Published: 29 May 2023

Premier Rockcliff couldn’t have chosen a worse time to propose building the Macquarie Point stadium.

The State budget paints a bleak picture. Next year, 2023/24 will see the fourth operating deficit in a row.

There’s not enough cash coming in the door to pay operating expenses - the cost of day-to-day operations not including new buildings and infrastructure. The latter funded from a mixture of Federal capital grants plus more borrowings.

Paying interest on the debt requires further borrowings.

Paying the unfunded benefits for retired government workers strains the cash flow further.

The above would normally be enough to persuade a prudent person not to sign a $1 billion blank cheque to build a new stadium.

But that’s what the Premier has done.

The effects of the extra debt won’t kick in for a few years but when it does it will hit like a runaway train heading towards an abyss. Our GST share, already under pressure, will be hit with the loss of the GST no-worse-off guarantee which the Treasurer estimated to be $75 million per year. The funds from the 2016/17 Mersey Hospital Fund worth $100 million per year will end. The Commonwealth Grants Commission will reduce our GST share by $300 million because of the ‘loans’ we received from the Feds for Mac Point and York Park upgrade. It’s folly to think of the stadia grants as anything but short-term loans because they will, almost certainly, be offset against future GST entitlements.

I cannot recall such wanton recklessness in any of my 18 years of analysing government budgets.

Unfortunately, when one considers the wider State sector, including government businesses, the future is even more foreboding. One needs to consider not just debt but other liabilities including unfunded superannuation which also needs to be paid. Tasmania has a much higher level of the latter than other States on a proportionate basis.

Back in 2014 revenue of the total State sector was $8.5 billion and net financial liabilities were $10 billion, a liability to revenue percentage of 118 per cent. Financial liabilities can only be serviced by revenue. Thus, this percentage gives an indication of government sustainability.

By the end of the forward estimates in 2026/27, total State revenue is estimated to be $12.8 billion whereas net financial liabilities are estimated to blow out to $22.5 billion. The ratio of net liabilities to revenue will be a staggering 176 per cent. The Treasurer indicated his Budget was “charting a safe path through the economic uncertainties we face”. Many would disagree.

The need to consider the wider State sector when discussing the sustainability of government is essential as increasingly, significant entities such as Macquarie Point Development Corporation, TasWater and the newly created

Homes Tasmania and Stadiums Tasmania, operate outside of the general government, alongside other all-important government businesses including Hydro, TasNetworks, Aurora Energy, TTLine, Tas Ports, Irrigation Tasmania and so on.

For too long we have been presented with a tired set of budget papers every year in the same format with just a few cut and paste changes.

But this year our current position including the risks and challenges have been clearly presented in a new enhanced format with more charts and explanations. The outdated fiscal strategies have been ditched, replaced with a revised set of strategic actions and targets over ten years.

Of note was a total absence of explanations as to how a $1 billion stadium investment will help meet the strategic actions and targets. It’s as if Treasury gave the government a detailed account of the challenges ahead, but then the government, in a moment of madness, went off and handed over a blank cheque to the AFL.

The new approach was supposed to “improve the rigour of Cost Benefit Analysis in relation to investment decisions.” Nowhere is the absence of rigour more apparent than with the Mac Point decision.

The need to raise more of our revenue is stressed with a proposed 10-year target of at least 37 per cent of revenue. We are currently languishing at 32 per cent. Arguably its 31 per cent as the annual drawdown of Mersey

Hospital funds is erroneously included as own source income. No hints are given how to raise another 6 per cent revenue -over $500 million.

The strategies recognise the importance of having the capacity to pay debt noting “the greater cost of debt, the less funding available to provide direct service”’ but no suggestion as to how will this be done.

The strategies discussion states “Government is implementing important fiscal sustainability measures in this Budget that are essential to constraining the level of any increase”. The only proposal in this regard is the so-called efficiency dividends in latter years of the forward estimates aimed at removing $300 million from expenses. How and where is yet to be determined.

The budget is a steady-as-she-goes-downhill affair. Revenue will barely move over the forward estimates. In real terms there will be a marked reduction. The same goes for expenses. With government failing to cater for needs in so many areas problems will only worsen.

This budget is a watershed moment for Tasmania. Let’s not resort to partisan mudslinging. For close observers, it’s been a long time coming. All parties and all of us are responsible for the mess and the refusal to face realities.

It’s up to all of us to fix it.

The Mercury, 29 May 2023


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