA+.
“This means South Australian taxpayers are already paying higher interest rates on refinancing government debt as it falls due,” Shadow Finance Minister Rob Lucas said.
“Mr Rowse estimated the extra interest costs on total debt of $8 billion would be between $4 million and $8 million.
“It is clear financial markets have already lost confidence in the Labor Government’s ability to manage its budget and in particular to meet its budget savings tasks.”
Mr Rowse also confirmed both the Health and Communities and Social Inclusion departments were likely to overspend their budgets this year. Health’s overspending was $125 million and DCSI’s was $11 million.
Mr Rowse has also ‘blown out of the water’ Minister Hill’s claim that key reasons for the $125 million overspend included demand pressures and wage pressures on the Health Department. Mr Rowse made it clear that was incorrect because Treasury provided additional funding to Health for demand and wage pressures and they were not included in the $125 million budget blowout.
“Mr Hill’s position is becoming untenable when the most senior Treasury bureaucrat in the state publicly contradicts the Minister’s explanation of the $125 million blowout,” Mr Lucas said.
Other evidence to the Committee included:
• The Government hasn’t decided whether Health will be required to in essence ‘repay’ the budget for the $125 million blowout – this would add to the savings task next year
• Health had only achieved 70 FTE job cuts this year out of a required total of about 440 FTE
• The policy of allowing public servants to cash out their long-service leave had not led to significant budget problems as instructions had been issued to restrict the take-up rate
• There was no policy which allowed public servants to cash out their recreation leave
• Whilst there had been a job cut target of 4143 FTE for 2010/11 to 2013/14 Treasury was not monitoring progress on 670 of those because agencies were allowed to substitute other budget savings rather than job cuts
• There had been further cost blowouts and delays in Treasury’s IT project called RISTEC, and final costs and completion dates were still up in the air