Investor Update – February 2017

Andrew Blaskett – General ManagerAndrew Kennedy – Director, Treasury Services

South Australia – Who we are and what we do

• Population: 5th largest state with 1.707 million people (7.3%)• 4th largest landmass but 6th in population density despite most highly

centralised – “driest state on the driest continent”• Principal industries and exports are mining, wine and agriculture• AA (positive outlook) S&P – September 2016• 1/3rd of world’s uranium deposit, 9% global production• Sporting and cultural centre, food and wine hub

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Key Economic Indicators

¹ Australian forecasts from 2016-17 Commonwealth Government MYEFO ² Employment growth forecasts and projections reflect full year averages

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2016-17 Budget Targets and New Measures

New Measures:

• Tax relief for industry – payroll tax rebate, stamp duty concessions• Jobs Accelerator grants – additional worker hires• Investment in infrastructure – over $1.5b each year creating around 6k jobs p.a.• Developing our Defence Sector• Investing in STEM in our Schools - $500m to develop and upgrade science,

technology, engineering and mathematics facilities• Innovation – Venture Capital Fund, early commercialisation fund, future industries

institute (Uni SA), Gig City project• Supporting Industry and Investment - tourism and major events, ePlanning reforms,

Investment Attraction Agency

Fiscal Targets Reaffirmed:

• Achieve a net operating surplus in the general gove rnment sector every year• Limit operating expenditure to trend growth in hous ehold income• Achieve a level of general government net debt that remains affordable over the

forward estimates – a maximum ratio of net debt to r evenue of 35%

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Budget Outlook*MYBR released in December ’16 – no material change in expectations

1 Commercial completion of New Royal Adelaide Hospital

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2016-17 Environmental Landscape

• Public sector wage growth capped at 4.5% over 3 years• Operating expenses are expected to grow by 1.6% in real terms from

2015-16 to 2019-20• Reviewing options for private sector involvement in Land Titles registration

and HomeStart• Last motor vehicle manufacturer in Australia to close in October 2017• Transition from traditional manufacturing base to advanced manufacturing• Focus on Defence industries• Ship building

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Ensuring a Sustainable Budget

14%

15%

16%

17%

18%

19%

General Government Revenue and Expenditure as a per centage of Gross State Product

Revenue/GSP Expenditure/GSP

• Operating budget expenditure addresses pressing needs, while being maintained at a sustainable level.

• Average real expenditure increase across the forward estimates is 0.9 per cent per annum.

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Building Key Infrastructure

0

500

1000

1500

2000

2500

3000

General Government Infrastructure spend ($m)

Purchases of non-financial assets ($m) Adjusted for estimated timing of nRAH expenditure ($m)

• The forward estimates contain a major infrastructure investment program of $9.8 billion in the general government sector over four years, including the recognition of the $2.8 billion finance lease liability for the new Royal Adelaide Hospital (nRAH).

• The government will maintain an infrastructure program of at least $1.5 billion per annum in the general government sector across the forward estimates

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Future Defence Projects – direct jobsPage 9

Merchandise exports by commodity

0 500 1,000 1,500 2,000 2,500 3,000

Crude Minerals excluding FuelsPrecious Stone

Coal and GasPetroleum and petroleum products

Wool and sheepskinsFish and crustaceans

Road vehicles, parts and accessoriesMachinery

Vegetables and FruitWheat

Metal Ores and Metal ScrapMeat and meat preparations

WineTotal, Metals and Metal Manufactures

Other commodities (including bulk barley)

Year to Nov 2015 Year to Nov 2016

In the year to November 2016 vs the year to November 2015, goods exports in current price terms fell by 9.0%. In volume terms, goods exports were 5.2% higher in the year to the September quarter 2016 vs the year to the September quarter 2015.

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The Housing Market

Houses Other dwellings

Median sale price ($ 000)

Quarterly % change

Annual% change

Median sale price ($ 000)

Quarterly % change

Annual % change

Adelaide 440.0 -2.2 2.3 335.4 -3.6 2.6

Sydney 1076.9 3.1 2.9 697.5 2.3 2.7

Melbourne 740.0 3.2 4.5 545.5 2.1 3.5

Brisbane 494.0 -1.2 2.4 395.0 -1.3 -3.4

Perth 512.0 -3.8 -3.8 425.0 3.7 -1.2

Hobart 385.0 -2.5 7.8 285.0 -0.2 -1.4

Canberra 570.0 -2.6 -0.9 415.0 -2.4 1.2

Darwin 550.0 -4.5 -9.2 460.0 -8.0 -7.0

Capital cities 712.8 1.4 2.2 558.6 1.6 2.0

Capital City Median Property Prices as at Q3 2016

22.8 22.825.2 26.6

29.5 30.9

35.5

WA TAS SA QLD AU VIC NSW

% of family income devoted to meeting average loan repayments

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South Australia’s Housing Finance Commitments by type (trend) November 2016

0

1000

2000

3000

4000

5000

Construction/purchase of new dwellings Purchase of existing dwellings Refinancing of existing dwellings

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The Housing MarketCapital City Median Rental Prices as at Q3 2016

3 BR Houses 2 BR Other dwellings

Median rent ($ pw)

Quarterly % change

Annual % change

Median rent ($ pw)

Quarterly % change

Annual% change

Adelaide 340.0 3.0 0.0 285.0 1.8 -1.7

Sydney 470.0 0.0 2.2 540.0 3.8 3.8

Melbourne 375.0 1.4 4.2 400.0 2.6 2.6

Brisbane 380.0 0.0 1.3 380.0 1.3 1.3

Perth 380.0 -2.6 -9.5 350.0 -2.8 -10.3

Hobart 330.0 -2.9 3.1 280.0 0.0 3.7

Canberra 450.0 0.0 4.7 400.0 0.0 0.0

Darwin 511.5 -0.7 -8.0 386.5 -0.9 -9.7

19.222.4 22.9 23.4 24.0 24.2

28.1

WA SA VIC QLD TAS AU NSW

% of family income devoted to meeting median rents

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SAFA’s Funding TaskPage 14

SAFA’s Select Lines

0

0.5

1

1.5

2

2.5

Current2016/172017/18*

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Select Line Issuance

• SAFA will continue to provide monthly updates to its Dealer Panel and investors, as well as post budget indicative funding programs

• SAFA intends to next access markets in March with a new fixed rate September 2027 bond

• SAFA continues to explore issuing an OIS based FRN

• SAFA targets to build existing and new Select Lines up to $2 billion as soon as feasible

• SAFA will continue to explore a variety of techniques to access markets

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Contact Details

Andrew KennedyDirector, Treasury Services

+618 8226 9840

andrew.kennedy2@sa.gov.au

www.safa.sa.gov.au