There is no shortage of global issues to ponder for 2026, but less than eight weeks out from the March election, I have zeroed in on a local matter that has been relatively absent from the campaign to date.
SA net debt is projected to increase from around $31 billion in 2024 – 25 to roughly $48 – 49 billion by 2028 – 29. As a proportion of GSP, that’s approximately 13% or as some like to put it, $30,000 for every person living in our state.
While that doesn’t put us in the rarified air of Victoria where debt sits at 22%, it does place us about mid-range, higher than NSW but under Queensland. That news should be taken in context that pre pandemic, most states debt levels were between 0 – 5% of GSP, with SA at the upper end of that scale.
Our debt has more than doubled post-pandemic and continues to rise. As my banker used to say, debt is not always a bad thing — the phrase “lazy balance sheet” springs to mind — but in a small transitioning economy like ours, everything needs to go to plan to avert disaster.
Victoria is a case of what happens when the plan falters and debt spirals.
Business there is being asked to service and repay that debt through increases in fees, levies, licences and taxes. None of these would be welcomed by an SA small business community still battling a cost of doing business crisis.
As our leaders head out on the hustings, they would be wise to consider S & P Global Ratings’ commentary after the last State Budget that big new spending ahead of the election could trigger a credit rating downgrade from AA+ (stable).
If inflationary pressures push interest rates higher, there is a risk that servicing a growing debt may be at odds with the ongoing investment in infrastructure, skills and training, energy stability and digital capability that is critical for businesses tasked with building our economy and boosting productivity.
We cannot afford to delay or pull these projects.
It could also take the shine off our burgeoning reputation as a great state to do business, which is starting to translate into private investment, a key marker that will confirm our economy has sustainable prosperity.
Such is global uncertainty around trade, climate and conflict, having a budget buffer sounds like prudent financial management right now. Post-pandemic spending was essential for industry recovery, but today debt is at a level where the next major economic challenge may not be met with stimulus, but cutbacks.
Spruiking fiscal discipline is not a vote catcher, but sustainable public finances are essential for business confidence, investment and long-term competitiveness. Business operators will need to make a choice as to who they believe can get the balance right and manage conflicting priorities that present themselves over the next four years.
Our leaders will have the perfect opportunity to convince us our debt is strategic rather than structural when the South Australian Business Chamber presents the Leaders’ Debate in partnership with SA Press Club on March 13.
