APPROPRIATION BILL 2016

Mr DULUK (Davenport) (19:54): A little over 12 months ago, I had my first opportunity to respond to this house in regard to the state budget. At that time, I called on the government to be courageous and look at new programs and new initiatives to kickstart our lagging economy. 

I strongly encouraged our political leaders to look abroad at cities that have experienced similar challenges to those confronting our state—a sharp decline in key sectors of the economy, high unemployment, increasing living costs and population decline—cities that have successfully confronted these challenges and transitioned to a new modern economy. Last year, I highlighted Pittsburgh in America, and I commented:

The revival of Pittsburgh, Pennsylvania, has lessons for us all…The city of bridges has built a bridge from its steel past to a diverse 21st -century economy…Following the lead of Pittsburgh could have significant benefits for all South Australians.

I found it very encouraging when a little over six months after making my comments in the house the Premier travelled to the city of Pittsburgh to learn for himself how the former steel city had turned its economy around and to gain an insight into the ideas and opportunities that South Australia could capitalise on. I was further encouraged when the Premier released the report by RedFire Consulting which outlines a plan for fostering an innovation ecosystem in South Australia.

These important steps by the government illustrate a willingness to explore the potential in areas beyond South Australia's traditional sectors, and they are steps which I warmly welcome. I also welcome the Treasurer's announcement that the 2016-17 state budget includes an innovation support package. Government support and a strong commitment are critical to fostering entrepreneurial activity across a broad range of sectors.

Pittsburgh's success in developing new industries in advanced manufacturing and venture capital was built on a broad range of dedicated government programs. The New Zealand government has been luring entrepreneurs with co-working spaces and publicly funded business accelerators like the Lightning Lab, a four-month program that helps new companies grow and is the only accelerator in Australia or New Zealand to be a member of the invite-only Global Accelerator Network. The success of Block 71, a Singapore start-up nucleus, has been underpinned by government collaboration with the private sector and the National University of Singapore.

Each example has two important elements in common—strong government investment and sound leadership. Whilst I was happy to see the government act on several recommendations of the RedFire report and announce significant investment in initiatives designed to encourage industry innovation, including establishing a $50 million South Australian venture capital fund, I was disappointed that the government failed to act on a key recommendation of the report, and that is the establishment of a new innovation agency, AccelerateSA. AccelerateSA would bring all innovation programs under one umbrella to enable consistent and coordinated development and implementation of innovation policy. RedFire made this recommendation after it found that currently:

Innovation Policy is administered across multiple government departments and ministries…there is often conflict, duplication and inconsistencies within Government in relation to goals, programs and initiatives…

Indeed, RedFire noted that despite renewed efforts across Australia to develop innovation programs at the state level, with New South Wales, Victoria and Queensland all making relevant announcements over the past year, the report found:

…none of these States appear to have done this in a coordinated and joined up way.

Like South Australia, efforts on the east coast to establish a vibrant innovation ecosystem have been shackled by poor governance. An opportunity beckons for our state. So, it is incredibly disappointing that the government failed to take definitive steps in this year's state budget to establish a coordinated and integrated approach to innovation through AccelerateSA. It is concerning that valuable funds allocated to the innovative support package are now at risk of being wasted by a government that has a strong track record of mismanagement and inefficiencies, and I will be watching the developments in this area with a great deal of interest.

I am especially interested to see how South Australia's venture capital fund is rolled out, given RedFire recommended that a key facet of the funds management structure included AccelerateSA. I am also surprised that it appears that only $750,000 has been set aside each year for administration costs for the venture capital fund. This is in relation to the RedFire report having noted that the annual cost to run a venture capital fund is typically equivalent to 2 per cent of committed capital. So, for the maths and science students out there, on a $50 million fund, this implies an annual cost of about $1 million, so we are falling short already at the first hurdle in terms of our new venture capital fund.

I look forward to the opportunity to explore these figures in budget estimates along with questions I have concerning the source of funds, governance, management and the investment process. As I have indicated, I am a strong supporter and advocate for investment and innovation in South Australia. I believe government support is critical to fostering an innovation ecosystem, but government support is twofold. It involves both investment and, more importantly, sound management—something that has unfortunately been missing from successive Labor governments.

If you tuned into this debate and only heard the member for Kaurna's contribution, you would have thought that the 2016 state budget was a work of art and South Australia was in some golden era. The member for Kaurna touched on the Labor Party being the party of the working person, the working man in the street. Well, after 16 years of long, tired Labor government, I do not think anyone on that side can say that the Labor Party stands up for the mum-and-dad worker in the street, given where unemployment is at the moment and given what the real figures within this year's state budget are.

The 2016-17 state budget illustrates how poorly South Australia's finances are being managed. Net debt will jump by more than $2 billion to $6.25 billion largely due to the new Royal Adelaide Hospital hitting the books. Non-financial public sector debt is forecast to peak at $14.2 billion in 2017-18. This financial year, South Australian taxpayers will cough up $638 million in interest payments to service non-financial public sector debt. That is over $1.7 million each and every day. That, ladies and gentlemen, is $1.7 million in interest a day. That is an opportunity cost that I have talked about in many of my speeches. That is an opportunity cost that does not allow us to invest in health, education and infrastructure because of course we are servicing our debt.

Let's not forget that the Treasurer's much-vaunted surplus is only made possible by the Motor Accident Commission's sale. Without the $448.5 million in payments from the privatisation of MAC in 2015-16 or the $624 million payment forecast for 2016-17, this surplus, this paper surplus and the one that is forecast for next year, would not be possible. In fact, without funds from the MAC sale, the state budget would show a deficit of almost $0.5 billion.

Indeed, beyond the Treasurer's smoke and mirrors, this state is in structural deficit, and until the government realises this, stops the spin and pretence and actually deals with the real issues and the real structural issues that face South Australia, we are never going to get ahead. This budget surplus is a sham. It has not been achieved by prudent economic management. It is not based on improved efficiencies and saving measures. The state budget is propped up by yet another asset sale.

The sale of MAC in 2015-16 can be added to a long list of asset sales that the Labor government have used to save the budget. We had ForestrySA, which I know has had a huge impact on the member for Mount Gambier's community. We have the lotteries commission. We have the Glenside acreage, the Hampstead hospital, of course the closure and sale of the Repat and, again, in this year's budget, the state government announced that the transactional services administered by the Land Services Group would be commercialised.

Essentially, we are seeing the sale of the LTO in this year's budget. Industry experts expect the government to move towards full privatisation of the agency, and I think we can see this. I know that the PSA are one group who are very concerned about this and are having a rally on Friday in Hindmarsh Square in relation to the sale of the LTO. As we sit in this house, I think we can reflect on our third premier in this state, Sir Robert Torrens, whose portrait hangs in this building. I have no doubt he would be turning in his grave to know that the institution that he founded, being Torrens title, is being stripped the way it is by this state government.

South Australia is of course running out of assets and, soon enough, there will be nothing left to sell. How is the budget bottom line going to look when there are not any more quick fixes available to this government? The government cannot continue to turn a blind eye to the underlying issue. As every household knows, if expenditure exceeds income, then you either need to spend less or earn more.

Adding insult to injury, the Commonwealth Grants Commission reports that South Australia is now the highest-taxing jurisdiction in the nation. So, even though it is hitting the hip pockets of South Australians again and again, the government still needs to sell the state's assets to prop up its income, and let's not forget the contribution that South Australia makes to our economy. Despite the Labor government's repeated claims of reduced federal funding, South Australia will actually receive an extra $528 million in GST funding in 2016-17 compared to the previous year.

What is the Labor government doing with all the extra money that is coming in from Canberra, with all the extra taxes that South Australians are paying and with all the extra income from our asset sales? Why does the government still need to sell assets to prop up income revenue? Is it because of the Gillman sale that wasn't or the payment of taxpayer-funded electricity concessions to almost 4,500 dead people? Maybe it was the $13.6 million spent on public servants at the Investment Attraction agency to distribute $15 million in grants to businesses?

Perhaps it is due to the likely $245 million cost blowout for the EPAS hospital records project, the $46.5 million added to the budget for the Adelaide Convention Centre renovation, the $30 million in rail electrification assets written off after further delays in the Gawler line modernisation project or perhaps the $3 million spent to spruik the government's changes to the health system? There is an extra $3 million we could find that did not need to be spent by this government. Perhaps it was the $236,000 paid by SA police to rent vacant stations at Blakeview, Malvern, Newton, North Adelaide and Tea Tree Gully or the $195,000 spent for an episode of Jay TV. There are a couple of savings that could be found in this year's budget that could have been reinvested in South Australia.

Whilst there is an obvious need to stop this ridiculous waste of taxpayer money, we must also find a sustainable revenue stream, one that is not reliant on asset sales and one that does not impose crushing cost-of-living pressures on households. We need economic activity. The South Australian Centre for Economic Studies forecasts South Australia's gross state product at just 1¼ per cent for 2016-17 and 1½ per cent for 2017-18. The depressed outlook is the result of a crippling unemployment rate, low wages growth, depressed property activity, declining business investment and a contracting mining investment program. South Australia needs a government committed to getting our economy moving. It needs a government that is able to stimulate growth and especially stimulate the jobs growth that our state desperately needs.

Last year, the Treasurer announced his budget was a jobs budget, yet it delivered only half of the 1 per cent growth promised, that is just 0.5 per cent growth. Twelve months later, we have been told we have another jobs budget on our hands, yet it does not look to be faring any better. The Treasury Department's own forecasts predict only a 0.75 per cent growth in employment in 2016-17 and 1 per cent for each of the following three years. The Deloitte Access Economics Business Outlook report released last week forecast even lower employment growth than that of the Treasurer, with just 0.6 per cent growth expected in 2016-17 and 0.8 per cent in 2019-20.

As the leader touched on in his remarks, as have many other speakers, the government, given the facts that we know about percentage growth, has committed $109 million over two years on a job creation grant scheme. That is $109 million over two years of an $18 billion budget to job creation which we all recognise, and even the member for Kaurna recognises, is the single biggest issue facing our state. We have this $109 million job creation grant scheme for the next two years from this government. We have a host of other big ticket expenditures to stimulate our economy and, after all of this, we can only find a 0.6 per cent employment growth as our forecast for South Australia. Dare I say, thank goodness this is a jobs budget because who knows what we would be looking at it if it was not.

At a time of unemployment being the highest in the nation (currently at 6.9 per cent) and youth unemployment at 13.5 per cent across the state and, of course, much higher in certain regions, underemployment is growing and participation rates are declining. The jobs budget is forecast to only make modest inroads into employment growth. The job creation incentive program is not the great white hope that the Treasurer purports. I have previously mentioned that we should look at other transitioning economies to see what has worked, and learn from their experiences. Equally, we should look at and learn about what has not worked, and the effectiveness of wage subsidies is, at best, questionable.

There is little evidence that this type of grant actually entices hiring and encourages job creation. A review of the research available on this, and other similar policy instruments, show no definitive answer as to its effectiveness. The Alberta government recently abandoned their 2015 budget commitment to the job creation incentive program due to mild business interest, despite a two-year $178 million appropriation.

Closer to home, the commonwealth's Restart incentive to encourage employers to hire mature age students could, potentially, have limited success. Going back federally, only 230 employers took advantage of a $1,000 annual subsidy under the two-year life of the Gillard-Rudd government's Jobs Bonus scheme. That program was meant to benefit up to 10,000 employers. Furthermore, the 2014 report of the National Commission of Audit, entitled Towards Responsible Government, found:

The effectiveness of wage subsidies is open to question, given that they may displace other job seekers or simply result in employment ceasing once the subsidy is finished.

Of course, there are then the administration costs of such a program. How much will it cost the state government to spend $10,000? The administration costs of establishing the program—advertising it, processing applications, managing case files, making payments, ensuring compliance—all have a cost. How many public servants will be required to shuffle paper just to create a 1 per cent lift in the private job sector under the Treasurer's job creation incentive program?

At a time when small businesses are asking government to reduce red tape, the effect of this program, in my mind, is just the opposite. It is more paperwork and more hassles: first, you have to understand the program and check you meet the criteria. Then you have to complete a bunch of paperwork and hope that your business can sustain the position for the full two years and that your new staff member sticks around. Then you have to chase the government for the first half of your entitled payment 12 months later, and then the other half a further 12 months after that. This is more paperwork, and more work for business owners.

Businesses, especially small businesses—the mum-and-dad businesses that our state is built upon—want government to simplify things for them, not add layers of complication. The state budget fails to address the real burden of employing staff. Ask any business and they will tell you that taking on new staff is not a snap decision. Additional staff are employed when there is a genuine need, not when the government hands out the money to do so. Those businesses that do take advantage of the incentive would, more than likely, have made the decision to hire someone, irrespective of the grant. It is why wage subsidy programs have been so ineffective elsewhere.

Taxpayer dollars are precious. For every dollar of the $109 million committed to the job creation incentive program, there is an opportunity cost. That is the cost of that dollar not being spent on far more productive programs that would actually help create jobs and deliver better outcomes than the 0.6 per cent employment growth predicted—perhaps a scheme where the wages of workers hired are excluded from the calculation of workers compensation premiums, where vouchers are available to assist apprentices purchase new tools and equipment and payroll exemptions apply for trainees and apprentices, or we could look at tax rebates that are provided for taking on a new trainee or apprentice.

Efforts to reverse the disturbing decline in the number of apprentices and trainees would be far more beneficial to the state's economy. This government has stumbled from one embarrassment to another in the vocational education portfolio, and it simply cannot hide from the figures recently released by the National Centre for Vocational Education Research which confirm a massive drop in the number of apprentices, falling from 28,600 in 2011-12 to just 10,200 in 2015. Traineeship commencement has plummeted as well, from 23,000 in 2011-12 to only 6,100 in 2015. That is a 75 per cent decrease.

How can we expect to sustain our future economic growth and expect businesses to take on new staff with such a significant and growing gap in skills amongst both young people hoping to start their working lives and older workers in need of retraining? Wage subsidies is not the answer— removing red tape is. Stimulating business confidence in the economy with good policy will create jobs in their own right—good policy that includes investment in skills programs and training.