If this past year has been tough, brace for worse years ahead.
Expenses in 2026-27 are expected to be less in nominal terms than what the government is promising to spend next year, in 2023-24. Remove the extra interest on the increased debt and it's even less. Adjust for inflation expected to average around 3.5 per cent makes it a looming disaster.
As a service deliverer it can only mean one thing - less services.
Revenue will grow by less than one per cent a year. We will continue to spend more than we receive. The promise of achieving an operating surplus has been deferred. The chances of an overall surplus in the future, calculated by including infrastructure and other capital outlays, has vanished.
Excluding federal capital grants, our operating revenue for next year won't cover operating expenses. Borrowings will be needed for our share of infrastructure and other capital outlays, to pay the government's unfunded superannuation liabilities and pay interest on amounts previously borrowed.
The government's net debt will increase by $1.2 billion. That's about 12 per cent of all outlays. There's no sign of this reversing. Without real change, more debt with less services is our future.
It is in this climate the government has decided to build a new stadium at Macquarie Point.
The effects of the extra debt won't kick in for a few years but when it does it will hit us like a runaway train. Our GST share already under pressure will be hit with the loss of the no-worse-off guarantee worth $75 million a year and the claw back of $305 million federal grants for the stadiums. To make matters worse, funds from the 2016-17 Mersey hospital fund worth $100 million a year will dry up.
It's folly to think of the stadium grants from the feds to build Mac Point and upgrade York Park as anything but short-term loans because they will, almost certainly, be offset against future GST entitlements.
The government's defence is that our net debt is quite low. Treasurer Ferguson was reported as saying " ... our borrowings are very, very small in comparison to other jurisdictions per capita, just have a look across the waters that Victoria what they are doing ... I wouldn't want to be in their shoes."
But Tasmania has a much higher level of unfunded superannuation liabilities. And Tasmania has a different overall state sector including government businesses, not just the familiar ones like Hydro, TasNetworks, Aurora Energy, TT-Line, Tas Ports and so on, but Macquarie Point Development Corporation and newbies Stadiums Tasmania, and Homes Tasmania.
If one is to compare states then the measure should be based on overall net financial liabilities, which includes all liabilities that have to be paid, like unfunded superannuation and employee entitlements, not just net debt. In 2023-24 estimated net financial liabilities for Tasmania and Victoria on a per capita basis are similar with Victoria at $32,000 just shading Tasmania at $31,000. Our liabilities are growing faster and in four years' time we will catch the Victorians. The Treasurer is hiding the truth from us. Our position is probably worse than Victoria's, because we rely more on the feds to help service our liabilities.
Treasury Secretary Tony Ferrall in his swan song budget has clearly set out our current position, the risks and challenges, 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 10 years.
However, nowhere is it explained 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 government in a moment of madness went off and handed the AFL a blank cheque.
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 languishing at 32 per cent. Arguably it's only 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 six per cent revenue - $500 million.
The strategies recognise the importance of having the capacity to pay debt. How and when will this be done?
There's a 10-year target where interest and unfunded superannuation payments remain under six per cent of cash receipts. We might meet the target next year in 2023-24 but thereafter blue sky beckons. What's the government's plan to fix this, noting we need to borrow more to pay any interest?
This budget highlights we are nearing a fork in the road. One fork leads to budget chaos and declining government services masked by PR spin. The other points in the direction of major reforms of the Federation and a willingness to raise more of our own revenue. I know which direction I wish to take.
The Advocate, Tuesday 6 June 2023Go Back