GDP GROWTH IN SLOW LANE; SA DEBT LEAPS

SA government books surplus as debt climbs

South Australia is projecting four years of budget surpluses but a sharp rise in public sector debt in its 2025-26 State Budget presented on June 5. Treasurer Stephen Mullighan’s budget papers estimate a $18 million surplus for the current year, down from the 2024-25 Budget projection of $248 million. The slimmer surplus is attributed to increased health spending and the Malinauskas government’s Whyalla steelworks support package. For 2025-26, the budget papers project a surplus of $179 million, and net debt of $35.5 billion, rising to $48.5 billion by 2028-29.

Private spending keeping GDP growth above water

Economic growth in Australia has remained in the slow lane, with the gross domestic product (GDP) rising by just 0.2 per cent, seasonally adjusted, in the March quarter. Latest figures from the Australian Bureau of Statistics show that GDP grew by 1.3 per cent over the 12 months to March, with growth propped up by private investment (0.7 per cent rise) and household spending (up by 0.4 per cent). On a population basis, however, GDP per capita went backwards by 0.2 per cent in the March quarter and by -0.4 per cent over the year. During the March quarter, there was a sharp two per cent fall in public investment (primarily on energy and infrastructure) and a 0.1 per cent fall in the contribution of net trade, with lower demand for Australian exports.

OECD pumps up growth hopes, but warns on spending

Meanwhile, the Organisation for Economic Co-operation and Development (OECD) said that GDP growth in Australia would reach 1.8 per cent in 2025, rising to 2.2 per cent next year. In its latest Economic Outlook, the OECD predicted that Australia’s strong recent immigration-driven growth in employment and the labour force would subside, while inflation would remain close to target, averaging at 2.3 per cent. The OECD said Australia had limited direct exposure to US tariff changes but was at risk from any marked slowdown in China, especially via its effect on commodity prices. In addition, the OECD said the Federal Government should look to save any windfalls relative to current plans. Consolidation was needed over the medium term, given the fiscal pressures on the horizon, including population aging and the costs associated with the transition to net zero.

Australia holds out for EU free trade deal

Australia remains confident that it can strike a free trade agreement with the European Union, according to Trade Minister Don Farrell. Returning from Paris for talks with the EU, Senator Farrell said there was “a lot of goodwill in the air”, and that he believed there was an appetite to reach an agreement on both sides, in the context of “free and fair trade”. The Trade and Tourism Minister also affirmed that Australia would continue to lobby the United States to remove all tariffs on Australian imports, including on steel and aluminium. Senator Farrell said there was no justification for US tariffs on Australian goods, given that Australia imported around A$70 billion of US product while exporting A$30 billion. Meanwhile Prime Minister Anthony Albanese said that Australia would not relax its biosecurity rules to allow the importation of US-sourced beef.

Social benefit payments up by 15.5 per cent

Social benefits paid by the Australian government sector rose 15.5 per cent to more than $167 billion in 2023-24, according to official statistics. Government finance statistics released by the ABS reflected the increase in demand for aged and home care, disability, and health and childcare services. In 2014-15, the expenditure on social benefits was $65.4 billion. Commonwealth expenditure accounted for around 90 per cent of social benefits paid, with the states contributing concessions to electricity, water and transport use, and payments to non-government schools. Updated figures for the 12 months to March 2025 revealed that Commonwealth social benefits increased almost 10 per cent, with aged care benefits rising by 15 per cent over the period. Disability benefits rose by 7.4 per cent, down from the 19.5 per cent growth rate of a year ago, reflecting reforms to the National Disability Insurance Scheme introduced in the 2024-25 Budget.

Defence Industry Minister defends project delivery

Defence Industry Minister Pat Conroy has hit out at criticism that the Federal Government was falling behind in delivery and funding of defence projects. Addressing a defence industry forum, Mr Conroy said the Government had brought forward initial delivery dates for priority projects and shortened their overall time to completion. The first of the new general-purpose frigates, for example, would be delivered by 2029 and in the water by 2030 – four years earlier than originally planned – and with four frigates on track for delivery by 2034. Delivery of new Infantry Fighting Vehicles for the Army had been accelerated, with the first vehicle due by 2027, not 2029, while a number of High Mobility Artillery Rocket systems (HIMARS) launcher vehicles had already been delivered ahead of schedule.