Tasmania budget: Debt doubled, deficit delayed to fund promises

Tasmanian budget delays return to surplus to deliver election promises and tackle a failing health system.

Tasmanian Premier Peter Gutwein. Picture: Richard Jupe

Tasmania’s Liberal government will double government debt and delay a return to surplus to deliver election promises, invest in infrastructure and tackle a failing health system.

The state’s success in avoiding Covid-19 lockdowns, as well as a record government stimulus program, will see growth double to 4 per cent in 2021-22.

The surge will be short, with growth forecast to drop to a more normal 2 per cent in 2022-23 as the pump-priming eases. Optimistic economic and jobs growth are dependent on the state remaining Delta-free and mainland tourists returning in summer.

The state budget delivered on Thursday is in deficit by $411m in 2020-21, far less than the $1.11bn red mark originally forecast. This is in large part thanks to stronger than expected growth bolstering state tax and GST revenues.

Premier and Treasurer Peter Gutwein will allow net debt to double from $1.7bn to $3.47bn over four years to fund infrastructure and meet or exceed election promises, particularly in health.

The Premier, re-elected in May, justified the debt and prolonged deficits as necessary to deal with Covid-19 impacts and to seize an opportunity to invest in future-proofing infrastructure.

“While it is a time of uncertainty for Tasmania, it is also a time of opportunity,” he said.

“Our economy is strong, we live in one of the safest and most beautiful places in the world, our businesses and our people are confident.

“The state will achieve great things if we all work together to secure Tasmania’s future. The time is now. The moment is here.”

Mr Gutwein’s $7.94bn budget contained few surprises, committing $1.6bn to state election commitments and $4.6bn to infra­structure spending on roads, hospitals, irrigation and ports.

Spending on health will increase by $900m over four years, including $198m to help the state’s major hospitals deal with increased demand, $120m for elective surgery and – as the state introduces voluntary euthanasia – $52m to improve palliative and community healthcare.

The budget net operating deficit will grow to almost $690m in 2021-22, before a surplus of $39m in 2023-24.

 

Labour and equipment short­ages amid booming housing construction have slowed the gov­ern­ment’s infra­structure splurge, under­spent by $430m in 2020-21.

Mr Gutwein said the infrastructure program would help create more than 28,000 jobs over four years. The budget records an unemployment rate of 6.4 per cent in 2020-21, falling to 5.5 per cent in 2021-22.

The Premier told The Australian the debt levels were respon­sible and better than expected.

“Our debt position has ­improved dramatically since last year’s budget – we were forecasting in last year’s budget $1.5bn more in debt over the forward estimates,” he said. “What we are doing is paying down the state’s debt because that was an investment we made into Tasmania’s future when we needed to.”

He said he was confident in the federally agreed road map to ease Covid-19 restrictions as vaccination rates exceeded 70 per cent but the budget includes a $300m “Treasurer’s Reserve” to allow further cash splurges should they be necessary in an outbreak or deteriorating economic conditions.

 Labor Treasury spokesman Shane Broad said the budget would “plunge Tasmania into further record debt” and “mortgage the state’s future”.

“Tasmania’s debt will spiral to nearly $3.5bn by 2025 and it’s taxpayers who will foot that bill,” Dr Broad said. “Ignoring the problem is not a budget strategy.”

Greens leader Cassy O’Connor said it was “a Band-Aid budget” that played “catch up on key social infrastructure”.

Peak welfare body TasCOSS said the budget included “significant” measures that “will benefit Tasmanians experiencing disadvantage”. The Australian Medical Association welcomed increased health funding but criticised a lack of extra pay for doctors.