Tuesday 31 May, 2016

Mr President, I don’t know why, but every time I hear a premature claim of victory, I think of President Bush the Younger standing on the deck of that aircraft carrier announcing victory in Iraq in 2003. Mr President that war went on for a long time after then, in fact, it’s still going. The government’s talk about the budget being back on track.  Likewise, it is very premature.

Mr President I reckon the speech was written before the Federal May 3rd budget, when the GST boost we thought we were getting, disappeared.

Mr President there’s a lot of figures in the budget which are hard for a lay person to understand and make it even harder to see the true picture.

The overnight borrowings for instance which occur on 30th June but are repaid on the 1st July.

When you ignore them, as you must if you wish to get the true picture,  we will spend $134 million more then we receive next year 2016/17 - $137 million more in the following year and $127 million more the year after, in 2018/19.

Mr President, by what stretch of the imagination can it be said that we are back on track?

Specifically, what track are we talking about Mr President? The one heading for the cliff?

Actually I don’t think it’s that bad. I just wish to make the point that it is nowhere as good as the government is saying.

It is important for the government to tell us the real situation.

As soon as the government said they had achieved a surplus of $77 million for 2016/17, just about everyone thought it was a cash surplus the government was spending less than it expects to receive.

Not true Mr President. The government will spend more than it receives,  for the next three years.

Just because there’s a positive net operating balance, or a surplus as the government mischievously, perhaps even deceptively calls it, doesn’t necessarily mean there is a cash surplus.

I’m not trying to apportion blame for the situation just drawing attention to the reality.

It’s been a tough year as we all know. The loss of GST revenue was not our fault and we weren’t really very surprised when it happened. Then there were the bushfires and Hydro’s problems. The Treasurer was dealt some difficult cards.

For me, is the problem that the government has only partially addressed the problem, probably hoping that a tsunami of GST receipts in each year of the forward estimates might solve it - like what was flagged to happen last year.

The problem is that during the post GFC years we spent more than we received and we did that by internal borrowings - by borrowing from accounts that were intended for other purposes.

Mr President if we didn’t know what was happening we should have. I know I used to drive some of you crazy by always banging on about the SPA account with no money in it.

I used to ask questions about the Temporary Debt Repayment account to work out how much the government was borrowing internally. It wasn’t just all the super money that wasn’t there.  The government borrowed from other accounts as well.

The Government also borrowed from the Australian Government Funds Management account which included the $290 million of RHH money.

The Risk management account holding all the workers comp and general insurance moneys for the general government - well over $200 million.  When I looked at this year’s budget papers there’s supposed to be $225 million there right now.  I wonder how much is actually there?  I might ask the Treasurer that next week.

Where was I....... The internal borrowings, currently they’re at about $420 million. A  lot is to do with the RHH grants that have been spent.  So when the hospital rebuild has to be paid for, the funds have to be found out of current cash flow because the funds intended for the rebuild were spent elsewhere.

If there’s not enough new cash the government has no alternative but to internally borrow other funds - and that’s what it will do over the next few years - the level of internal borrowings will rise once again.  So much for being back on track.......

Maybe the Treasurer meant back to old tricks.  There’s no temporary Debt Repayment account but the overnight borrowings that only get mentioned in a couple of footnotes, serves exactly the same purpose.
Why isn’t the Treasurer levelling with us?

We are not running surpluses. We are struggling to find the cash to build the hospital because it was spent elsewhere and we have to continue to borrow from other internal accounts to do so

Little wonder, Mr President, the Treasurer and the Infrastructure Minister were at great pains to say the same wouldn’t occur with the special dividends of $80 million from TTLine.

This proposed special fund will be protected from internal borrowing.

While we’re on that matter, why not leave the TTLine money where it is. I believe the TTLine invests it at a higher rate than that will occur if transferred to a special fund held by Finance General.

I will at this point Mr President, make it quite clear, that support for the budget does not indicate my support for all legislation that may be needed to give effect to some of the measures contained within it.

I have a strong view that supply should only be blocked in rare and extraordinary circumstances – not just because I don’t think one aspect of it is right. If there was evidence of gross malfeasance or illegal borrowings or other corrupt activity I would have no hesitation in contemplating blocking supply. I don’t see any evidence of that here.

What were are seeing here with the TTLine funds is a smoke and mirrors trick to make the GG bottom line look better and claim a surplus.

Mr President, if I was a member of the Board of TTLine or the CEO or CFO, I would be insulted to think that when we are running the business well - saving money to replace the SPOT vessels as we have known we have to, and have had a number of years of dividend holiday to enable this.

To now be effectively told by the Treasurer, that he thinks he can manage the money more effectively by tucking it away in a special place to prop up his balance sheet and possibly not even earn as much interest as TTLine could.

Mr President, we pay the Board and senior management a not insignificant sum, just under $5m last financial year, to manage this business – why don’t we trust them to do it well now? If they can’t do the job well why are they operating as a Government Business?

Mr President I won’t go on any further at this stage about the TTLine funds. It’s pretty obvious it’s being done to make the bottom line better. Overall the State sector doesn’t change - it’s just a cosmetic exercise to make the government look like good managers. 

The net debt position will look better too, even though the monies can’t be spent on anything but new ferries.  What’s the bet the funds will be taken into account when calculating net debt?

Whilst on the matter of General Government net debt Mr President, it is worth noting that the net debt position isn’t as good as projected in last year’s Budget. Instead of improving from a net debt position of -$253m at 30 June 2016 to -$493m at 30 June 2019,  it is now expected to deteriorate by $371m -  from -$428m at 30 June this year and to $-57m at 30 June 2019,  before improving again to $162mn by June 2020.

Mr President, the ‘starting position’ at the end of this year is better, but the ‘end position’ is worse, than forecast this time last year.

Back to the matters raised by the TTLine deposit transfer. The TTLine deposit transfer has shone a light on the cash backing of all the special deposit and trust funds and their very existence.

Mr President won’t the new Financial Management Bill, if we ever debate it in this house, do away with most deposit and trust funds, with only ‘real’ trust funds would continue to exist.

I understand that the express aim of the new model is to run a single fund public account not the dual system of a Consolidated Fund and a series of Special Deposit and Trust Funds.

Mr President, are we back to the future already, as well as being back on track?

With regard to cash backing I will be interested to find out how the government intends to run the Risk Management fund.

As I said, there’s supposed to be $225 million in the account to cover the estimated liabilities of that amount. They’re just estimated liabilities, by the actuary based on past claims history I guess, much the same as the superannuation liability of the government.

Both appear to be completely un-funded. Money is appropriated each year but is there any cash?

Getting back to the matter of the government’s surplus of $77 million for 2016/17, we shouldn’t really be referring to it as a surplus.

A surplus refers to a cash outcome, in which case it’s either a surplus or a deficit, like the Feds do.

The figure in our budget is a profit figure. The budget papers use the term ‘net operating balance’.

So we should use the term ‘profit’ if the figure is positive or ‘loss’ if the figure is negative. To use the term ‘surplus’ is misleading because it suggests we’re spending less than what’s coming in the door. Which, we aren’t.

A deliberately targeted subliminal message from the government I would suggest Mr President.

Mr President, I note that the government did a reasonable job with last year’s budget.

Despite the fire costs of $31 million the loss for the year was only $90 million compared to a budget prediction of a $58 million loss. 

Spot on budget Mr President ignoring the fire costs. I was just about to send the Treasurer a gold medal and high commendation.

But then I noticed a couple of book entries totalling $50 million which had saved the Treasurer’s bacon. Noted in the Policy and Parameter Statement on page 64.

I encourage Members to have a close look at the P&P statement as there is a lot of useful detail there.

Mr President, the Treasurer must have forgotten to mention that in his speech.

Without these book entries, O the loss would have been $140 million.

The book entries related to reduced depreciation and reduced nominal super interest.

My point here Mr President is that a profit or loss figure can be affected by book entries which can easily lead to a misleading impression -  the underlying position could well be a cash deficit, which it is as I have already explained.

Over the next three years depreciation will be a staggering $130 million less than what was in the FEs last year. That improves the bottom line by $130 million.

I couldn’t find anywhere in the Treasurer’s budget speech the biggest reason we’re supposedly back on track is the government has decided to reduce depreciation by $130 million.

That is deception by omission Mr President.

The TTLine transfer is no doubt designed to boost the bottom line as I’ve noted.

But also are increased capital grants - road, rail and water.

I’ve said it before, on other occasions, but I’ll say it again. It’s misleading to include these amounts in a profit figure, when they’re spent it doesn’t reduce profits for the very reason they’re capital amounts and not operating expenses.

The Treasurer needs to point this out.  Again - deception by omission, Mr President.

Mr President when one looks at the government’s total revenue one thing is immediately apparent. The revenue in the budget year 2016/17 peaks before falling away over the next two years. That is a worry.

In real terms that must mean we’re even worse off.

The government has been conservative with estimates of future GST.

The amounts in the budget are less than the amounts in the Federal Budget No.3 which contains estimates of the future split of the GST pool.

Even so, we will receive more in Federal grants than last year’s amounts and more than we expected as per last year’s forward estimates.

Federal grants will represent 65% of revenue. It’s an uncomfortable dependence,  one that all political parties show no interest in tackling.

Another point perhaps worth mentioning is that regardless of the suggestion that we are back in a surplus position in 2016/17, the budget position is actually worse than projected this time last year.

Last year’s FEs showed profits or a NOB of $372 million.

This year for the comparative period, profits total only $24 million, a difference of $348 million.

This can be partly ‘explained’ by two matters. GST is down as we all know and so is revenue from GBEs. But as I have noted, NPPs and SPPs are up compared to what we were expecting.

With regard to policy revenue impacts, the only revenue policy decision of the government relates to the deferring of reductions in motor tax and insurance.

This helps the bottom line by $50 million over the FEs.

But tax collections in other areas are expected to increase.

There are two specific matters I’d like to briefly mention.

First is the continuing rise in conveyancing duties which explains all expected increases in taxation.

This is indeed welcome from a revenue viewpoint, but as most relates to the purchase of existing dwellings it’s a little detached from the real economy.

The problem with conveyancing duties is they can be volatile and not an ideal tax base for a service deliverer needing certainty of income. Unfortunately, no-one‘s interested in taking up the challenges to make changes.

On the other hand, there are slight downward revisions in expected payroll tax which seems to be a puzzle because a supposedly growing economy should be producing the opposite result.

It’s even more puzzling when one reads the risks and sensitivity section of the budget papers relating to payroll tax.

Mr President may I quote a sentence from page 18 BP 1:

“For example, it is estimated that a one per cent variation in the number of people employed within the Tasmanian economy would result in a variation of 1.3 per cent in Tasmania's Payroll Tax revenue in 2016-17 and a one per cent variation in average weekly earnings in Tasmania would result in an estimated variation of 0.8 per cent in Payroll Tax receipts in 2016-17”

So what’s happening if payroll receipts keep getting written back Mr President?

My point here Mr President is that a healthy economy should reflect growing government revenue. Despite the rhetoric of Government, there appears to be less of a direct link here in Tasmania.

The tax expenditure statement in the budget again highlights the inequity of our tax system.

Were payroll tax and land taxes levied on the same basis across the whole economy an extra $440 million would be raised Mr President.

I’m not suggesting by any means that the government should do this so let’s be quite clear about that to avoid the Treasurer suggesting otherwise across the table next week, but a little base broadening accompanied by rate reductions could accomplish a lot.

To move on Mr President - there are times when I think the format of the Budget papers needs a complete overhaul. 

One area where I’d like to see changes relates to where amounts in Output Groups over the Budget year and FEs would be prefaced by the corresponding figure in last year’s budget.

Furthermore, what is more relevant is not last year’s budget figure, but last year’s estimated outcome.

Take the THS for example. There’s only one output group for all acute health services as noted on page 108 of the Budget Paper 2, Vol 1.

This year’s budget totals $1.368 billion. Last year’s budget amount is shown as $1.355 billion so it appears to be a small projected increase.

But the P&P statement shows budget policy changes of $10 million and budget parameter changes of $20.9 m making the total changes in the estimated outcome in THOs budget for 2015/16 of $30.9 million.

Doesn’t this mean the estimated outcome for the THO for this year is $1.386 billion. Compared to next year’s budget of $1.368 billion - that’s a reduction in spending for THO of $18 million? Is that right Mr President?

Perhaps it more a question for the Treasurer and/or the Minister for Health next week!

In a second example Mr President have a look at Education.

A lot of increased education spending relates to the flow through grants for non-government schools. But have a look at Output Group no.1 covering government schools.

The budget reveals spending of $869 million for 2016/17. Last year the budgeted amount was $861 million so there’s a small projected increase. But if the LYs budget is adjusted for the parameter changes that have occurred in the current year the estimated outcome for spending on government schools is $872 million. Again, am I correct Mr President?

That means a decrease in nominal terms of $3 million. In real terms that is a $25 million decrease.

Getting back to the THO the reduction in real terms amounts to about $50 million. That’s a lot of money.

Mr President I stand to be corrected on those calculations I’ve just presented. If I am right, the track we’re rediscovered might be heading in the wrong direction?

Mr President, the Treasurer was talking up the economy of Tasmania is his speech with comments claiming business confidence amongst the highest in the country and at record levels, expected economic growth to remain above the long term trend of 2 percent at 2¼ percent and continued strong growth in real gross state product per capita expected, following the large increase in 2014-15.

He claimed that over the term of this Government, the labour market has strengthened with unemployment rate falling from 7.5 per cent two years ago to 6.6 per cent now, with 2,300 jobs have been created.

The commentary in the budget papers is a little more cautious and expressed a number of concerns and caveats. Such as:

On page 25, Budget Paper 1 “The reliability and volatility of some key data for Tasmania, including data relating to the labour force, average earnings and gross state product and its components, especially international trade, is of concern to Treasury’.

Page 26 Budget Paper 1 – The projections related to areas including GSP, State Final Demand, employment and labour force participation, are noted to be projections not forecasts, based on long term averages that do not take into account the potential impact of any future economic events of government policy changes.

Mr President, a cautious reminder, that we could see things change in either direction.

P. 27 Budget Paper 1 - stated that one factor constraining Tasmania’s economic growth is the low population growth – the projection in Table 2.1 shows no growth in population over the FE period.

P. 28 Budget Paper 1 – The unemployment rate is estimated to be 6 ¾ percent for 2015-16 in year average terms, similar to the rate for2014-15 and labour market participation has been easing and this lower level is expected to remain over the forecast period. The modest year average growth forecast of ½ of one percent for 2016-17 is due to the low reported level of employment in recent months.

P. 30 Budget Paper 1 – trend employment has declined by around 4000 persons since its peak in September 2015 – ABS data also report a recent increase in the unemployment rate and lower labour market participation.

P.31 Budget Paper 1 – a modest forecast for employment growth of ½ of 1 percent in year average terms for 2015-16 and 2016-17.

And P. 33 Budget Paper 1 - under the heading risks to the outlook – it states:

The outlook for the Tasmanian economy is positive, with above trend economic growth in 2015-16 and 2016-17. However, one driver of this growth is external demand, for which the risks appear on the downside. If China experiences increased obstacles to its structural transition, or there is a return to volatility in its financial markets that has economy wide impacts, this could lead to lower export demand and weaker commodity prices. It could also affect tourism demand to Australia, and reverse the trend of increased visitors from China to Tasmania.

Words of caution, Mr President, that we should not ignore.

Mr President, this detail in the budget papers does not really support the generally rosy picture the Treasurer gave us in his Budget Speech and we should be alert to such challenges.

Mr President, I wish to touch briefly on a couple of key areas other than the financial and economic considerations in the budget. I am sure other Members will focus on areas I may not, and there will be plenty of time next week to delve more fully into other areas.

Therefore, I wish to make some comments regarding the vitally important areas of education and health. 

Mr President, I was a little bemused to note the second title of the budget papers. I have already commented on the title indicating we are back on track. The second claim is that we are ‘reinvesting in essential services’.

Mr President, it seems to me that you really only need to reinvest I you have previously underinvested or cut investment to an area of essential services. Is this actually an admission that the government have been underinvesting or divesting.  Otherwise wouldn’t you just use the tag line ‘investing in essential services’?

I say this as it is actually quite difficult to determine what the real situation regarding investment in essential services is difficult to follow and be certain of - particularly in the area of health.

But first I will make a few comments about education.

The Treasurer informed us that the Government is investing a record $1.48 billion into education and training this year so better results for our children can be delivered.

He also stated that the Government knows that the built environment within which education is delivered is very important in supporting learning outcomes and in making sure our young people want to attend school.

Mr President, I agree that a new, modern learning environment does promote learning but only if the human and other resources are provided in ways that meet the needs of our students and future employers.

If new buildings were the solution you would think that the millions of dollars spent under the former Rudd Government BER funding would have seen significant improvements in outcomes for our students. I think it is quite apparent that this hasn’t been the case.

Capital expenditure, upgrades to old tired schools and educational facilities should all be part of a long term rolling maintenance and upgrade program.

Not subject to election cycles and pork barrels. None of us would begrudge the capital expenditure that is proposed but this of itself does not address our educational outcome challenges.

I do acknowledge the commitment of the Government to fully meet its commitment to provide $134 million over six years to implement the Students First education reforms.

These are important measures including the support for students with disabilities, further targeted literacy and numeracy support and STEM programs, and programs for combatting bullying and student health.

It is quite clear that students who do not feel safe and are not well nourished, in every sense of the word, have a limited capacity to learn.

The underlying barriers to their learning need to be identified and addressed if we are to assist all children and young people to learn, achieve and meet their full potential.

I commend the Government for recognising the harmful impacts on young people and their learning that bullying causes. I agree with the Treasurer when he said ‘combatting bullying, keeping our children safe and ensuring they enjoy turning up to school is of paramount importance in ensuring that they are encouraged to learn. It is quite appropriate that this initiative will particularly target cyber bullying as well as address other bullying issues.

 

Mr President, on the area of health I found the Treasurer’s speech disappointing. Whilst much was said about health funding, the major focus continues to be in the acute health sector. The progress of the one health system is taking far longer than it should in my view and unless we can ramp this up we will not see the benefits promised anytime soon.

The other challenge in this area is, understanding how much was budgeted last year in health and how this compares with health funding this year as has been the ongoing problem for many years of constant change in the allocations and reporting on health funding in the budget.

As I mentioned earlier, I really would like to see in the budget papers, what was budgeted – like for like – the previous year and how much has been spent and is expected to be spent in the current year to enable us to see whether the promised increases in funding are real!

The Treasurer informed us that this Budget provides additional funding of $29.5 million over four years to support One Health System reforms – why doesn’t he tell us at the outset how much will be spent this coming year?

I do accept that the $9.5 million in capital funding for improved Health Transport and Coordination infrastructure is a very welcome addition to the $17 million in operational funding to improve transport services.
He said that this funding of $26.5 million will result in enhanced patient coordination, transport and accommodation to support our One Health System reforms.

Mr President, the reforms simply won’t work without this investment. It should not be considered a generous gift …. Rather an essential part of the reform.

It is an absolutely vital aspect to ensuring all Tasmanians have more equitable access arrangements as was highlighted in our recently tabled Joint House Preventative Health Committee Report.

Mr President, the Treasurer told us that he will continue to roll out the extra $76 million investment in elective surgery – how much of this re-announced funding has already been spent? A rhetorical question for you Mr President, as I know it is one better addressed to the Minister for Health next week.

 

I found the greater focus on spending in the acute health sector continues to overshadow the need for far greater investment in primary and preventative health measures.

This is obviously a matter the Federal Government also have responsibility in and I hope that whatever the outcome on July 2 we will see greater focus and funding for health and wellbeing promotion and illness prevention as this is the ONLY way we have any chance of getting health expenditure under control.

As the Joint Committee Report noted – we need to accept the fundamental relationship, and statistical correlation, between the health of Tasmanians and their underlying socio-economic status, housing, education, employment and other factors, referred to as social determinants of health, and that continuous improvement in addressing these determinants be the highest long-term priority

Unless greater attention and focus is given to adequate funding across almost all portfolio areas, including education, justice, planning, infrastructure, transport, the arts and primary industries and water, to promote health and wellbeing and address the negative impacts related to the social determinants of health we will not see a reduction in demand on the acute health sector.

We have recently seen far too many cuts to health funding in this area. I do note that we may see some promises over the next 4-5 weeks in this area.
However, what we need is a long term plan to adequately fund health and wellbeing promotion and illness prevention that is supported across all political spheres and not subject to the vagaries of political cycles and pork barrels. 

I note the Treasurers comments that to achieve a healthier Tasmania we must start with promoting a healthy lifestyle and preventing chronic disease. The Government have set the ambitious goal of making Tasmania the healthiest population in Australia by 2025.

This will take much more than words obviously to achieve and time will indeed tell if this can be achieved – I have my doubts!

The Treasurer also stated that the Budget allocates $2.6 million over four years for Healthy Tasmania, which includes new funding of $1.6 million.

I assume this new and additional $1.6m is also over 4 years – so we have approximately $400k a year increase in health promotion. I don’t believe that will even scratch the surface.

I agree that targeting smoking and obesity are key priorities. I also support the need to fund and promote student health and wellbeing and mental health.

In my view, we really need to invest much more in these and other areas to reduce our reliance on the very money hungry acute health service and keep as many people out of hospital not only for the sake of cost savings but in many ways for the benefit of their own health and wellbeing.

The more we can provide to keep people well and cared for within their own homes, the better the long term health outcomes.

Of course there will always be people who need and benefit from the acute health services and we must ensure that these services are well resourced and fit for purpose.

But as we all know, demand for the acute health sector services far exceeds supply – that is why waiting lists and times are so large and long. Effectively resourcing and delivering primary health services, is the most effective way of addressing this imbalance.

The ongoing commitment to the Affordable Housing Strategy is also welcome as addressing homelessness and other matters related to poverty and disadvantage will also have a positive impact on acute and primary health services.

I commend the Government for their ongoing commitment to addressing this challenge as well as the much needed upgrade of our child protection systems and support for programs to support victims of domestic violence. These Tasmanians need and deserve our support and attention and it is pleasing to see a renewed focus in this area.

Similarly, the commitment to the National Disability Insurance Scheme is a necessary and important reform that at any time, any one of us, or one of our close family or friends may become reliant on.

There is still a lot of work to do in this area and I am sure more questions will be asked about how this will be rolled out more broadly in the future will be asked, however I do commend the Government for their ongoing commitment to and support for the NDIS.

Mr President, I was somewhat bemused by the announcement of the new Community Infrastructure Fund.

 

The Treasurer told us that new funding of $5 million has been allocated in 2016-17 for the establishment of a $13.9 million Community Infrastructure Fund. He went on to say that this will be used to support private sector and community projects as well as assisting local government to generate economic development opportunities in their municipalities.

Mr President, the cynic in me says this is just another pre-election slush fund. I will be interested to know more about it next week, but I do ask why it is necessary to establish yet another fund for the purpose of supporting private and community projects.

The new Financial Management Bill is supposed to reduce the number of such funds. We’re supposed to be moving to a one fund Public Account system replacing the dual model we currently have which everyone thinks is a crock.

Mr President, what will the administration costs be?

Are the criteria going to be different for other similar grants programs and if so, why create another administrative process and task?

Will additional people need to be employed to administer and provide oversight and probity functions for the fund?

Yes I know Mr President – these are questions for next week.

Mr President, in closing I note that this budget demonstrates how fragile our budgetary position is. It has clearly shown how one year, a rise in expected GST receipts, which heralds an end to all our problems, disappears 12 months later due to events completely out of our control.

On the other hand, there is evidence of underlying strength. Merely deferring small reductions in motor tax and insurance duties can raise revenue by $50 million, shows we have more wherewithal than some people suggest.

The promises of federation and tax reform have so far amounted to nothing. We are still just cutting and shutting whatever revenue ends up on the plate.

 

Our dependence on the Commonwealth keeps growing. The government has proven it can produce workmanlike budgets but they don’t have a master plan that will lead us out of the wilderness despite discovering a track heading who knows where.

A little scratching below the surface reveals the government’s spin is not matched by reality.

No one expects the government to be able to solve all problems overnight.

But people prefer to know the extent of our problems and any contingency plans the government may have. That is what is lacking.

Mr President, I go back to my opening comments, where I noted my concern regarding premature claims of victory.

With the Treasurer making such claims of victory, I hope he has checked that the deck on which he is standing is not actually on fire.

A burning deck would clearly need a clear, concise plan of action to avoid disaster. I can’t see one here and I think we all know the mission has not been accomplished.

Even with 4 year electoral cycles there is generally only one year where a government can offer a bold plan. That opportunity has passed till after the next election.

It’s a sad indictment on the way we govern ourselves that governments are beholden to the need to get elected rather than providing a solution to our problems.

We are not running surpluses. We are struggling to find the cash to build the hospital because it was spent elsewhere and we have to continue to borrow from other internal accounts to do so

Little wonder, Mr President, the Treasurer and the Infrastructure Minister were at great pains to say the same wouldn’t occur with the special dividends of $80 million from TTLine.

This proposed special fund will be protected from internal borrowing.

While we’re on that matter, why not leave the TTLine money where it is. I believe the TTLine invests it at a higher rate than that will occur if transferred to a special fund held by Finance General.

I will at this point Mr President, make it quite clear, that support for the budget does not indicate my support for all legislation that may be needed to give effect to some of the measures contained within it.

I have a strong view that supply should only be blocked in rare and extraordinary circumstances – not just because I don’t think one aspect of it is right. If there was evidence of gross malfeasance or illegal borrowings or other corrupt activity I would have no hesitation in contemplating blocking supply. I don’t see any evidence of that here.

What were are seeing here with the TTLine funds is a smoke and mirrors trick to make the GG bottom line look better and claim a surplus.

Mr President, if I was a member of the Board of TTLine or the CEO or CFO, I would be insulted to think that when we are running the business well - saving money to replace the SPOT vessels as we have known we have to, and have had a number of years of dividend holiday to enable this.

To now be effectively told by the Treasurer, that he thinks he can manage the money more effectively by tucking it away in a special place to prop up his balance sheet and possibly not even earn as much interest as TTLine could.

Mr President, we pay the Board and senior management a not insignificant sum, just under $5m last financial year, to manage this business – why don’t we trust them to do it well now? If they can’t do the job well why are they operating as a Government Business?

Mr President I won’t go on any further at this stage about the TTLine funds. It’s pretty obvious it’s being done to make the bottom line better. Overall the State sector doesn’t change - it’s just a cosmetic exercise to make the government look like good managers. 

The net debt position will look better too, even though the monies can’t be spent on anything but new ferries.  What’s the bet the funds will be taken into account when calculating net debt?

Whilst on the matter of General Government net debt Mr President, it is worth noting that the net debt position isn’t as good as projected in last year’s Budget. Instead of improving from a net debt position of -$253m at 30 June 2016 to -$493m at 30 June 2019,  it is now expected to deteriorate by $371m -  from -$428m at 30 June this year and to $-57m at 30 June 2019,  before improving again to $162mn by June 2020.

Mr President, the ‘starting position’ at the end of this year is better, but the ‘end position’ is worse, than forecast this time last year.

Back to the matters raised by the TTLine deposit transfer. The TTLine deposit transfer has shone a light on the cash backing of all the special deposit and trust funds and their very existence.

Mr President won’t the new Financial Management Bill, if we ever debate it in this house, do away with most deposit and trust funds, with only ‘real’ trust funds would continue to exist.

I understand that the express aim of the new model is to run a single fund public account not the dual system of a Consolidated Fund and a series of Special Deposit and Trust Funds.

Mr President, are we back to the future already, as well as being back on track?

With regard to cash backing I will be interested to find out how the government intends to run the Risk Management fund.

As I said, there’s supposed to be $225 million in the account to cover the estimated liabilities of that amount. They’re just estimated liabilities, by the actuary based on past claims history I guess, much the same as the superannuation liability of the government.

Both appear to be completely un-funded. Money is appropriated each year but is there any cash?

Getting back to the matter of the government’s surplus of $77 million for 2016/17, we shouldn’t really be referring to it as a surplus.

A surplus refers to a cash outcome, in which case it’s either a surplus or a deficit, like the Feds do.

The figure in our budget is a profit figure. The budget papers use the term ‘net operating balance’.

So we should use the term ‘profit’ if the figure is positive or ‘loss’ if the figure is negative. To use the term ‘surplus’ is misleading because it suggests we’re spending less than what’s coming in the door. Which, we aren’t.

A deliberately targeted subliminal message from the government I would suggest Mr President.

Mr President, I note that the government did a reasonable job with last year’s budget.

Despite the fire costs of $31 million the loss for the year was only $90 million compared to a budget prediction of a $58 million loss. 

Spot on budget Mr President ignoring the fire costs. I was just about to send the Treasurer a gold medal and high commendation.

But then I noticed a couple of book entries totalling $50 million which had saved the Treasurer’s bacon. Noted in the Policy and Parameter Statement on page 64.

I encourage Members to have a close look at the P&P statement as there is a lot of useful detail there.

Mr President, the Treasurer must have forgotten to mention that in his speech.

Without these book entries, O the loss would have been $140 million.

The book entries related to reduced depreciation and reduced nominal super interest.

My point here Mr President is that a profit or loss figure can be affected by book entries which can easily lead to a misleading impression -  the underlying position could well be a cash deficit, which it is as I have already explained.

Over the next three years depreciation will be a staggering $130 million less than what was in the FEs last year. That improves the bottom line by $130 million.

I couldn’t find anywhere in the Treasurer’s budget speech the biggest reason we’re supposedly back on track is the government has decided to reduce depreciation by $130 million.

That is deception by omission Mr President.

The TTLine transfer is no doubt designed to boost the bottom line as I’ve noted.

But also are increased capital grants - road, rail and water.

I’ve said it before, on other occasions, but I’ll say it again. It’s misleading to include these amounts in a profit figure, when they’re spent it doesn’t reduce profits for the very reason they’re capital amounts and not operating expenses.

The Treasurer needs to point this out.  Again - deception by omission, Mr President.

Mr President when one looks at the government’s total revenue one thing is immediately apparent. The revenue in the budget year 2016/17 peaks before falling away over the next two years. That is a worry.

In real terms that must mean we’re even worse off.

The government has been conservative with estimates of future GST.

The amounts in the budget are less than the amounts in the Federal Budget No.3 which contains estimates of the future split of the GST pool.

Even so, we will receive more in Federal grants than last year’s amounts and more than we expected as per last year’s forward estimates.

Federal grants will represent 65% of revenue. It’s an uncomfortable dependence,  one that all political parties show no interest in tackling.

Another point perhaps worth mentioning is that regardless of the suggestion that we are back in a surplus position in 2016/17, the budget position is actually worse than projected this time last year.

Last year’s FEs showed profits or a NOB of $372 million.

This year for the comparative period, profits total only $24 million, a difference of $348 million.

This can be partly ‘explained’ by two matters. GST is down as we all know and so is revenue from GBEs. But as I have noted, NPPs and SPPs are up compared to what we were expecting.

With regard to policy revenue impacts, the only revenue policy decision of the government relates to the deferring of reductions in motor tax and insurance.

This helps the bottom line by $50 million over the FEs.

But tax collections in other areas are expected to increase.

There are two specific matters I’d like to briefly mention.

First is the continuing rise in conveyancing duties which explains all expected increases in taxation.

This is indeed welcome from a revenue viewpoint, but as most relates to the purchase of existing dwellings it’s a little detached from the real economy.

The problem with conveyancing duties is they can be volatile and not an ideal tax base for a service deliverer needing certainty of income. Unfortunately, no-one‘s interested in taking up the challenges to make changes.

On the other hand, there are slight downward revisions in expected payroll tax which seems to be a puzzle because a supposedly growing economy should be producing the opposite result.

It’s even more puzzling when one reads the risks and sensitivity section of the budget papers relating to payroll tax.

Mr President may I quote a sentence from page 18 BP 1:

“For example, it is estimated that a one per cent variation in the number of people employed within the Tasmanian economy would result in a variation of 1.3 per cent in Tasmania's Payroll Tax revenue in 2016-17 and a one per cent variation in average weekly earnings in Tasmania would result in an estimated variation of 0.8 per cent in Payroll Tax receipts in 2016-17”

So what’s happening if payroll receipts keep getting written back Mr President?

My point here Mr President is that a healthy economy should reflect growing government revenue. Despite the rhetoric of Government, there appears to be less of a direct link here in Tasmania.

The tax expenditure statement in the budget again highlights the inequity of our tax system.

Were payroll tax and land taxes levied on the same basis across the whole economy an extra $440 million would be raised Mr President.

I’m not suggesting by any means that the government should do this so let’s be quite clear about that to avoid the Treasurer suggesting otherwise across the table next week, but a little base broadening accompanied by rate reductions could accomplish a lot.

To move on Mr President - there are times when I think the format of the Budget papers needs a complete overhaul. 

One area where I’d like to see changes relates to where amounts in Output Groups over the Budget year and FEs would be prefaced by the corresponding figure in last year’s budget.

Furthermore, what is more relevant is not last year’s budget figure, but last year’s estimated outcome.

Take the THS for example. There’s only one output group for all acute health services as noted on page 108 of the Budget Paper 2, Vol 1.

This year’s budget totals $1.368 billion. Last year’s budget amount is shown as $1.355 billion so it appears to be a small projected increase.

But the P&P statement shows budget policy changes of $10 million and budget parameter changes of $20.9 m making the total changes in the estimated outcome in THOs budget for 2015/16 of $30.9 million.

Doesn’t this mean the estimated outcome for the THO for this year is $1.386 billion. Compared to next year’s budget of $1.368 billion - that’s a reduction in spending for THO of $18 million? Is that right Mr President?

Perhaps it more a question for the Treasurer and/or the Minister for Health next week!

In a second example Mr President have a look at Education.

A lot of increased education spending relates to the flow through grants for non-government schools. But have a look at Output Group no.1 covering government schools.

The budget reveals spending of $869 million for 2016/17. Last year the budgeted amount was $861 million so there’s a small projected increase. But if the LYs budget is adjusted for the parameter changes that have occurred in the current year the estimated outcome for spending on government schools is $872 million. Again, am I correct Mr President?

That means a decrease in nominal terms of $3 million. In real terms that is a $25 million decrease.

Getting back to the THO the reduction in real terms amounts to about $50 million. That’s a lot of money.

Mr President I stand to be corrected on those calculations I’ve just presented. If I am right, the track we’re rediscovered might be heading in the wrong direction?

Mr President, the Treasurer was talking up the economy of Tasmania is his speech with comments claiming business confidence amongst the highest in the country and at record levels, expected economic growth to remain above the long term trend of 2 percent at 2¼ percent and continued strong growth in real gross state product per capita expected, following the large increase in 2014-15.

He claimed that over the term of this Government, the labour market has strengthened with unemployment rate falling from 7.5 per cent two years ago to 6.6 per cent now, with 2,300 jobs have been created.

The commentary in the budget papers is a little more cautious and expressed a number of concerns and caveats. Such as:

On page 25, Budget Paper 1 “The reliability and volatility of some key data for Tasmania, including data relating to the labour force, average earnings and gross state product and its components, especially international trade, is of concern to Treasury’.

Page 26 Budget Paper 1 – The projections related to areas including GSP, State Final Demand, employment and labour force participation, are noted to be projections not forecasts, based on long term averages that do not take into account the potential impact of any future economic events of government policy changes.

Mr President, a cautious reminder, that we could see things change in either direction.

P. 27 Budget Paper 1 - stated that one factor constraining Tasmania’s economic growth is the low population growth – the projection in Table 2.1 shows no growth in population over the FE period.

P. 28 Budget Paper 1 – The unemployment rate is estimated to be 6 ¾ percent for 2015-16 in year average terms, similar to the rate for2014-15 and labour market participation has been easing and this lower level is expected to remain over the forecast period. The modest year average growth forecast of ½ of one percent for 2016-17 is due to the low reported level of employment in recent months.

P. 30 Budget Paper 1 – trend employment has declined by around 4000 persons since its peak in September 2015 – ABS data also report a recent increase in the unemployment rate and lower labour market participation.

P.31 Budget Paper 1 – a modest forecast for employment growth of ½ of 1 percent in year average terms for 2015-16 and 2016-17.

And P. 33 Budget Paper 1 - under the heading risks to the outlook – it states:

The outlook for the Tasmanian economy is positive, with above trend economic growth in 2015-16 and 2016-17. However, one driver of this growth is external demand, for which the risks appear on the downside. If China experiences increased obstacles to its structural transition, or there is a return to volatility in its financial markets that has economy wide impacts, this could lead to lower export demand and weaker commodity prices. It could also affect tourism demand to Australia, and reverse the trend of increased visitors from China to Tasmania.

Words of caution, Mr President, that we should not ignore.

Mr President, this detail in the budget papers does not really support the generally rosy picture the Treasurer gave us in his Budget Speech and we should be alert to such challenges.

Mr President, I wish to touch briefly on a couple of key areas other than the financial and economic considerations in the budget. I am sure other Members will focus on areas I may not, and there will be plenty of time next week to delve more fully into other areas.

Therefore, I wish to make some comments regarding the vitally important areas of education and health. 
Mr President, I was a little bemused to note the second title of the budget papers. I have already commented on the title indicating we are back on track. The second claim is that we are ‘reinvesting in essential services’.

Mr President, it seems to me that you really only need to reinvest I you have previously underinvested or cut investment to an area of essential services. Is this actually an admission that the government have been underinvesting or divesting.  Otherwise wouldn’t you just use the tag line ‘investing in essential services’?

I say this as it is actually quite difficult to determine what the real situation regarding investment in essential services is difficult to follow and be certain of - particularly in the area of health.

But first I will make a few comments about education.

The Treasurer informed us that the Government is investing a record $1.48 billion into education and training this year so better results for our children can be delivered.

He also stated that the Government knows that the built environment within which education is delivered is very important in supporting learning outcomes and in making sure our young people want to attend school.

Mr President, I agree that a new, modern learning environment does promote learning but only if the human and other resources are provided in ways that meet the needs of our students and future employers.

If new buildings were the solution you would think that the millions of dollars spent under the former Rudd Government BER funding would have seen significant improvements in outcomes for our students. I think it is quite apparent that this hasn’t been the case.

Capital expenditure, upgrades to old tired schools and educational facilities should all be part of a long term rolling maintenance and upgrade program.
Not subject to election cycles and pork barrels. None of us would begrudge the capital expenditure that is proposed but this of itself does not address our educational outcome challenges.

I do acknowledge the commitment of the Government to fully meet its commitment to provide $134 million over six years to implement the Students First education reforms.

These are important measures including the support for students with disabilities, further targeted literacy and numeracy support and STEM programs, and programs for combatting bullying and student health.

It is quite clear that students who do not feel safe and are not well nourished, in every sense of the word, have a limited capacity to learn.

The underlying barriers to their learning need to be identified and addressed if we are to assist all children and young people to learn, achieve and meet their full potential.

I commend the Government for recognising the harmful impacts on young people and their learning that bullying causes. I agree with the Treasurer when he said ‘combatting bullying, keeping our children safe and ensuring they enjoy turning up to school is of paramount importance in ensuring that they are encouraged to learn. It is quite appropriate that this initiative will particularly target cyber bullying as well as address other bullying issues.

 

Mr President, on the area of health I found the Treasurer’s speech disappointing. Whilst much was said about health funding, the major focus continues to be in the acute health sector. The progress of the one health system is taking far longer than it should in my view and unless we can ramp this up we will not see the benefits promised anytime soon.

The other challenge in this area is, understanding how much was budgeted last year in health and how this compares with health funding this year as has been the ongoing problem for many years of constant change in the allocations and reporting on health funding in the budget.

As I mentioned earlier, I really would like to see in the budget papers, what was budgeted – like for like – the previous year and how much has been spent and is expected to be spent in the current year to enable us to see whether the promised increases in funding are real!

The Treasurer informed us that this Budget provides additional funding of $29.5 million over four years to support One Health System reforms – why doesn’t he tell us at the outset how much will be spent this coming year?

I do accept that the $9.5 million in capital funding for improved Health Transport and Coordination infrastructure is a very welcome addition to the $17 million in operational funding to improve transport services.

He said that this funding of $26.5 million will result in enhanced patient coordination, transport and accommodation to support our One Health System reforms.
Mr President, the reforms simply won’t work without this investment. It should not be considered a generous gift …. Rather an essential part of the reform.

It is an absolutely vital aspect to ensuring all Tasmanians have more equitable access arrangements as was highlighted in our recently tabled Joint House Preventative Health Committee Report.

Mr President, the Treasurer told us that he will continue to roll out the extra $76 million investment in elective surgery – how much of this re-announced funding has already been spent? A rhetorical question for you Mr President, as I know it is one better addressed to the Minister for Health next week.

I found the greater focus on spending in the acute health sector continues to overshadow the need for far greater investment in primary and preventative health measures.

This is obviously a matter the Federal Government also have responsibility in and I hope that whatever the outcome on July 2 we will see greater focus and funding for health and wellbeing promotion and illness prevention as this is the ONLY way we have any chance of getting health expenditure under control.

As the Joint Committee Report noted – we need to accept the fundamental relationship, and statistical correlation, between the health of Tasmanians and their underlying socio-economic status, housing, education, employment and other factors, referred to as social determinants of health, and that continuous improvement in addressing these determinants be the highest long-term priority

Unless greater attention and focus is given to adequate funding across almost all portfolio areas, including education, justice, planning, infrastructure, transport, the arts and primary industries and water, to promote health and wellbeing and address the negative impacts related to the social determinants of health we will not see a reduction in demand on the acute health sector.

We have recently seen far too many cuts to health funding in this area. I do note that we may see some promises over the next 4-5 weeks in this area.
However, what we need is a long term plan to adequately fund health and wellbeing promotion and illness prevention that is supported across all political spheres and not subject to the vagaries of political cycles and pork barrels. 

I note the Treasurers comments that to achieve a healthier Tasmania we must start with promoting a healthy lifestyle and preventing chronic disease. The Government have set the ambitious goal of making Tasmania the healthiest population in Australia by 2025.

This will take much more than words obviously to achieve and time will indeed tell if this can be achieved – I have my doubts!

The Treasurer also stated that the Budget allocates $2.6 million over four years for Healthy Tasmania, which includes new funding of $1.6 million.

I assume this new and additional $1.6m is also over 4 years – so we have approximately $400k a year increase in health promotion. I don’t believe that will even scratch the surface.

I agree that targeting smoking and obesity are key priorities. I also support the need to fund and promote student health and wellbeing and mental health.

In my view, we really need to invest much more in these and other areas to reduce our reliance on the very money hungry acute health service and keep as many people out of hospital not only for the sake of cost savings but in many ways for the benefit of their own health and wellbeing.

The more we can provide to keep people well and cared for within their own homes, the better the long term health outcomes.

Of course there will always be people who need and benefit from the acute health services and we must ensure that these services are well resourced and fit for purpose.

But as we all know, demand for the acute health sector services far exceeds supply – that is why waiting lists and times are so large and long. Effectively resourcing and delivering primary health services, is the most effective way of addressing this imbalance.

The ongoing commitment to the Affordable Housing Strategy is also welcome as addressing homelessness and other matters related to poverty and disadvantage will also have a positive impact on acute and primary health services.

I commend the Government for their ongoing commitment to addressing this challenge as well as the much needed upgrade of our child protection systems and support for programs to support victims of domestic violence. These Tasmanians need and deserve our support and attention and it is pleasing to see a renewed focus in this area.

Similarly, the commitment to the National Disability Insurance Scheme is a necessary and important reform that at any time, any one of us, or one of our close family or friends may become reliant on.

There is still a lot of work to do in this area and I am sure more questions will be asked about how this will be rolled out more broadly in the future will be asked, however I do commend the Government for their ongoing commitment to and support for the NDIS.

Mr President, I was somewhat bemused by the announcement of the new Community Infrastructure Fund.

The Treasurer told us that new funding of $5 million has been allocated in 2016-17 for the establishment of a $13.9 million Community Infrastructure Fund. He went on to say that this will be used to support private sector and community projects as well as assisting local government to generate economic development opportunities in their municipalities.

Mr President, the cynic in me says this is just another pre-election slush fund. I will be interested to know more about it next week, but I do ask why it is necessary to establish yet another fund for the purpose of supporting private and community projects.

The new Financial Management Bill is supposed to reduce the number of such funds.

We’re supposed to be moving to a one fund Public Account system replacing the dual model we currently have which everyone thinks is a crock.

Mr President, what will the administration costs be?

Are the criteria going to be different for other similar grants programs and if so, why create another administrative process and task?

Will additional people need to be employed to administer and provide oversight and probity functions for the fund?

Yes I know Mr President – these are questions for next week.

Mr President, in closing I note that this budget demonstrates how fragile our budgetary position is. It has clearly shown how one year, a rise in expected GST receipts, which heralds an end to all our problems, disappears 12 months later due to events completely out of our control.

On the other hand, there is evidence of underlying strength. Merely deferring small reductions in motor tax and insurance duties can raise revenue by $50 million, shows we have more wherewithal than some people suggest.

The promises of federation and tax reform have so far amounted to nothing. We are still just cutting and shutting whatever revenue ends up on the plate.

Our dependence on the Commonwealth keeps growing. The government has proven it can produce workmanlike budgets but they don’t have a master plan that will lead us out of the wilderness despite discovering a track heading who knows where.

A little scratching below the surface reveals the government’s spin is not matched by reality.

No one expects the government to be able to solve all problems overnight.

But people prefer to know the extent of our problems and any contingency plans the government may have. That is what is lacking.

Mr President, I go back to my opening comments, where I noted my concern regarding premature claims of victory.

With the Treasurer making such claims of victory, I hope he has checked that the deck on which he is standing is not actually on fire.

A burning deck would clearly need a clear, concise plan of action to avoid disaster. I can’t see one here and I think we all know the mission has not been accomplished.

Even with 4 year electoral cycles there is generally only one year where a government can offer a bold plan. That opportunity has passed till after the next election.

It’s a sad indictment on the way we govern ourselves that governments are beholden to the need to get elected rather than providing a solution to our problems.

 

 

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