More than any other State, Tasmania doesn’t have much wriggle room when framing budgets. The Treasurer’s recently released Revised Estimates Report for 2014-15 shows this year’s budget hasn’t strayed too far from what was expected. It would have been alarming if it had as only four months elapsed from budget day to the end of the first half year.
We’re still spending more than we’re receiving and that pattern is predicted to continue for 4 years at least. Even the last two years of the forward estimates which are rarely achieved and little more than guesswork, show excess spending.
There has been a slight slowing in the expected cash drain for this year but that‘s because upgrade of the Royal Hobart Hospital has been delayed even longer saving $27 million this year. It must be noted that this is only a deferment. In fact an extra $74 million will be spent on the hospital in 2017-18.
The need to find funds to rebuild the hospital is what is keeping up the pressure on the budget. The specific purpose grant received from the Australian government to upgrade the hospital was in effect a claytons deal, as future GST receipts were subsequently reduced.
Realistically the grant was simply GST entitlements paid in advance.
It’s all been spent on other things, and now finding $400 million to complete the project over the next 4 years is the biggest budget constraint and challenge.
It does beg the question as to how we should prioritise and fund large infrastructure projects in future. T
he $400 million Midlands Highway upgrade funded by the Australian government is welcome but is it the highest priority?
The $38 million for the Hobart Airport is also welcome. The question should be asked as to whether this should be funded by means of a loan rather than a grant as the major reason for the Hobart Airport’s shortage of cash for development was a $74 million penalty paid two years ago to opt out of a Macquarie Bank organised fixed interest rate contract.
Large projects such as the hospital, the replacement for the Bridgewater Bridge, and even the Tasman Bridge at some stage, should be priotised in a non parochial and non partisan climate and removed from the reach of pork barrellers at election time.
Currently road and rail funding are subject to Federal-State five year agreements. I fail to see why five year arrangements, covering more than one election cycle, couldn’t lead to the payment of a lump sum each year to be spent on designated large infrastructure projects at the discretion of each state. If federalism is to work at all, each State should be able to achieve that. We should learn from the hospital upgrade planning debacle.
This may go some way to addressing the problems caused by budgetary pressures meaning funding large infrastructure from own source revenue is impossible.
Finding ways to make federalism work better is just as important and perhaps should complement fixing the budget. The government has been silent as to their preferred option(s), if any.
With the budget most changes tend to occur in the second half of a year.
The first will be a change in Tasmania’s share of the GST pool due to be revealed this month. We probably won’t know till June whether the pool itself has changed in size, but our percentage share will, almost certainly be downward, as a result of reduced royalties in the mining states of Queensland and WA which will necessitate an upward revision of their shares.
The next will be the projections of specific purpose grants and national partnership payments to States in the Federal budget due to be handed down a few weeks before the Tasmanian budget on 28th May.
The Tasmanian budget will need to address the ongoing needs of Forestry Tasmania and determine whether a special dividend from Hydro Tasmania in 2017-18 of $75 million will still be possible in light of the Government’s recent acknowledgement of its woes when it shifted $325 million of debt onto TasNetworks.
The Government, to be fair, has avoided capsizing. But the current trajectory has changed little. In 4 years time the only cash on hand will be the proceeds of a $700 million overnight loan used to repay amounts borrowed from amounts set aside for other specific purposes, which will disappear the next day from whence it came.
We are still very vulnerable.
Whilst the Revised Estimates Report show things are no worse we need to keep a realistic view of our situation and start offering a broader vision, rather than merely slowing our decline.
Realism must rank before false optimism, and in that regard, it is incumbent on the Treasurer to avoid deliberately misleading interpretations of economic events as he recently did by declaring a Merry Christmas for Tasmanian retailers based on retail trading figures for December, whereas the Australian Bureau of Statistics reported a fall in seasonally adjusted terms, the worst monthly result in Australia and the continuation of a downward trend.
The South Australian government has recently announced a review of its tax system. Even the Abbot government may have to take a hard look at the sacred cows of negative gearing and superannuation arrangements which favour the well-off.
We need to have greater peripheral vision and an open mind when tackling our budgetary problems. I am fully cognisant of the need to stop spending more than we receive given our incapacity to borrow, and if cutting employee costs is the only option, we need to do things in the right sequence. Redesigning programs should precede staff reductions, not the other way around.
The experience of the Department of State Growth, currently suffering the greatest staff losses on a pro rata basis will be an intriguing case study at the June estimates hearings. Will all these staff losses actually result in significant savings or will employee costs remain high as we continue to pay many 'retirees' who could have continued to work and be productive? How were these decisions made? Has the Government discovered a viable template for downsizing the workforce without loss of programs? Or will we ultimately end up paying more in consultants fees that are hidden away in consumables? What are the ramifications for State Growth's outputs? All questions for a later time.
The Government must receive marks for doing what it promised, but to underestimate the challenges ahead given our precarious situation would be a grave mistake. Ruth Forrest MLC Independent Member for Murchison Note: this article appeared in the Mercury Newspaper on 2 March 2015 titled 'Talking Point: There's still no hay in the barn'.Go Back