Published: 19 February 2024

Where there’s smoke there’s fire. All it will take is another wind shift and an early State election will be upon us. Retired warriors have been recruited to rejoin the battle so there’ll be plenty of politics, finger pointing and photoshopped views of opponents’ past achievements or lack thereof.

But what of actual policies?

First and foremost is our ability to deliver the services people need and expect. Guideposts for the State’s future path have been absent. The government finally released its long overdue revised Fiscal Strategy as part of the Budget in May 2023. It received little or no attention which is an appalling reflection on the level of policy discourse now occurring.

Conspicuously absent from the eleven strategic actions and targets which together comprise the Fiscal Strategy was the measure the government has been using to spruik its budgetary credentials. It was always misleading to pretend overlooking capital and infrastructure outlays and contributions into government businesses could lead to a meaningful measure of a budget outcome. When capital and infrastructure outlays are added any hope of a surplus disappeared.

The new Fiscal Strategy includes targets for the Fiscal Balance which is a superior measure of a government’s performance in that it includes capital and infrastructure outlays as well as ordinary operating expenses. The aim is now to produce breakeven Fiscal Balances by 2032/33. The figure for the most recent completed year 2022/23 was negative $654 million. The current 2023/24 Budget estimates a worsening outcome to a negative $989 million. Like Sisyphus there’s a big job ahead. The Fiscal Balance in the 2013/14 year, the last under the previous Labor government, was negative $161 million.

The problem with running budgets with negative Fiscal Balances means more funds need to be borrowed which leads to problems with another of the Fiscal Strategy’s targets, a limit to the proportion of receipts devoted to servicing debt. We are almost at the limit already with no prospect of reversing the steady increase currently being experienced.

If borrowing too much is risky then raising more revenue from our own resources looms as the only alternative. The new Fiscal Strategy contains a target for own source revenue. We have become too reliant on the Federal Government. The average proportion of expenditure from our own source revenue (which includes State taxes and charges and returns from government businesses) over the last 10 years of 37 per cent is the target rate under the Fiscal Strategy. The peak was 39 per cent during the carbon tax years when returns from Hydro Tasmania were a godsend for Tasmanians. The current proportion is languishing at 32 per cent. In current dollar terms that means another $450 million from own source revenue. That’s the challenge implied by the new Fiscal Strategy.

In fact, it’s the challenge for all of us if we are to meet the needs of our community.

The government is to be commended for setting out a detailed Fiscal Strategy. But in so doing it has provided yardsticks which suggests the government’s performance over the last ten years has not been quite as the spinmeisters have argued. But at least we have a clear idea of the challenges ahead.

One reason the government has issued a Fiscal Strategy is that it’s a statutory requirement to do so pursuant to the Charter of Budget Responsibility Act 2007. It’s also a statutory requirement for Leaders of Opposition parties to produce a Fiscal Strategy. And maybe other parties lining up to hopefully achieve a balance of power role in an expanded Parliament should also do the same. In the interests of giving electors a greater understanding, the strategies need to be more than mere assortments of motherhood statements and aspirational goals. They need to explain how the goals will be achieved. Telling us simply the economy will grow because of their policies and the benefits will filter down into government coffers is fabricated nonsense well past its used by date.

At the risk of sounding alarmist, the challenges implied by the government’s Fiscal Strategy need serious and urgent attention. It is incumbent on all of us particularly media, commentators, and other influencers to push the debate and keep asking questions about budget sustainability.

All too often the only sign of non-partisanship in today’s increasingly polarised world is when political parties sub-consciously conspire to ignore the elephant in the room because they don’t know what to do and hope it will simply disappear. That’s not going to happen this time. To ignore the elephant runs the huge risk of waking up one morning to find all the furniture trampled.

The Mercury, Tuesday, 6 February 2024


Go Back