Double threat to Tasmania’s finances looms in federal budgets

A key source of government revenue faces a two-pronged threat, Treasurer Michael Ferguson says.

Treasurer Michael Ferguson - budget reaction. Picture: Chris Kidd

A key source of government revenue faces a two-pronged threat, Treasurer Michael Ferguson says.

Mr Ferguson will be keenly watching the May 9 federal budget keenly before he can put the finishing touches on his own budget to be handed down just 16 days later.

Mr Ferguson said the state faces two potential threats to its share of GST revenue, one of which was predictable, the other less so.

“We do have a looming challenge with the Australian government on a key revenue line for the state: GST is about two-thirds of our income,” he said.

“It is there is a fiscal cliff with GST when the ‘no-worse-off guarantee’ comes to an end. It mustn’t come to an end.”

The Coalition government guarantee that no state would end up worse off after changes to GST arrangements made to appease Western Australia expires in 2027/28.

Treasury has forecast that Tasmania’s GST revenue will drop by $83 million in that year under the new arrangements or $147 per person.

Western Australia would gain $5.6 billion, or $1,945 per person.

Mr Ferguson said the second threat was a decrease to the size of the national GST pool if there is a downturn in consumer spending as growth slows.

“If the economy were to falter, as I hope it will not then, our GST pool will be written down and that will be a direct downgrade to our future income predictions,” he said.

“Now that will be material for the budget. We’re working through it very closely.

“For me, we are working very closely together as a cabinet on our budget setting process but a key event for us between now and my next budget will of course be the federal budget on May 9, because there’ll be a key reference there in terms of our future income, which is something that we’re very alive to.

“We’re optimistic and hoping that the national economy and the GST pool will hold up.”

Current estimates of Tasmania’s GST revenues for the next financial year vary by around $250m.

The state government will also be watching keenly to see that Labor follows through on its election promises including $540m for road upgrades, $50m for a Nystar, $60m to runway upgrades at Hobart airport and $20m to expand ferry services,” Mr Ferguson said.

“They must keep their promises and they were very clear, the Australian Labor Party, in the lead up to the last federal election, they nearly matched everything of the previous coalition’s commitments, particularly in infrastructure and transport projects and then they went a little bit further and good on them.

“So we’ll be holding their feet to the fire they need to keep their commitments and not dilly dally around any of our existing projects which are critical for our state.”