State’s finances unsustainable without decisive action: Treasury

Tasmania’s budget is on an unsustainable financial footing and governments will struggle to provide services amid mounting debt without action to balance revenue and spending, the Pre-Election Financial Outlook Report says. IN-DEPTH >>

Deputy Premier Guy Barnett. Picture: Nikki Davis-Jones

Tasmania’s budget is on an unsustainable financial footing and governments will struggle to provide services amid mounting debt without action to balance revenue and spending, the Pre-Election Financial Outlook Report says.

State Treasury’s frank look at the state’s finances paints a vivid picture of the need for budget reform.

“The state budget has a structural problem … expenses, significantly driven by health demand and costs, are growing at a faster rate than the State’s current sources of revenue,” the report says.

“This structural imbalance has developed over a number of years.

“Recent State Budgets and Forward Estimates have been defined by increasing deficits and debt. As a state, we are spending more than we earn and the gap is growing.”

The report notes that since 2016-17, the fiscal balance has recorded successive annual deficits, the average being $527m.

As a result net debt for the General Government Sector is projected to grow from $4.2bn in 2024-25 to $13.0bn by 2027-28.

“Under this scenario, annual interest costs are projected to rise by approximately 202 per cent from $230.9m to $697.9m over the same period,” the report said.

“This will reduce the state’s ability to manage economic shocks and to provide services to the community in the future.

The increasing frequency of elections — and the cost of the commitments made during them — isn’t helping matters.

“The previous three state elections (in 2018, 2021 and 2024) added an initial $1.4bn, $1.6bn and $1.4bn respectively in operating and capital expenditure to the existing Budget and Forward Estimates at that time,” it says.

“This compares to $400.7m of election commitments made during the 2014 state election.”

And it notes the proposed stadium is among a number of uncertainties affecting the state’s bottom line.

“Notwithstanding the current cost estimate of $945m for the Macquarie Point Multipurpose Stadium (as a component of the Macquarie Point Urban Renewal Project), the actual cost of construction of the stadium will not be known until the project is put to tender,” it notes.

Treasurer Guy Barnett said that the PEFO showed the 2025/25 Budget, which has not been passed by parliament, would have made the changes needed.

“The government was taking the action required, and as demonstrated by the 2025/26 Budget, a range of measures proposed by the government would’ve seen a sensible return to surplus.”

Mr Barnett’s budget contained projections of four deficits in a row.

“This election wasn’t our choice. Labor forced the election on you because they are more interested in political games than Tasmanian families.

Labor’s Shadow Treasurer Josh Willie said the outlook was grim.

“Today’s Pre-Election Financial Outlook Report shows the Liberals’ budget mess was even worse than they were admitting,” he said.

“The PEFO proves that the Liberals can’t be trusted to manage Tasmania’s finances. If you can’t manage the budget, you can’t govern Tasmania.”

Originally published as State’s finances unsustainable without decisive action: Treasury