As a South Australian resident, I’ve been working through the latest state budget, and what stands out isn’t any single line item,  it’s the cluster of optimistic assumptions underpinning the entire forward estimates. In a period of strong population growth and solid economic activity, the state is forecasting a $189m surplus next year and accelerating surpluses beyond that. On paper, it looks fine. In practice, the assumptions feel unusually fragile.

Below is a breakdown of the key assumptions and why I think the risk is skewed to the downside.

Revenue assumptions

The budget leans heavily on several favourable macro settings:

• Population growth driving higher state and federal tax receipts
• Strong labour markets despite unemployment already near historic lows
• Single‑digit house price growth and robust transaction volumes
• Continued commodity prices supporting current royalty income rates
• Inflation returning to target despite geopolitical risks
• Public sector “efficiency” via replacing only 1 in 2 vacancies

Individually, these assumptions are defensible; collectively, they require the favourable run of conditions to continue.

A few pressure points on those assumptions include:

• Middle East instability (e.g. Strait of Hormuz) could easily push energy and freight costs higher, delaying the return to target inflation and undermining revenue assumptions tied to nominal growth.
• Migration forecasts (225–250k nationally) are politically exposed. Housing affordability and cost‑of‑living pressures make it likely that migration settings tighten, not loosen.
• Public sector vacancy “savings” rarely materialise. With the Treasurer’s intention to fill some of these vacancies with contractors, it’s likely that these assumed savings could turn into an increased cost pressure.

The budget reads as though the downside scenarios have been acknowledged but not priced. The counterargument is that state governments should borrow during periods of population growth to build the infrastructure needed for future demand. If the investments improve productivity and population growth remains strong, today's debt may prove entirely manageable.

My concern is simply that the forecasts leave little room for disappointment if growth, migration or revenue assumptions fall short.

Budget Indicators and Key Announcements

The state is planning a 40% increase in non‑financial public sector spending over four years and doubling debt to $40bn by 2029–30. Borrowing for long‑lived infrastructure is defensible, when the spending lifts the future productive capacity.

Several decisions however don’t meet that test:

• $319m to support the Whyalla steelworks sale – in effect this is largely socialising private risk without a clear productivity dividend or return.
• Removing public school fees and camp fees — welcome for families, but a recurring $40m+ annual cost that doesn’t expand capacity or improve outcomes. I would instead preferred to see the same expense directed toward infrastructure upgrades that are flagged in the 30 year infrastructure plan (schools and hospitals for growth areas)
• Downsizer stamp duty concessions up to $2m — intended to free up supply, but in practice often facilitate lateral moves or upgrades which may not result in net new housing stock.
• Large‑scale infrastructure (tunnel + hospital) — essential infrastructure for future potential,  but they add significant balance-sheet pressure at a time when fiscal flexibility is already narrowing.

The common thread is that much of the spending delivers immediate benefits, while the long-term productivity payoff is unclear.

Perhaps I'm more sensitive to this than most. As a parent of a young child, I find myself thinking less about next year's surplus and more about the resilience of the state's balance sheet over the next decade. Debt isn't inherently bad, but optimistic assumptions and shrinking fiscal buffers can become the future generation’s problem surprisingly quickly.

The Debt Trajectory Leaves No Buffer

By 2028-29, general government net debt is forecast to exceed annual revenue. That doesn't imply insolvency, however the current strategy assumes that future economic growth, revenue growth and productivity improvements will be sufficient to support a much larger debt burden.

That’s the part that worries me. If those assumptions prove correct, the debt may remain manageable. If they don't, future governments will face higher interest costs and fewer policy options available.

SA doesn’t have the revenue‑raising flexibility of the Commonwealth, nor the commodity base of WA. Once the debt is locked in, the state has limited levers:

• Sell remaining income‑generating assets (few left)
• Adjust royalty regimes
• Introduce user‑pays models (tolls, levies)
• Cut services
• Raise taxes

None of these are politically easy to implement, and would dampen future economic growth. Higher debt also increases exposure to refinancing risk, with interest costs already one of the fastest‑growing expenditure lines across most states.

Looking at other states, they don’t seem to be in great shape from an NFPS basis either:

• VIC: ~185%
• QLD: ~135%
• NSW: ~130%
• WA: ~55%

Timing and Fragility Concerns

My concern isn’t that SA is investing and spending this year, it’s that we are spending aggressively at a time when the balance sheet is already stretched and the revenue assumptions are unusually optimistic. If even one assumption breaks, migration, inflation, labour markets, house prices, royalties, the state risks sliding into a structural deficit without the capacity to absorb it.

We should be using the current period of prosperity to rebuild buffers, not run them down.

Where This Leaves Us

States don’t have monetary tools. They rely on productivity and population growth to fund services. South Australia has already sold many of its traditional revenue assets (lotteries, land titles, office space), leaving fewer options to stabilise the balance sheet in a downturn.

Unless we see a meaningful productivity uplift, potentially via technology or AI adoption in the public sector,  the current trajectory looks difficult to sustain.

This isn’t a prediction of crisis, as the budget isn’t reckless, it’s more about the acknowledgment of the fragile the numbers are, and how quickly the margin for error is shrinking.