South Australia's Budget: Echoes of 2017 Challenges and New Geopolitical Risks

If a week's a long time in politics, nine years is an eternity.

Yet some things haven't changed since Labor Treasurer Tom Koutsantonis last handed down a state budget in 2017.

Back then, the Weatherill government was negotiating a support package for the Whyalla steelworks after the collapse of Arrium, putting up more than $50 million for a new owner.

That budget also contained $528 million for a new Adelaide Women's Hospital to be co-located with the Royal Adelaide Hospital and "completed in 2024".

The best-laid plans of mice and men often go awry.

Labor was swept out of power nine months later, the steelworks went back into administration in 2025, and a co-located Women's and Children's Hospital won't be finished until at least 2031.

Mr Koutsantonis, appointed treasurer after Labor's landslide March election win, handed down a budget on Thursday still confronting those challenges from nine years ago.

Another $159.5 million has been allocated to keep the steelworks afloat through its second administration, pushing the state and federal allocation to Whyalla towards $3 billion.

The steelworks are also classified as a risk if something were to go wrong with finding a new owner, with the budget papers noting "unquantifiable potential exposures to the state in certain circumstances".

The design of the new Women's and Children's Hospital is still not finalised, and might not be before October, with signs of a major cost blowout not going away.

"We've allocated $3.2 billion and we're not ashamed to say this project is having difficulties," Mr Koutsantonis said.

"But I'm not going to raise the white flag.

"There's going to be budget discipline, and budget discipline means sticking to budgets as much as we possibly can."

Risks on the horizon

The emphasis on discipline comes as Mr Koutsantonis also confronts a host of challenges that did not exist in 2017.

Back then, most of the geopolitical risks on Treasury's radar were around the Chinese economy and rising interest rates in the United States.

Now, the Iran War has made economic forecasting a whole lot more difficult.

"I don't know what shocks are coming next," the treasurer said, adding that the government was deliberately under-forecasting its revenue and overestimating expenditure due to the war.

"The geopolitical instability globally now is growing not shrinking."

In 2017, net debt was at $13.8 billion. That's now projected to rise to $53.7 billion by 2029-30 as the government eats its share of the $15.4 billion South Road upgrade and the new Women's and Children's Hospital.

The budget's risk statement notes that "large capital programs increase the risk of additional cost", as does the "current high demand for infrastructure-related labour and materials".

Mr Koutsantonis said he was confident both projects will be completed by 2031, after which debt will go down.

That would bring some much-needed relief to the state's books.

At the end of the forward estimates, interest expenses on the government's debt bill are projected to hit $2.9 billion a year.

The state budget's risk statement also notes that a one percentage point increase in the average interest rate applying to general government debt would add $288 million to net interest expenses, and $409 million by 2029-30.

These are all facts that will no doubt be seized on by the government's political opponents in the budget wash-up.

But Mr Koutsantonis argued the debt is sustainable and repeatedly pointed out that the government's net debt to revenue ratio has actually decreased.

The treasurer is, however, concerned about GST, which is set to account for around 30 per cent of the state's revenue next financial year.

The federal government's "no worse off" guarantee to compensate other states for Western Australia's favourable GST share is set to expire in 2030.

Asked how big a risk that was to the state budget, Mr Koutsantonis said: "It's existential."

"We would lose $2 billion across the forward estimates without that no-worse off guarantee. The Commonwealth government cannot allow it to happen."

The federal government's funding pull-back on the NDIS is also noted as a risk in the budget papers.

No surprises?

The government was keen to emphasise, in the lead up to this budget, that there would be no surprises.

Premier Peter Malinauskas led off his budget address emphasising that there were no new taxes.

That's a marked change from 2017, when Mr Koutsantonis introduced the controversial bank tax that was intended to raise more than $300 million in revenue.

Then-premier Jay Weatherill later shelved the proposal after the Liberal Party and others vowed to block it in the upper house.

Asked if his philosophy on taxation had changed, Mr Koutsantonis said: "The premier's changed."

"Treasurers serve the government of the day, and I serve the ideology of the current premier, who is more business friendly, we make no apologies for this we are a pro-business Labor government," he said.

"Jay Weatherill had very different views about taxation than the current premier does, and the current premier made a solemn promise not to increase taxes, and we're going to deliver that."

Unlike the federal budget just gone, this was not an exercise in spending mountains of political capital, but rather allocating $2.2 billion in real capital towards already-announced election commitments.

"I don't think this is a budget that's going to cause controversy in two weeks' time," Mr Koutsantonis said.

There was still, however, some devil in the detail.

The government is shutting down a $154 million grants program for businesses called the Business Growth Fund.

"The Business Growth Fund is there to invest when you need business growth. We're at full employment," Mr Koutsantonis said, arguing now was the time to be "re-investing those funds into other core services."

Labor's election promise to waive public school fees will cost $174 million — $26 million more than anticipated in the government's election costings.

"Obviously a costings document, they don't have access to the ability of Treasury, and of course why we're there we might invest more money to certain schools that need more investment," the treasurer said.

There's $3.3 million to work on plans for the MotoGP, but the total cost of the major events endeavour is not disclosed.

"We are very careful about what we publish," Mr Koutsantonis said.

"No-one can tell me what the Victorian MotoGP costs the Victorian government. You keep these things secret because you don't want other states to steal them.

"We've got Western Australia circling Gather Round, we've got Victoria circling LIV Golf and the Australian Open, we've got people who want the MotoGP."

Mr Koutsantonis also rejected that Labor's $300 million package for Murray Bridge and Mount Barker had fallen off the priority list.

That's despite a commitment to deliver more buses to Murray Bridge not coming in until 2028-29.

Promises to build new police stations in both cities will also have to wait with only $5 million allocated to "planning work" in the budget.

"We're being prudent," he said.

"Things need to be planned in time. For example, we promised people in Murray Bridge that they would get access to the MetroCard, and they did.

"Where we're building things, it takes time to plan these things."