Business SA expected more from Lucas budget

It must be tough being Treasurer Rob Lucas right now. Other than those involved in construction and major infrastructure works, the majority of other stakeholders are throwing rotten tomatoes over his decision to hike up fees and charges, waste levies for councils, land tax aggregation changes and more. Business SA expected more too, though we’re holding back on the tomatoes for now.

We sat down with the Treasurer before the budget and presented him with 17 priorities, including further payroll tax concessions, public sector rationalisation, the introduction of a gas efficiency program for businesses struggling with high energy costs and more funding to boost export growth.

Disappointingly, very few of these priorities have been included in the budget.

Payroll tax is a disincentive to employ more people. It is a tax on success. If thresholds were further increased or rates reduced, more businesses could take on more staff or give their casuals and part-timers more hours. If businesses employing science, technology, engineering and maths PhD graduates were given payroll tax concessions, we could reverse some of our state’s brain drain.

Public sector numbers are due to fall by just 600 staff over forward estimates. That’s less than one per cent. Those decreases don’t even take into account the extra teachers and support staff needed as year seven transitions from primary to high school. For the past decade, both the Labor and Liberal governments have failed to rein in public sector numbers – and it’s looking highly unlikely they ever will. South Australia spends more on its public sector in employee costs than any other state or territory. It’s a big part our state’s budget, consuming almost half of the entire state expenditure, at $9.6 billion.

A massive public sector and growing state debt, heading to record levels by 2023, are worth two rotten tomatoes at least. The general government sector debt, excluding the likes of SA Water, will double from $6.3 billion to $13.2b and will represent 60 per cent of state revenue. While all other states bar Western Australia have taken on extra debt in their budgets and recognising governments spend money to simulate the economy and create jobs, our State Government cannot continue this approach in future years.

The business community can create those jobs by building industries which play to our strengths such as defence, space, biotechnology, agriculture, renewables, tourism, arts, education and health care. With more support, the business community can also drive export growth. But in a tight economy, where the State Government isn’t doing enough – such as further reducing payroll tax – how will we ever achieve a growth rate of three per cent?

It’s clear the restrained budget does little to help the state’s wider business community, other than boosting infrastructure spending to improve the state’s major transport thoroughfares. Infrastructure spending is vital, but there is very little in this budget to boost business growth and help owners and operators still battling increasing energy costs and water bills. If the increased spending leads to more jobs, better economic conditions and improved transport outcomes, the state’s thousands of business owners could eventually see an improvement in economic conditions. It might just take a while.
 
This article was originally published in the South Australian Business Journal on Tuesday, 25 June 2019.

Martin Haese is chief executive of Business SA.

Image: SA Treasurer Rob Lucas selling his budget. Picture: AAP/Kelly Barnes

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