Tasmanian budget: doubling debt, trimming spending, surprise surplus
Amid claims Tasmania may need a federal bailout, new state Treasurer Eric Abetz has unveiled a budget big on debt but with promises of better days ahead.
Tasmania’s minority Liberal government will continue on the path of doubling the state’s debt while temporarily trimming spending to deliver a wafer-thin operating surplus in four years from now.
Eric Abetz, taking the Treasury reins for his first budget amid claims the state may need a federal taxpayer bailout, has opted not to halt its slide deep into debt.
Net debt – virtually eliminated before the Liberals came to office in 2014 – will double from $5bn in 2024-25 to $10.4bn in 2028-29.
The former federal minister instead promised “peak debt” – ending the growth in debt by 2028-29 “and to begin to pay it down thereafter”.
He defended the ongoing addiction to credit until then as necessary to avoid sudden spending cuts that would send “shocks and tremors” through the state economy.
“When you have budget deficits you can either go the ‘big bang theory’ like Labor and the Greens tried to do just before losing office (in 2014) or you go into a trajectory to wean off,” Mr Abetz told The Australian.
“That’s so that you don’t cause too many economic shocks on the way through. That’s basically what we’re trying to achieve.”
To that end, deficits will continue for three years, but decline via what Mr Abetz called a “glide path” – from $1bn in 2025-26, to $807m in 2026-27, $293m in 2027-28 and a surplus of $5.6m in 2028-29.
Spending will be trimmed from $10.5bn in 2025-26 to $10.27bn in 2028-29, via efficiency dividends, cuts to marketing, leasing and procurement, as well as via yet-to-be-decided cuts overseen by a razor gang.
About 2800 public servants’ jobs will go by 2032 through hiring freezes – 300 more than previously planned after a failure to contain numbers.
These cuts will in reality have to be more severe than outlined in the budget, which is based on capping public service wage rises at 2.5 per cent.
The government has already offered 3 per cent and unions are demanding more than 5 per cent – any increase above 2.5 per cent will either destroy the modest surplus or require deeper cuts.
There is $609m for the contentious Hobart AFL stadium, but overall infrastructure spending will decline, from the $1.1bn allocated in the 24-25 budget to $780m in 2028-29.
The 2025-26 budget – the second such document, after the first in May was effectively scrapped by the calling of the snap election – is modestly optimistic about the state economy.
Treasury forecasts an uptick in growth – gross state product – from 1 per cent in 2025-26 to 2.25 per cent in 26-27 and 2.5 per cent from 2027-28.
Unemployment is forecast to remain steady at 4 per cent for the next four years, while population is tipped to grow slightly, by 0.5 per cent in 2025-26 rising to 0.7 per cent from 2027-28.
Challenged as to how the budget was so unsustainable that it required a doubling of debt, Mr Abetz blamed Covid, child abuse compensation, a federal election and two consecutive early state elections.
He said these snap polls, both called by Premier Jeremy Rockliff, the last in July to save his political skin after a no-confidence emotion, had required “new expenditure measures” – election promises made to voters.
The Labor opposition, which has claimed the state may need a federal bailout, said the budget confirmed a fiscal crisis caused by years of mismanagement.
“After 11 years, the Liberals have taken Tasmania from having no net debt to the worst set of financials of any state in Australia,” said Labor Treasury spokesman Dean Winter.
“This budget sets the scene for more cuts across health, housing and community services in next year’s budget to pay for a ballooning interest bill that will total almost $2bn – more than twice what is spent on housing.
“The interest bill goes up every year and Tasmanians will pay the price – 2500 jobs will be slashed, all to help offset the Liberals’ interest bill.”
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