South Australia set to have nation’s highest interest bill, new analysis shows

Victoria has Australia’s highest debt level but another State delivering Budget surpluses is set to have the nation’s highest interest bill by 2030, a new analysis shows.

South Australia, led by popular Labor Premier Peter Malinauskas, is set to have annual interest costs making up 33.4 per cent of its tax revenue by the 2029-30 financial year as it borrows big to host the MotoGP from next year.

This is significantly higher than Victoria’s 23.6 per cent, Queensland’s 21.4 per cent, NSW’s 18.2 per cent and the Commonwealth’s 6.6 per cent as higher interest rates push up government bond yields, or the annual interest payment given to those lending them money.

By 2030, $226.5 billion worth of COVID debt matures in those states, collectively forecast to cost $33.5 billion in gross interest costs.

Adam Creighton, the chief economist at the conservative Institute of Public Affairs think tank who analysed Budget papers, said SA was set to have Australia’s highest interest bill within four years, despite State Treasurer Tom Koutsantonis in June announcing a $223m surplus for this financial year or close to $1.4b over five financial years.

“South Australia is on track to have the most precarious interest burden of any state by 2030, when interest payments will consume 33.4 per cent — one dollar in every three — of its own taxation revenue,” Mr Creighton said.

“South Australia’s interest bill is already forecast to approach $3 billion by 2030 - around twice what it is budgeted to spend on its entire police force - and that is before most of the cheap COVID debt is refinanced at substantially higher rates.”

Victoria, by virtue of Melbourne’s world-record COVID lockdowns and the ultra-expensive 90-kilometre Suburban Rail Loop, was projected to have Australia’s highest net debt per capita of $26,160 by 2030- four times the $6619 level of 2020 when the pandemic started, by which time it would owe $199b.

But other states also have high debt levels for every resident with South Australia in second place at $20,544 - more than three times the $5,956 level of 2020.

“Victoria has been a fiscal shocker, but it increasingly has company,” Mr Creighton said.

“South Australia is poised to overtake it on some measures of fiscal vulnerability, while Queensland’s extraordinary borrowing binge means it is catching up rapidly.”

Queensland was in third place with per capita debt of $16,294 - six times the $2175 level of a decade earlier in a State with 50-cent fares across bus, trains, ferries and light rail.

NSW was in fourth place with projected per capita debt of $16,088 - up from $2359 in 2020, followed by Tasmania on $15,948 as it embarks on building a new stadium in Hobart, having had little debt before COVID.

Only mining-rich Western Australia has reduced its per capita debt, with $9547 predicted by 2030, down from $11,228, as it fights to keep a per capita 75 cent GST redistribution floor from the Commonwealth.

WA is also the only State to have a AAA credit rating from both Moody’s and S&P, alongside the Federal Government.

SA Labor was resoundingly re-elected in March with Mr Malinauskas announcing during the campaign that the MotoGP would be coming to Adelaide from November 2027.

This would mark the biggest motor sport event to be hosted in SA since Adelaide last hosted the Australian Formula 1 Grand Prix in 1995.

The SA Government has disputed a $100m estimate about the cost of remodelling the Adelaide Street Circuit to host the Australian MotoGP.