Budget better than expected but virus still the key challenge

The latest budget update paints a sobering picture of the state’s economic future.

• Budget update predicts recession for Tasmania
• At a glance: Your five-minute guide to Tasmania’s State Budget 2019

THE state budget is in better shape than feared despite the impact of the coronavirus pandemic — although a second wave of infections could still bring the economic outlook unstuck.

Premier and Treasurer Peter Gutwein released the Economic and Fiscal Update report on Friday, describing it as “cautiously optimistic”.

It showed that instead of a $57 million surplus in 2019/20, the budget ended up $273 million in deficit. But that result was better than the $716 million deficit predicted in the May budget update.

And instead of the $85 million surplus originally forecast, there 2020/21 budget deficit is expected to be $936 million.

By the end of next year, the state will have seen a $177 million in cash in the bank deteriorate to net debt of $1.5 billion.

Premier Peter Gutwein gives an update on Tasmania's budget and Covid-19 situation. Picture: LUKE BOWDEN

Among the good news was a half percentage point upward revision in the actual economic growth last financial year to -1.5 per cent: the recession may not be as deep as feared.

The improved economic outlook was attributed to strong government stimulus spending and the Federal Government’s JobKeeper and Jobseeker payment but Victoria’s outbreak and border closures remain key challenges.

Mr Gutwein said the state’s “glide slope” had stabilised, but things could change very quickly.

“Importantly, today, the numbers that I’m releasing are an improvement on what we were originally forecast in back in May, but they need to be considered cautiously and carefully,” he said.

“But I would point to New Zealand, I would point to Victoria, things can change very quickly.

“I do want to make this point and make it very clearly: this pandemic turns on a five cent piece, it turns very quickly. And we are in a very good place at the moment and it’s important that we do what we can to remain there.

Labor’s Treasury spokesman David O’Byrne accused Mr Gutwein of a “pea and thimble trick”.

Tasmania's economic and fiscal update report for August 2020. Picture: LUKE BOWDEN

“What we’ve seen today is budget numbers that are predicated on a significant underspend in infrastructure in areas where we know the recovery will be crucial: affordable public housing and TAFE and training, chronic under spending in those areas,” he said.

“This is bad news for Tasmania. We were in trouble going into COVID with deficits and net debt and the situation has just got worse.”

Tasmanian Chamber of Commerce and Industry CEO Michael Bailey said the key to the state’s economic recovery was increased stimulus spending for business.

“Tasmania’s economic recovery will be driven by the business community,” he said,

“That’s why we need the government to provide as much support as possible.

“With the State’s finances in a relatively strong position, the Government needs to look at what else it can do to prime the business sector for a quicker recovery.”

Civil Contractors Federation CEO Rachael Matheson said actually delivering planned projects was important.

“Today’s budget update shows that while the Government hasn’t spent as much as it budgeted on infrastructure, it has improved in areas such as roadworks.”

“It’s vital that we have a consistent pipeline of infrastructure projects to support the civil construction sector.”

Mr Gutwein is due to hand down the 2020/21 state budget on November 12.

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