No minister: economist says asset sales won’t help fix budget black hole

A leading economist has compared the government’s response to his report on budget reform to a bumbling fictional TV character. He outlines a way forward, without privatising GBEs.

Actors (L-R) Nigel Hawthorne, Paul Eddington and Derek Fowlds in TV show 'Yes, Minister'.

Selling off government businesses to reduce debt doesn’t make financial sense, a leading economist has warned.

Saul Eslake says the state budget is in trouble because of reckless government spending and cutting services was also the wrong way to address the state’s budget black hole.

Mr Eslake made the comments during a UTAS ‘Island Of Ideas’ event on Wednesday evening.

In his presentation, he said that even if the government were to throw the prime asset of Hydro Tasmania into the mix – something that been has ruled out — it would save less money than the companies pay the government in annual dividends.

Economist Saul Eslake at Hobart. Picture: Chris Kidd

“The 2024-25 budget papers show that the government’s equity in the three electricity GBEs is estimated to be worth $3.75bn at 30 June 2025,” he said.

“So if the government could sell all three GBEs for that amount, it would save $199m a year in interest — using the budget assumption of an interest rate on new debt of 5.3 per cent.

“But the budget papers also show that the government expects to receive $203m in 2024-25, rising to $252m in 2027-28, by way of tax equivalent and dividend payments from these GBEs.

“So on purely financial grounds the sale of these three GBEs (as a group) wouldn’t make sense.”

Mr Eslake said there were other hypothetical situations with different hypothetical results.

He said the government was better off increasing taxes on business and wealthy individuals than cutting services, which would inevitably affect vulnerable people more.

“Tasmania’s public finances are in the mess they are in because, since 2017-18, this government has consciously chosen to increase spending (especially at each of the 2018, 2021 and 2024 elections) without giving a moment’s consideration as to how that spending should or would be paid for,” he said,

“I’m not especially critical of the vast bulk of that spending − although a good deal of it (including in health, education and infrastructure) could have been, and should be, spent

more efficiently and effectively.

“Crude methods of cutting expenditure – such as ‘efficiency dividends’ and ‘vacancy control’ – will inevitably result in greater inefficiencies and poorer standards of service − just as they do in the private sector.”

And Mr Eslake noted the government’s response to his report into the state’s budget sustainability.

“Some of the government’s response read like it was written by Sir Humphrey Appleby’s ghost,” he said, referring to a fictitious public servant in the satirical TV Series ‘Yes Minister’.

“The government claims that “in many ways, the recommendations in the Independent Review are consistent with the government’s fiscal strategy.

“No, they’re not.”