State finances – insights on the 2026-27 Budget

Audit snapshot 

Key insights

The 2026-27 Budget forecasts rising net debt and ongoing net operating surpluses. There is a range of significant longer-term financial risks that may affect the State’s financial position as debt, interest costs and infrastructure investment continue to increase as well as capital revenues that make the underlying operating balance challenge less apparent. 

Our key insights are:

• NFPS net debt is forecast to increase by $19 billion to $53.7 billion by 2030. The Budget indicates that net debt-to-revenue ratio will stabilise once the T2D project and new Women’s and Children’s hospital are complete
• despite the completion of major projects such as the T2D project and new Women’s and Children’s hospital, an ongoing pipeline of infrastructure investment and significant maintenance backlogs will continue to place pressure on the State’s finances beyond the forward estimates
• operating surpluses rely heavily on Commonwealth capital grant revenue associated with major infrastructure projects. Without capital grants, forecast operating balances would be in deficit throughout the forward estimates 
• annual NFPS interest expenses are forecast to almost double to $3.5 billion by 2029-30, reducing financial flexibility and increasing the share of revenue required to service debt – revenue that would otherwise be available to fund service delivery or reduce debt
• uncertainty around the extension of the GST no-worse-off guarantee may also adversely impact the operating position
• future budget outcomes remain exposed to risks including health expenditure growth, child protection costs and wage negotiations. 

We reviewed the 2026-27 State Budget to identify key trends and risks affecting South Australia’s public finances. We did not audit the accuracy of Budget forecasts or assumptions. 
 

Why this matters

Projected rising net debt and related increases in debt servicing costs, and continuing operating expenditure pressures in health and child protection, present significant challenges to the State’s fiscal position.
 

Key facts