Budget 2025: Promises at the polls leave Tasmanian finances in a hole

Tasmanian Treasurer Eric Abetz delivers his first state budget on Thursday. Picture: Nikki Davis-Jones

So why exactly is Tasmania doubling its already considerable debt?

Eric Abetz – Tasmania’s third Liberal treasurer in 13 months – used his first budget speech to blame everyone else for the tsunami of red ink.

Culprit No.1? Yes, you guessed it: Covid. The virus is still being blamed for wrecking state finances.

Doubtless Rona’s lockdowns and rescue packages took their toll, driving net debt to $1.5bn by June 30, 2022. But $1.5bn is a long way from $10.4bn – the level of debt the island state will be sinking in by 2028-29.

Economist Saul Eslake estimates $1.5bn to $2bn of debt can be attributed to Covid impacts and responses. So let’s stop blaming the pandemic for more than – at most – 20 per cent of the problem.

Abetz also blamed: compensation for child abuse victims; a federal election; two early state elections; “global uncertainties”; “volatile interest rates”; and “federal government neglect, together with cost-of-living pressures”.

As well, there were “rising service delivery costs”, a “tight labour market”, “higher wages”, “supply chain constraints”, and “the ongoing cost of meeting community expectations for essential services”.

Some of these are, of course, valid, but don’t of themselves explain the repeated recourse to debt, rather than tighter budget management or fiscal reform.

It’s difficult to see how a federal election has impacted state coffers. In terms of “meeting community expectations for essential services”, the credit card splurge has not achieve this aim.

Public services are worse than ever, with soaring waiting lists for public housing, hospitals at breaking point (parts of the Launceston General don’t even have aircon, with patients given icy poles to cool down in summer), while educational attainment levels are poor and the bus network is struggling.

It was in the mention of state elections that Abetz came closest to the truth. And it doesn’t relate to the $5m or so the Tasmanian Electoral Commission requires to make democracy happen.

Pushed to explain, the newly minted Treasurer said: “State elections, as of necessity, do require from both sides, in fact all sides, of politics, new expenditure measures.”

“The real world in which we live”, he argued, required parties to promise new spending at each election. “Think of the consequences,” he said, had the Liberals gone to the last election – held 16 months after the last, essentially to save Premier Jeremy Rockliff’s career – without making new spending commitments.

Well, Treasurer, one consequence would have been to break the cycle of unsustainable Liberal election promises that lie at the core of Tasmania’s debt problem.

Eslake has calculated that three-quarters of the increase in net debt since 2017-18, compared to what had been forecast, related to Liberal spending promises at the 2018, 2021 and 2024 state elections. In other words, Liberal pork barrelling is the main reason Tasmania faces crippling debt. Not Covid, not federal elections, not child abuse compensation, etc.

Abetz’s budget promises a surplus and “peak debt” – “the point at which annual borrowings stop increasing” – in 2028-29. In the unlikely event these targets are achieved, Tasmanians can – on the evidence and now the Treasurer’s own words – expect a return to profligacy at the next election. And on it goes.