Graeme Goodings:
Well, Victoria may have Australia’s highest debt for every resident, but South Australia is set to have the nation’s highest interest bill. The shock prediction comes from the right-wing think tank, the Institute of Public Affairs. And before we speak to the institute’s Adam Creighton, this is what the premier had to say on Breakfast this morning with Will and Stacey.
Will Goodings:
Is there a debt time bomb that’s coming for South Australia?
Peter Malinauskas:
No, not if we keep the budget in the position that it’s currently in. So let me just flesh that out for you for the benefit of you and your listeners. As you know, Will, we have delivered a budget surplus in not every single year during the life of this government. And not just forecast budget surpluses, actually delivered them. That is the reason why we are able to do the tunnels and do the hospitals because we have got the budget into it, not just balance, but into surplus. And so when we go to the market to get those bonds, that is to say raise the debt to be able to fund those investments, the bond markets have supported it, and that’s underpinned by the independent credit rating agencies who have actually got South Australia with the second best credit rating in the country…
Will Goodings:
But we’ve added debt with those big projects. So this would have to be the end of those big build projects for some time in South Australia.
Peter Malinauskas:
That’s right. That’s right. That’s right. We are doing the schools, not the schools, sorry, we’re doing the tunnels and the Women’s and Kids Hospital as promised. There’s a few other bits of infrastructure we’re investing, but they’re the two big projects.
Graeme Goodings:
The premier on Breakfast this morning. Joining us now is Adam Creighton from the IPA.
Adam, how would you respond to what the premier had to say regarding your claims?
Adam Creighton:
Well, certainly it’s right that they’re running surpluses in a very strict technical sense, but it’s quite sneaky that state premiers are able to get away with this because they’re not surpluses at all in the sense of how you talk about federal government budget. They would be huge deficits. So it’s differences in accounting between federal level and state level, which enables him to say that. The reality is that net debt in South Australia has gone up from $11 billion in 2020, and it’s headed for 41 billion in 2030. So that’s basically quadrupling almost in that 10-year period. And by 2030, according to my calculations, the interest bill on all of the debt is so great that it’s going to be equivalent to a third of the state’s own tax revenue, which is the highest of any state.
Graeme Goodings:
Is that a debt burden you think the state can’t handle?
Adam Creighton:
Well, look, you can handle it. It’s just a lot of money going to interest. States and countries can handle all sorts of debt levels. It’s just a question of how much of your tax revenue do you want to be going to interest costs? And in South Australia’s case, that’s a third by comparison… Well, sorry, it’s a third by 2030. By comparison, Victoria, which quite rightly in many cases gets all the criticism. By 2030, only 24% of its tax revenue will be going to interest, so a bit less.
The other area where South Australia stands out is net debt per capita by 2030, and it will be $20,500, the second highest after Victoria, which is $26,000. So this is very topical too. We’ve got the GST distribution discussion. Of course, Western Australia only has nine and a half thousand dollars debt per capita pencilled in for 2030, and that’s actually a decline from 2020. It’s the only state where there’s a decline. So that’s probably got something to do with their GST.
Graeme Goodings:
Would you agree with the state’s pursuit or the other states other than Western Australia of getting the GST returned to where it was back in 2018?
Adam Creighton:
Look, I think the deal that was done in 2018 was done for political reasons to hold on to various seats in Western Australia. And I think that that worked for Scott Morrison. I think back in 2019, he won that election. But I think the thought and reasoning that going to the productivity commission report is correct. I think the reason why there’s basically no debt in Western Australia, well, indeed forming debt and there’s constant budget surpluses is probably because the GST share’s a bit higher than it should be. But people could debate the correct allocation.
I mean, we’ve always supported at the IPA just a simple per capita allocation where it’s just based on population because that’s the most transparent and it’s the most simple. Everyone knows what they’re going to get. Whereas the situation at the moment is very convoluted and very complicated. I mean, it’s always been like that, but it’s not necessarily the best system. But certainly, I do have some sympathy for the Eastern states that they’re getting a bit of a raw deal.
Graeme Goodings:
It seems like the Prime Minister has dug his heels in saying there’ll be no change.
Adam Creighton:
Yeah, look, it surprises me that… I mean, I’m not a political expert. I’m an economist, but I would’ve though that there’d be more seats in the Eastern states than in Western Australia to be concerned about, especially given the huge population growth in New South Wales and Victoria. But it doesn’t seem to be the case. He seems to be more concerned with a handful of seats in Western Australia, to hold onto those. But I think in the long run, it’s definitely going to change because in 2029, that no worse off provision that was promised in 2019, that ends. And when that ends, there’s going to be a massive decline in GST distribution to New South Wales and Victoria. And when I say massive, I mean tens of billions of dollars a year. And obviously that is not sustainable. So there will certainly be a redrafting of the rules in 2029, ’30. There’s no choice about that. There’s no doubt about that.
Graeme Goodings:
If we can just get back to the South Australian economy, I mean, on the national scale, we’re doing pretty well. I think it’s pretty robust. The economy is going along quite well. That would seem to be justifying the fact that we’ve got infrastructure spends and there are big ticket items as you are aware of the North-South corridor and the Women’s and Children’s Hospital. So states do need to go into debt to be able to produce these major infrastructure levels, don’t they?
Adam Creighton:
Yeah, certainly that is true. I mean, state governments do have the responsibility for most infrastructure, I would say, certainly most basic infrastructure in the country. And as long as those infrastructure projects are not excessive and they’re well-considered… And I live in Melbourne and I’m from Sydney, so I’m not familiar with the project in Adelaide, but certainly having lived in Melbourne for one and a half years, one does become a little bit sceptical of the sense of many state government projects, but certainly the government in South Australia may be a lot more sensible than the one in Victoria. I mean, I’m sure you’ve heard of the suburban rail loop here, which is just magnitudes too expensive and will probably be cancelled. But it may well be that the hospital and the tunnel that the premier was talking about before are quite sensible and appropriate. But it’s probably the case that after those are completed, there’ll have to be a pause for quite some time to ensure that these debt levels don’t get too high.
Graeme Goodings:
I think the most concern that taxpayers have is all this is based on the current economy and things going along pretty positively. But if there’s some sort of downturn and we’ve still got to pay the debt, then things could get very tough.
Adam Creighton:
Yeah, that is true. My analysis of the future interest payments after 2030 was based on interest rates being where they are now. And I think South Australia can borrow at about 5.5% per year now for 10 years, which of course is much, much higher than it could borrow back during COVID when the interest rates were as low as 1.5%. But it’s quite possible that interest rates will be even higher than 5.5% because it seems around the world, just this week, we’re having a lot of increase in government bond yields in the US, in France, in Japan, all over the place. As I think lenders are getting concerned about inflation and they’re getting concerned about government’s ability to repay, not necessarily Australian governments, but of course Australia gets caught up in all that perception globally. So there is a risk that interest rates will be even higher.
I mean, certainly if you go back to 1980s, they were much, much higher. I’m not saying that we’re going to be anywhere near there, but five and a half may well end up being at the lower end of what we might expect.
Graeme Goodings:
Adam, thanks so much for your time today.
This transcript with Adam Creighton talking on Mornings with Graeme Goodings – fiveAA from 25 August 2026 has been edited for clarity.
