Ms FORREST - Mr President, the Budget is always a complicated document and this year's is certainly no exception with ongoing agency restructure, as it is called in the budget papers.
There is much shifting of deckchairs in areas including Health, Education, Primary Industries, Parks, Water and the Environment resulting in new output groups in most areas. The process of scrutiny is a constant challenge and a moving feast. Regardless, I always feel it is important to understand the overall context to the Budget, not just try to work out what is being spent where and who are the winners and losers, particularly in our own electorates.
This year the budget papers, once again, have the estimated outcomes for this current year, 2014-15. Too often we gloss over what has happened just to concentrate on what is ahead. Understanding the past is a prerequisite of proper planning for the future. There are a few striking features in the estimated outcomes report that warrant a comment.
(1) The variation in estimated expenditure for the year is minor and the Government is to be commended for its discipline. I am speaking here strictly from a financial management viewpoint, not from a social equity viewpoint, whether or not it is fair or whether it is efficient and makes economic sense.
(2) Revenue was more than expected due mainly to more money from the federal government, higher duty revenue and higher payments from Aurora Energy and TasNetworks and Hydro Tasmania.
(3) Spending on infrastructure was slashed by $110 million mainly by deferring spending on the Royal Hobart Hospital, schools and roads. Overall, it meant our cash at the end of the year, in a month's time will be - I have missed a line here.
Before I move onto the cash at the end of year, I want to focus on the second point I made in relation to more revenue being received.
It is pleasing to note Hydro Tasmania's earlier than expected return to profitability. The Treasurer's Budget Speech attributed this to the Government's strong stewardship. I thought this may have been a thinly veiled suggestion that Hydro's board needed to be shown the correct path by government but it seems not.
Last weekend's Australian Financial Review contained a story on page 2 that Hydro has been the country's largest beneficiary of the Renewable Energy Target scheme over the last three years. Prices for renewable energy certificates, or RECs, increased with the uncertainty over the future of the RET. There will be increased demand for RECs as a result of the recent new RET deal. The Australian Financial Review speculated that Hydro manages its business to maximise REC income.
We know now that it was not Mr Gutwein's strong stewardship which has turned around Hydro's fortunes but rather Hydro's expertise in the renewable energy credits market. It is a pity we had to read about this first in the media. Perhaps an earlier opportunity to scrutinise the financial position of our major energy entities would have shone a light on this good news much earlier and one of the reasons I was keen to see our Government Administration Committees used effectively for the purposes they were established. I am hopeful we may see this happening in the near future as there is always the need to more fully understand the successes as well as the challenges of such an important aspect of the state sector. It is important to note that the cash approved this year is greater than the windfall GST receipts over the next four years and yet there was virtually no comment by observers. The estimated spending on infrastructure currently in 2014-15 will only be $290 million. The depreciation is expected to be $289 million. In other words, we only spend as much as the old stuff is wearing out. This is merely a concern I have noted in previous years that the Government needs to address. It is almost the same as was spent in 2013-14. This is what has been happening over the last three years regardless of which government held the purse strings, deferring as much infrastructure spending for as long as possible.
The increased capital expenditure spending in the next few years needs to be seen in this context. Even when the capex spending over the next four years is considered, if one were to remove the spending on the Royal Hobart Hospital, the balance is not much more than what has been happening over the last three years, which is not much more than the rate of depreciation or impairment of existing assets. We need to see the level of infrastructure spending in this context. So much for the estimated outcomes.
I would like to make a few comments on the Government's fiscal strategies. Over the past few years we have seen as many different fiscal strategies as I have had hot dinners. This Government's election manifesto was pretty light on when it came to presenting a fiscal plan. Essentially, it was little more than a promise to do better than the other mob. Last year's Budget revealed a new fiscal plan comprising six strategies. The first of these is that expense growth should be less than revenue growth. This is on target to being achieved due in large measure to the GST windfall. I am still puzzled how a fiscal strategy designed in response to overspending in the past includes past excesses in calculating a benchmark average.
Mr President, I know you are not particularly good with numbers, as we have established in the past, but you do have a logical mind so perhaps you could explain and more understand the answer to this.
The Government expects a surplus the year after next in 2016-17. A surplus is measured by the net operating balance being a blank figure. The Budget says that 2016-17 surplus will be the first since 2009-10. The surplus in 2009-10 was $18 million. Does anyone else here remember the 2009-10 year as a fiscal triumph? I assume not because it was not. In that year, 2009-10, we spent $260 million more than we received. The only reason the net operating balance figure showed a surplus was that capital grants from the federal government were $381 million and as we all know, capital grants are treated as revenue in a net operating balance calculation but the consequent capital outlay is not treated as an expense. How misleading is that? It has been going on forever.
I am a little wary of using the net operating balance measure to measure fiscal rectitude. The Commonwealth adopts a simpler measure of cash in and out when it talks about surplus and deficit. I believe we should too; it is a matter I have raised before. The only reason net operating balance is in surplus in 2016-17 is because $98 million of capital grants from the federal government is included as revenue whilst the capital outlay is not included as an expense.
The second of the Government's fiscal strategies involves keeping the servicing costs of the Government's small borrowings and large unfunded superannuation liability below 6 per cent of cash receipts each year. This was achieved and should be achievable in the future. I agree with the Government that the unfunded superannuation liability, whilst large, is not out of control as many, including my local newspaper, have labelled it. It is not. The scheme has been closed for years and actuaries are able to tell us accurately what the cash outlays are likely to be over time. It is all in the budget papers from page 131 onwards in volume 1. It goes on for a long time but it is not out of control.
The members of the defined benefits scheme have never had one dollar of compulsory employee/employer superannuation set aside for them. The compulsory Superannuation Guarantee scheme has been going for over 20 years, starting at 3 per cent of salaries and rising to the current level of 9.25 per cent. Not a single dollar has been set aside for them. The government used to appropriate money into the Superannuation Provision Account, or the SPA, ostensibly to set aside money but there was never any cash in that account. It was always just a mirage or a book entry. I respectfully disagree with the member for Western Tiers and some other commentators such as Julian Amos who suggest that we cannot afford an unfunded scheme and we need to cut it back. To me, the only rorting, if you can call it that, is when the employee manages to gain large salary increases in the last three years before retirement, which sees a sudden large increase in that person's superannuation entitlement.
So, although the unfunded liability in the Government's balance sheet is quite big at over $5 billion, and likely to be much higher when the Treasurer's Annual Financial Report is finalised in October, the annual payments will not change. That is what is important. The size of the liability on the balance sheet depends on the interest rate used. When interest rates fall the liability rises but the annual outlays do not change. Paradoxically, annual outlays may even fall because if interest rates are lower, CPI increases may be lower, meaning actual increases in the pension will be less.
I commend the Government on having a clear, measurable and achievable strategy covering debt servicing and unfunded superannuation liabilities.
The third fiscal strategy is for state taxes to be efficient, fair, simple, stable and sustainable. Our tax system fails on every count. There is nothing in the budget papers to measure or address any of these points. This is an ongoing disappointment to me and a growing number of ordinary Tasmanians. The policy and parameter statement on page 56 onwards details how payroll tax, the largest revenue raiser of all our state taxes, raised less than expected in the current year of 2014-15. It will raise approximately $10 million less in the next year and in each year of the forward Estimates.
It seems a little surprising that this is happening in a growing economy. The budget papers suggest that growth is happening in businesses below the payroll tax threshold. As it is projected to fall below previously expected amounts, it also seems to indicate that there will be further job losses from the larger employers who pay payroll tax, although it is impossible to say this with any certainty.
Payroll tax in its current form is neither efficient, fair, simple, stable nor sustainable. The budget papers draw attention to the inequities of state taxes, but then offer no solutions. On page 95 of volume 1 there is a table, for the first time in seven or eight years, detailing how much revenue has been forgone by a system of high thresholds for payroll tax and exempting two-thirds of land from land tax, leaving commercial property owners and renters to carry the burden.
The total tax concessions granted for the next year will $442 million. It is important for people to understand that. The concessions are costing the state Budget that much. Surely it is an argument to have a look at that - $442 million. Even if we clawed some of that back with fairer tax settings we would end up with a simpler, more efficient, stable and sustainable tax system - the very thing fiscal strategy number 3 sets out to achieve, but fails dismally. I commend the Government for including this detail about the amount that is effectively forgone revenue. I hope it may be a lever to drive a discussion about our inefficient, unstable, unfair and unsustainable tax system. I remain ever hopeful of that.
The fourth strategy requires businesses to deliver services at the lowest sustainable cost to provide an appropriate return to government. Motherhood stuff, really. My problem is this strategy is conducted in the dark. I know we cannot be forever looking over the shoulders of boards appointed to run businesses, but the system we have at present gives us less information in a less timely manner than listed public companies. At a minimum, government businesses should provide annual reports at least a month earlier, by the end of September. Midyear reports should also be made available. The government receives them so why should we, the Parliament, not? Shareholders of listed companies get them, so why should it be any different here?
Government businesses also furnish governments with budgets and reports enabling future income tax equivalent and dividend payments to be included in the State Government Budget. Why can we not see them? I am not suggesting for a moment that we want all the reports and correspondence with the government. I simply mean a two-or three-page pro forma report with key figures, turnover, key expenses, profits, cashflows and balance sheet items over the period covering the Budget and forward Estimates. It is not really, I do not believe, asking too much. They prepare it anyway.
The fifth strategy relates to desirable spending on infrastructure. I have already commented on this. Spending over the last three years has hardly exceeded the rate of impairment. It is only the Royal Hobart Hospital upgrade in the future that gives it any respectability.
The sixth and final strategy relates to public service efficiency, productivity and financial transparency. We are still living through an information drought when it comes to provision of measurable outcomes and benchmarks with which we can assess public service performance. As I pointed out in a recent opinion piece in the Mercury, we receive 47 per cent more than our per capita share via Australian Government grants. Roughly one-third compensates us for having a weaker revenue base, and two-thirds for the extra cost of delivering equivalent services due to a variety of reasons, including the lack of scale, our demographic structure, geographic dispersion, and so on. The Commonwealth Grants Commission sets out how state relativities are calculated. This means we will receive, for the Budget year and over the period of the forward Estimates, 30 per cent more per capita than other Australian states to deliver equivalent services.
I ask how much this is really costing us. Are we spending more or less than the amounts being provided on these particular services, as assessed by the Commonwealth Grants Commission? Surely it is incumbent on us as responsible members of the Federation to ensure that money is spent as it was intended. It is an odd system, as highlighted by the Government's response to the GST windfall when asked how it would spend it. No, it would not be spent on operating expenditure, but rather on capital expenditure, which would lead to greater productivity in the future - maybe. That is where it is an odd system. We get amounts to provide services, but unless they are via tied grants, it does not seem to matter whether they are spent on wine, women or song. There is no expectation. The Government does not provide enough information for us to determine whether it has been spent wisely. More benchmarks and measurable outcomes are required. After all, the sixth fiscal strategy specifically mentions improved transparency.
I wish to comment on a few specific areas before making some closing comments. There is much that could be commented on. However, there will be other opportunities next week to focus on these specific areas. Education is clearly an area of vital importance to the future of our state - an area where we as a state have a lot of room for improvement.
High school upgrades are important and necessary in providing a learning environment that supports and instils pride in our students. But buildings alone do not achieve better learning outcomes. Investment in teaching and the early years is vital. The adage that, 'From birth to three you learn to read, and from three for the rest of your life you read to learn,' cannot be overstated. Launching into Learning is a very important initiative, but there is still a cohort of families who did not access this program.
I recently promoted the need for a parent liaison officer to work with those families who do not engage, in the early years from birth to five - families where the parents may have had very negative experiences in their own school lives, for example; families from intergenerational poverty and unemployment, with the result that they value education less and have less respect for the benefits it can bring. They are often absent. Their families may be struggling with a range of health, personal, domestic, geographic and other challenges that result in a limited ability to access or engage in formal educational offerings for their children. That is why we need to make sure we aim to support these families. Those who are really engaged will be there anyway. It is the ones who are not that we really need to target. If we can do that, we may see some education indicators start to change and improve.
I note the Students First funding will be used in part to support a new Early Years' program, targeting areas with the greatest need, and that is pleasing. I am sure Committee B will obtain further detail on this during Estimates hearings. I have probably provided the committee with a couple of questions about that. This really is a frightfully important area.
With regard to the ongoing push to have all rural high schools continue to year 12, there needs to be further consideration and understanding of why students who attend some of these high schools leave the school and move to a school that does, or is perceived to, provide a better education than the local school. I understand quite a number of these students leave before year 10. They do not wait until year 10 and then drop off the radar. They leave that school or that area in year 8 or 9 to go to the other school out of area, further undermining the school that they are leaving behind. If that is the reason, extending those schools to year 12 will not make any difference. We need to understand this much more than just assuming that it will all be fine if we make these changes.
Investing in the LINC in Burnie is also very welcome. Burnie is clearly in a high needs area and we do need well-planned and strategically-driven outreach services in this area. The north-west coast has a very dispersed population. For some residents, a 15- to 20-minute drive to access a service is out of reach as public transport in many areas is very limited and at times non-existent.
The ongoing investment in Smithton High School is also welcome and much needed as next to nothing has been spent on this school in recent years with the exception of the new gym. That has been fought for for many years. The recent completion of the new gym is a great source of school and community pride to the extent that it is being dubbed Keith Billing's, the principal of Smithton High School's, fourth grandchild. He has such pride when he showcases it to anyone who will have a look.
Mr PRESIDENT - Less costly.
Ms FORREST - Than a grandchild? Yes. In the long run it probably is. The previous hall at this facility that this gym has replaced was opened the year I was born and has not been updated until this very recent change. It was a pleasure to visit recently and see the students and community using it with such great enthusiasm and pride. Thanks must go to the successive Student Representative Council members who have continued to lobby for this. I know Mr Billing will ensure that all of those young people are invited to the official opening as it is they who should be doing any cutting of ribbons, not government members.
The inclusion of school nurses is also a welcome addition and should provide an important resource to all students in the schools where they will be placed. It is important to ensure that there is a focus on childhood obesity in primary schools. This is a huge health issue coming down the line, and in many ways it is under-recognised. The emphasis on hearing checks is also important. I would hope though that hearing impairment is less often identified these days as neonatal checks and child health checks should have picked up almost all cases prior to school entry. Ongoing assessment in primary years is important because some children can have ongoing issues with ear infections. I expect this to be much less of a problem area than it has been in the past, with those other interventions earlier on.
Mental health awareness and intervention is becoming increasingly important, unfortunately, particularly in high schools. Hopefully the presence of school nurses can lead to more early identification and thus early intervention in the lives of these young people with mental health issues. The nurses should also be able to play an important role in anti-bullying programs and awareness, which is often one of the great lead-ins to mental ill health. I know the Government has a focus on bullying and is doing some work on that but it really is a huge issue.
This leads me to the area of health. I commend the Minister for Health for his efforts and dedication to health reform throughout the state. We do need to move to a properly integrated health service that provides quality, safe care in a timely manner with a focus on prevention. Hospitals really are dangerous places and are best avoided, even if you work there. I read with a sense of irony the comments in budget paper number 2, volume 1, page 60, where it says -
It is clear that the division of Tasmania's acute health service into three distinct management structures has been a barrier to our hospitals working effectively together to deliver optimal care for all Tasmanians. This has led to safety and quality issues in some areas, duplication of services resulting in inefficiencies, identifiable service gaps and higher costs that limit the Government's ability to deliver the range and volume of services that Tasmanians need.
Really?
Ms Rattray - Are you going to say 'I told you so'?
Ms FORREST - I was getting that point, member for Apsley. The minister must have read my comments in the debate a couple of years ago. It is not as though we have to go through this slow, drawn-out, expensive, painful process before we get to a point. Thank goodness we are moving now. There is still some work to do. There are a few little road humps in his way but I am happy to work with the minister to try to get over these. We have to do it. If we do not do it now, I do not know how many more opportunities you can lose and not have a completely stuffed system. I note the additional $100 million over four years, earmarked as additional funding to frontline services. It is hard to get any sense of how this will be spent from the detail in any of the three volumes of the budget papers and I did scour it for further detail but there was none there. Possibly this was a last minute addition after news of a GST windfall and there has not been time to identify where the money will be best utilised. A question for next week, no doubt, but what is most important is that this money is spent wisely and in an evidence-based, targeted manner.
I commend the commitment to the hospital alternative program as this is a really important aspect of sustainable, safe and effective health care. We continue to see on a federal, as well as a state level, an unhealthy preoccupation and focus on acute health services rather than preventive health services where cost savings, in human and financial terms, are really only evidenced sometime later - in some cases many years later - and it is more a case of money not spent than observable savings.
When I attended the health reform forum in Devonport there was not a mention of the need to focus on preventive health. I did not manage to go to the others around the state but it is disappointing that we continue to have these discussions about our hospitals. When we look at the size of the investment in preventive health, it is just wrong. The federal government is as much to blame because they have cut the National Partnerships funding for preventive health. I have a big bruise on my forehead as a result of this issue.
The funding commitment to the operational costs in the North-West Cancer Care Centre is also welcome but a no-brainer. After spending all the capital on the infrastructure and the enormous private benevolent investment in this facility, it would be unthinkable not to see it operating. I do not wish to give them too many pats on the back. You could not have this built and not operate it.
It is sensible and necessary for this service to be running in collaboration with the Holman Clinic or another major provider to ensure quality care and appropriate support for conditions, to ensure the best possible outcomes for patients. Originally, there was some discussion about it being run through collaboration with Peter MacCallum Cancer Centre in Melbourne. Peter Mac is an amazing centre and would have worked well but it is good to have a collaborative approach in the state, vigorously moving to a statewide health system. It will make an enormous difference to the residents of the north-west and west coast not to have to travel to Launceston for the majority of cancer treatments. This should result in greater compliance with treatment regimes and hopefully improve recovery rates and outcomes for these people. One can only imagine how difficult it is for people suffering from cancer and the unfortunate side effects that many of the treatments result in, to travel for up to four hours suffering from the effects of their illnesses and then the often unpleasant effects of the treatment. I can appreciate why some patients would decide not to continue treatment in these circumstances so I hope people will see a greater level of compliance and hopefully better outcomes as a result.
Another positive announcement in this area is the focus on patient transport and, as I have said more times than I care to remember, this is an area where investment is needed. I am not sure how the two initiatives differ - in the budget papers there are two. The patient transport to support health and health transport, and coordination infrastructure. There is no doubt this is an area that will be more fully explored in Estimates but they seem to cross over. I am not sure why we are separating those into two different areas. Maybe the Leader can address her mind to that but if not it is something I can share in budget Estimates.
We cannot continue to try to provide all services everywhere. What we should be focusing on is equity of access, which is quite different to equality. The Patient Transport Assistance Scheme needs to be reviewed and overhauled to make it more user-friendly. I commend the work of those involved in running this service, particularly in the north-west, as I found them always helpful and accommodating, working in a system that does not work easily for patients who rely on it.
I hope that some of the funds allocated in this area and the initiatives I have mentioned will go towards reviewing this as well as support for accommodation for patients and carers who have to travel to access care. The Patient Travel Assistance Scheme is a system that needs to be there, but it is very cumbersome in many ways and many of the people who rely on it have to make the expenditure up-front, which is often very difficult, and then claim it back. I am sure there is a better way. At the current time with the IT advances we have made, surely there is a better way. I hope that will be looked at.
Suicide prevention is also a vitally important area that we do not seem to be having much impact on as a state. Clearly this is an area that needs to be addressed and promoted sensitively. We need to talk about it and make the general public aware that this is a serious issue, and provide skills to the general public to recognise the risk and how to take effective action.
Mr President, I wish to comment on the area of arts, tourism and events. It seems that the arts was certainly the poor cousin when it comes to this Budget; it did not even rate mention in any form in the Treasurer's Budget Speech. I am not sure how the Minister for Arts feels about this; she might do an interpretative dance to give us her answer. It is a missed opportunity when there is clear evidence of the positive health and wellbeing effects that participation in and engaging with the arts can have. I note there is additional funding of $1.2 million for TMAG, including some $500 000 for a new roof. This allocation would seem to be necessary to enable TMAG just to operate without major expansion or to manage their current budget situation. If I am wrong and there are other funds buried in the budget papers investing more in the arts, I will be happy to stand corrected on this, but I could not find it. It does appear that the allocation for arts industry development, which is a very important aspect, is really going backwards over the forward Estimates and perhaps this will change. Forward Estimates are only estimates after all.
Ms Rattray - We will find out next week.
Ms FORREST - Yes, and I have a few questions to hand in that area and I am sure he will be happy to take them. I do commend the Treasurer and the Government for their focus on jobs and job growth. I would like to remind the Treasurer that there are also jobs in the arts sector and these are just as important. In my view, it is also essential to ensure there are opportunities to encourage and support communities to get involved in the arts as there are many health and wellbeing benefits from doing so. The arts also have a natural synergy with tourism and hospitality. This is an area where we have seen only modest investment, especially at a time of growth in this sector, predominantly through the low Australian dollar, the visit by the Chinese president and the ongoing MONA effect.
It is difficult to identify how and where the new statewide tourism and events funding of $7.9 million will be spent. Hopefully, this will be explored further in the Estimates process. With different ministers it is always difficult to track where the funding benefits flow if they cross tourism and hospitality, events and the arts. We are often told in Estimates, as members would know, that 'this is a question for the Minister for Arts' or 'this is a question for the Minister for Tourism', but we had that yesterday. It is a challenge so it would be good to track some of this. I can only identify an additional $1 million per annum for three years for tourism marketing although I accept there is a current $4 million per annum allocation for tourism marketing. I am sure Committee B will look at those matters.
I found some comments made in the budget papers regarding Tasmania's economic outlook interesting, particularly in budget paper no. 1. The comment that the sharp decline in Tasmania's manufacturing which has detracted from economic growth in recent years appears to be largely ended. I found this a bit at odds with what is occurring on the north-west coast at the moment. Whilst I am hopeful that we will see a rebirth of manufacturing in the north-west in a smarter, more innovative and future-thinking way, we are hardly forging ahead and holding the decline right at the moment. Just ask any employee of Caterpillar. We can thank the ongoing forward-thinking, innovative approaches and striving for continuous improvement and excellence we see from amazing north-west coasters such as Dale Elphinstone, Lee Whiteley and others who have ensured manufacturing for the future and into the future will continue. There is of course much to be done. Unfortunately, we often only hear the stories about closures and job losses, not the new opportunities. I wish to recognise the commitment of many north-west businesses and industries that intend to never give up and have fought for the north-west community in many ways, but I do not think it has turned around in terms of manufacturing.
The budget papers also mention there has been an increase in private demand and the prospects are encouraging in the areas of tourism and some primary industries, such as horticulture and dairy. Tourism growth has not been even across the state. I hope that investment in marketing and other promotion undertaken with significant amounts provided over time to tourism in Tasmania will recognise and seek to address this issue. We also need to accept these industries, tourism and primary industries particularly, are subject to the vagaries of global markets and are often cyclical, with so many factors out of the control of the state. Mining has been an example of this, and not just in Tasmania, where a range of other factors have contributed to the downturn of the industry. The falling exports demonstrated in chart 2.2 in budget paper no. 1 clearly show the cold, harsh reality of this. Whilst not all this is mining-related, in that chart mining is certainly a significant proportion of it. I hope this will change in the not-too-distant future for a number of current and proposed mining ventures.
There are many other areas that warrant comment, but I will raise them over the coming weeks and through the Estimates process.
In closing I will make a few comments about the overall budget figures. The most striking thing is that without the GST windfall we would have struggled to build the hospital. We can thank our lucky stars. The Government deserves some credit for deferring as much infrastructure spending as possible to build up cash reserves, but even with the windfall, the cash reserves over the next four years will only increase by $90 million. At least we will have a new hospital.
I do not share the concerns of others that the Government is building a war chest for the next election. The cash on hand at the end of the year 2017-18, around the time of the next election, is estimated to be $440 million if one ignores the overnight temporary borrowings each year, which only confuses the picture. That is a decrease in the cash position compared to June this year. Current cash at the end of June this year, again ignoring the temporary borrowings which are parked in the cash account overnight on 30 June, will be $525 million. Therefore over the next three years of this election cycle cash will go down by $85 million. It is not a war chest.
Whether or not the moneys will be spent wisely is a different matter. From a financial management viewpoint, things are still tight. But, as I said, at least we will have a new hospital.
The temporary borrowings - that is the money the Government still owes to various government trust accounts it raids to pay expenses leading into or around the time of the next election - at 30 June 2018 is estimated to be $270 million. This means that accounts like the Risk Management Fund, which is supposed to have a balance of $233 million in June 2018, will actually have zero cash. In the same way as the old SPA account had a large nominal balance and cash backing of zero, so too does the Risk Management Fund have a large nominal balance but zero cash backing. The Risk Management Fund accepts cover for all our insurance needs via the appropriation bill before us, as the government is largely a self-insurer.
Private insurance companies with contingent liabilities and no cash backing would fall foul of the regulators. I am not suggesting the Government is doing anything wrong by having insurance liabilities of over $200 million with no cash backing. I am only making the point that, despite the GST windfall, we are by no means out of the woods. The budget papers suggest a surplus in the year ahead, but the cash flow statement indicates another year of cash deficits.
In the final two years of the forward Estimates, cash surpluses are budgeted. Can anyone remember when the last two years of forward Estimates were actually achieved? I cannot. Whilst the financial management plan gives hope, we should not be getting too carried away at this stage. Before the GFC in 2008, the Commonwealth used to provide roughly 60 per cent of the State Government's revenue. For the next four years the percentage will be 65 per cent, reaching almost 66 per cent in the final year. The average across the other states is roughly 45 per cent. We really need to note this. This is our problem and it is a major problem. The Budget has pointed this out. With all the hype after the Budget, this seems to have escaped most people. Our state taxes are as dysfunctional as ever. As I have said, payroll tax, our largest tax raiser, is in the current budget papers estimated to raise less tax than was projected last year.
We need to look calmly and rationally to try to find a solution. I know most of my fellow members regard payroll tax as anti-employment, because the employers pay. But economists almost universally agree that whilst the employer pays the tax from a legal point of view, the cost of the tax is ultimately borne by the employees, with lower wages. Just as the final seller pays GST, the burden of the tax actually falls on the purchaser by way of increased prices. It is similar thing with payroll tax. It would be really good if other people could grasp hold of this, because it is the reality. It is not an anti-employment tax. I feel certain that all states will be made to reform their inefficient state taxes in the not too distant future.
[11.45 a.m.]
The current Government white papers on reform of the Federation and taxation will inevitably see these matters raised. The Commonwealth is simply not going to raise the rate of GST, even if it does receive serious consideration to help the states out of the hole they have dug for themselves. If the GST exemption on fresh food and health products is to be removed, the Commonwealth will have to compensate those on lower incomes - which it can and might do via the transfer payment system, but it will want a trade-off. I do not think anyone seriously thinks the Government will bring education into the GST net. Can you imagine the private schools accepting that, in the national interest?
There are a few possible scenarios on reforming taxes across the Federation but all involve the states realistically facing up to their problems, and throwing out all the old dogmas and mantras that justify current beliefs. Throw them out the window and try to find another solution. If the states have thoroughly stuffed up payroll taxes in the last 40 years, since prime minister Billy McMahon handed payroll taxes over to the states - I think that was in 1971, I was only nine years old at the time. There might be some who can remember that in this place?
Mr PRESIDENT - Clearly. Yes.
Ms FORREST - When that was brought in, it was a fair tax. It has been transformed into an awful tax with a high threshold accompanied by a high rate. More than any other state Tasmania, because of our dependence on Commonwealth funds, needs to start preparing.
With all the cheering that accompanied this Budget one could be excused for thinking the 'Battle Budget' was won. The reality is that it has only just started.
[11.47 a.m.]
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