The Malinauskas Government handed down the first budget of its second term today, following through with its big spending election commitments and cost of living relief.
The Government is presenting the budget as one of “no surprises and no new taxes” and by the numbers released today, that framing holds.
The operating surplus trajectory is positive, and the revenue uplift from GST, conveyance duties and payroll tax has improved the near-term position. However, the net debt trajectory is steep and sustained – rising above $53 billion by 2029-30. This will be sure to attract ongoing scrutiny.
The two major infrastructure projects, the Torrens to Darlington motorway and the new Women’s and Children’s Hospital, are the Government’s stated explanation for the debt trajectory. The question for the years ahead will be whether the revenue conditions that have helped keep the operating position in surplus continue to hold, and whether the completion of those projects does indeed allow the debt ratio to turn around as forecast.
The headline number the Government is leading with is a cumulative operating surplus of $1.4 billion across the four-year forward estimates. Year by year, the net operating balance is projected as follows:
These are operating surpluses. Net debt, however, is a different story – and one that deserves closer attention.
Non-financial public sector (NFPS) net debt is forecast to increase substantially over the forward estimates.
The fact that net debt continues to climb steeply despite this revenue uplift is worth watching – it suggests the capital program is absorbing much of the windfall, and any softening of those revenue conditions could narrow the fiscal headroom quickly.
During the March 2026 election campaign, Premier Malinauskas pledged that his government would “not be increasing taxes and won’t be introducing new ones.” The budget makes a point of honouring that commitment with the Government explicitly ruling out the payroll tax increases on big business that were recommended by the SA Productivity Commission to fund the new Research and Development Productivity Fund. Instead, the Government says it will fund the $50 million R&D initiative through its existing budget envelope and will consult with business on the fund’s design.
The budget continues investment in two generational infrastructure projects that are the main drivers of the state’s growing debt. The budget documents reference ongoing delivery of both the Torrens to Darlington motorway and the new Women’s and Children’s Hospital (WCH), but specific updated cost figures for each project beyond their initial estimates are not detailed in the budget or Government media releases. The Government’s line is that the debt incurred is productive infrastructure investment that will yield long-term economic returns, and that debt as a percentage of revenue will begin falling once both are completed.
Separately, the budget allocates $3 million over two years to undertake a business case for the transformation of the current WCH site in North Adelaide into a dedicated health and aged care precinct which is expected to house a mix of public and private services, as well as around 600 aged care beds once the new WCH opens.
The Government has framed this budget explicitly as a delivery vehicle for the commitments taken to the March 2026 election. Below are the key commitment areas.
Housing is the single largest spending commitment in the budget at $2.5 billion. The package includes:
The Government notes it has committed more than $12 billion in additional health funding since its 2022 election, and has added 678 new beds along with significant staffing increases. The 2026-27 budget allocates $1.7 billion over the forward estimates for health service delivery. Selected new investments include:
The budget continues the Government’s “generational investment” in Whyalla and the Upper Spencer Gulf, with funding directed at supporting the sale of the steelworks and preserving sovereign national steelmaking capacity in South Australia. Specific new expenditure figures for the Whyalla steelworks are not broken out in detail, though the Government references the Whyalla administration response as one of the unforeseen events its fiscal discipline has enabled it to absorb.
The budget formalises the South Australian Strategic Gas Reserve, a domestic gas supply agreement with Santos to supply 20 petajoules of gas per year for 10 years from 2030, aimed at underpinning the transformation of the Whyalla Steelworks and providing price certainty for South Australian industry.
The budget allocates $650 million across innovation and productivity measures, with the headline initiative being the $50 million Research and Development Productivity Fund. Key points:
For South Australian households and businesses, the budget offers meaningful cost of living measures, particularly on school fees, housing, transport and health. The challenge is that financial pressures are being felt deeply by the community, and the gap between policy announcements and felt lived experience could mean the difference between the continuing resurgence of an emboldened One Nation and four more years of unprecedented Labor political dominance.
The May SEC Newgate Mood of the Nation report paints a picture of a community that is broadly under financial strain and cautious about the future, but where the SA Government is faring reasonably well relative to its interstate counterparts.
The SA Government’s approval rating stands at 47% ‘good or better’ – steady since April and above 28% for the Federal Government. SA is performing markedly better than Victoria (19%) and on par with Queensland (47%) and WA (47%).
But will these high approval ratings be retained following the budget?
Reach out to our Adelaide team if you would like to discuss the new South Australian Budget and what it means for you.
Sandy Biar, Associate Partner, SEC Newgate Communications – [email protected]
SEC Newgate’s integrated approach draws on our national team’s experience and networks to deliver a full service offering.
