Tasmanian budget: Debt balloon soars out of reach
Tasmania’s Liberal government will continue to invest heavily in infrastructure and housing while allowing debt to balloon, with no apparent idea of how or when it will be repaid.
Tasmania’s Liberal government will continue to invest heavily in infrastructure and housing while allowing debt to balloon, with no apparent idea of how or when it will be repaid.
Recently installed Premier Jeremy Rockliff and his new Treasurer, Michael Ferguson, on Thursday unveiled an $8.32bn state budget that commits to a $5.6bn infrastructure spend over four years.
The tab will be picked up later, with net debt doubling from $1.5bn in June 2022 to $3bn in June 2023 and rising further to $5.2bn in June 2026.
Costs of servicing the mountain of debt will rise from $48m in 2021-22 to $206m in 2025-26, exceeding a self-imposed limit of 6 per cent of cash receipts.
Even so, Mr Ferguson declared it was a “responsible budget”. “This is … a budget that shows in detail that we can lead with both our hearts and our minds,” Mr Ferguson said.
“It is about listening to Tasmanians and making their priorities our priorities. It is about investing for the future, using our strengths and building on the strong foundations we have established.”
Both Mr Rockliff and Mr Ferguson initially insisted the debt was “sustainable” but then appeared to suggest tax reform may be necessary for budget sustainability. They also gave vague and contradictory statements on whether the government would consider new taxes.
“We are ruling out new taxes, of course, we have done, but we are also open to pragmatically looking at ways we can have a sustainable revenue base moving forward,” Mr Rockliff said.
The budget will deliver deficits of $456m in 2021-22 and $474m in 2022-23, improving to wafer-thin net operating surpluses of $19m in 2023-24, $32m in 2024-25 and $30m in 2025-26.
Those surpluses appear optimistic, with Treasury assumptions providing for public service pay rises of only 2.5 per cent a year; well short of expected union demands. Mr Rockliff told The Australian that while bargaining “in good faith” he was “very mindful” that every 1pc pay increase above 2.5pc would cost the budget about $300m.
Spending – growing at 3.1 per cent a year across the budget years – includes a four-year, $5.6bn infrastructure program focused on hospital, schools, prisons and roads. Measures to improve the supply and affordability of housing, and respond to homelessness, will cost $538m over four years, including $204m in 2022-23.
With inflation rising rapidly – CPI in Tasmania is forecast to rise at 5.5 per cent in 2022-23 – there are $305m in concessions to reduce burgeoning water and sewerage and electricity bills, as well as council rates.
With GST payments constituting almost 40 per cent of his budget, Mr Ferguson flagged a concerted effort to persuade the federal government to extend a no-worse-off guarantee. The guarantee buffers Tasmania from changes to the distribution made in 2021-22 that disadvantaged economically weaker states, but is due to end in 2026-27.
“As a small state we should not be losing out to other states that are swimming in mining royalties and posting multimillion-dollar surpluses,” Mr Ferguson said. “This will be a test of the new federal government and whether they will govern for all.”
Treasury expects jobs and economic growth to slow. Growth in gross state product is estimated at 3.75 per cent in 2021-22, falling to 2.75 in 2022-23, rising briefly to 3pc in 2023-24, before falling to 2.25 from 2024-25.
Employment growth is forecast to dip from 2.25 per cent in 2021-22 to 1.25pc in 2022-23, before flatlining at 1pc from 2023-24.
While the budget is silent on how the debt will be paid off, Mr Ferguson said he had “tasked Treasury with providing advice to me on strategies to ensure our debt levels remain within manageable limits”.
Labor Treasury spokesman Shane Broad said Mr Ferguson’s first budget had “shredded the Liberal Party’s credibility when it comes to economic management”.
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