Rising tax takes will boost the state's bottom line even as debt continues to grow, the government's mid-year budget review revealed on Thursday.
The state's strong financial position was vital for the government's ability to invest in crucial infrastructure and skills, Treasurer Stephen Mullighan said.
"It's important that if we're going to borrow more money on the state's balance sheet, we do that to invest in productive infrastructure which will deliver benefits to the community in the decades to come, rather than borrowing more money to offset those continuing operating deficits as we've seen in the previous three financial years," he told reporters.
Stephen Mullighan says SA will increase its surplus to $616 million by 2027. (Matt Turner/AAP PHOTOS)
After bouncing back from three consecutive deficits with a slim $41 million surplus last financial year, South Australia is predicted to widen its surplus to $616 million by 2027.
However, net operating balances over the forward estimates were revised down $409 million compared to the June budget forecast.
The change was largely driven by increased infrastructure expenditure, while stamp duty and payroll tax revenue forecasts were revised upwards, as the jobs and housing markets continue to outperform expectations.
The Commonwealth revised SA's GST revenue forecast down for the next two years in its mid-year budget update on December 13.
Mr Mullighan said he expects SA's share of GST to decrease slightly when the Commonwealth Grant Commission completes its review into how the tax pool is divvied up between the states.
Cut from the state's expenses was a $3000 rebate for new electric vehicle purchases, which Mr Mullighan said was unnecessary after the federal government introduced incentives worth $12,000 and follows NSW and Victoria axing similar payments.
The Malinauskas government had already abolished a tax on electric vehicles which would have slugged a typical driver an extra $375 per year, he added.
Extra funding was included in the budget update to support 150,000 training places as part of the National Skills Agreement, as well as $465 million for the merger of the University of Adelaide and the University of South Australia and more money for road and hospital improvements.
The mid-year review delivered an improvement to government debt forecasts and its projected debt to revenue ratio - a key metric used to assess the state's capacity to service and take on more debt by ratings agencies.
Net debt is predicted to grow from $17.7 billion to $28.1 billion by 2027, half a billion dollars less than predicted in June.
Interest payments on government debt dropped marginally from the June budget to $1.24 billion but are expected to creep up to $1.83 billion in 2027, when they will account for 6.2 per cent of all government expenditure.
Inflation for this financial year was revised upwards by one percentage point, with the Adelaide consumer price index now forecast to grow by 4.75 per cent.
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