Published: 22 February 2024

The assessment of state government debt makes for some uncomfortable reading, writes Ruth Forrest

School is out and the 'kids' our House of Assembly representatives - have been sent home earlier than expected. The classroom was becoming too unruly. No work was getting done.

The end of term report issued on the last day of school reveals the kids were failing to meet required standards and were in danger of joining the growing cohort of children not reaching expected milestones.

The Revised Estimates Report (RER) for 2023-24 was issued the day the House of Assembly was dismissed as a prelude to the March 23 election.

The most revealing part is a performance assessment of each of the targets that comprise the government's fiscal strategy.

The fiscal strategy is a commendably detailed plan charting a sustainable way forward for Tasmania, which I discussed in a previous article (Mercury, February 6) If the RER were written as a school report the likely assessments would be 'needs to do better' .. 'unlikely to ever pass this subject' . 'has made no attempt to understand what's required'. It's a damning report.

So what did the RER say?

The government has a target for net debt relative to the size of the Tasmanian economy. Net debt is to be no more than 10 per cent of our Gross State Product, that is, what we as a state produce each year.

This year (2023-24) the percentage will double to 8.6 per cent. Next year the ceiling of 10 per cent will be breached. Government debt will grow faster than the size of the Tasmanian economy. Mark this down as an 'unlikely to pass'.

The government has a target that no more than 6 per cent of outlays should be devoted to paying interest on debt and meeting unfunded superannuation liabilities. This year 2023-24 will be the last year where the target will be achieved.

The general government, which doesn't include government businesses, needs to borrow an extra $1.4bn this year and $1.1bn in 2024-25.

With an increasing portion of government spending used to service debt, mark this down as an 'unlikely to pass'.

When government businesses are included, borrowings of the total state sector will increase by $2bn per year over the next four years, which makes it harder for those businesses to keep paying dividends when there's extra loans to repay. Dividends from government businesses form part of own-source revenues, which also includes state taxes such as payroll and land taxes.

We need to wean ourselves off our growing dependence on the federal government by raising more of our own revenue. The government has set a target that 37 per cent of expenditure be funded from this source. The RER shows a marginal improvement to 32.8 per cent.

In current dollar terms we need to raise another $400m. Mark this down as 'needs to show more resolve'.

Another target which measures budget sustainability is the fiscal balance, which includes capital and infrastructure as well as operating outlays. It gives a realistic picture of the problems we face.

The fiscal balance for the general government will be negative $1bn for 2023-24. The target is break even.

There is no hint this will ever be achieved. Mark this down as 'a fail'.

The fiscal balance when government businesses are included is even more challenging. The target is to break even. The RER forecasts a negative $2bn per year over the next four years. Mark this down as 'has made no attempt to understand what's required'.

Finally, large infrastructure projects require benefits to exceed costs. There is no evidence the government's Macquarie Point project will meet this target. Mark this down as 'needs a lot more work'.

The level of information and detail regarding the actual and potential challenges ahead is well set out in the RER and commendable as well as very concerning.

It clearly outlines the government's struggle to meet its own self-imposed targets, most of which seem entirely out of reach. However, now we are in election mode, the same rules apply to opposition parties. It is mandatory for them to produce a fiscal strategy.

If they are to have a say implementing a strategy over the next four years, should voters approve, we should know in advance how they would do it.

Aspiring politicians will cheerily tell you they intend to spend funds on "We need to wean ourselves off our growing dependence on the federal government by raising more of our own revenue Project X rather than on wasteful Project Y thinking that will absolve them from the need to explain where the money's coming from.

Regardless of whether diverted funds are to be used, the inescapable fact is that funds will need to be borrowed. Any promises need to show the effects on our precarious fiscal position.

The RER should be compulsory reading for all election candidates.

For others I offer the following precis: Premier Rockliff needs to understand winning fights in the schoolyard will not guarantee a pass.

He appears to understand what's needed but has yet to grasp the magnitude of the task ahead, judging by his disappointing progress to date.

The Mercury, Thursday 22 February 2024


Go Back