Admitting there’s a problem is the first stage in any recovery.

The Premier hasn’t done that yet.

He still says our debt is manageable. His State of the State speech told us “Labor left a debt legacy” but now “under the Liberals that debt burden was lifted”. That’s utter nonsense.

Labor left a large unfunded superannuation liability. Perhaps not a debt in the strictest sense, but a liability that required servicing just like a loan. For all intents and purposes, it was a loan.

Labor chose to spend each year borrowing from the future rather than borrowing at the time to make contributions.

But the Liberals have done the same. They haven’t set aside anything for defined benefit employees not even Super Guarantee amounts. Over $1 billion have been spent on other budget outlays rather than paying superannuation.

Fortunately, there are now only 2,800 such employees not yet retired, less than 10 per cent of total employees.

The Premier further claimed, “we have close to the lowest debt to revenue of all the States”, ignoring the defined superannuation liability, barely a minute or two after accusing Labor of leaving a debt legacy. Both cannot be true.

Chickens are now coming home to roost. Unfunded super commitments are set to peak in about 8 years time. Even though the government will need to find $500 million at the peak, as a share of total outlays it was manageable.

But it’s the growing deficits caused by other government commitments, not just ordinary operations and infrastructure spending but other liabilities such as historic child sexual abuse compensation which have now made our position unsustainable. More debt will be required each year to service existing debt.

Hence more borrowings are not a solution.

Plan B is to raise more revenue. The government has included this in its fiscal strategy, specifically to lift the proportion of own source revenue to fund 37 per cent of spending, up from the current level of 30 per cent. In current dollar terms that’s another $500 million at least. This will need higher taxes, higher charges for government services or higher returns from government businesses which imply higher charges by those businesses. The government has categorically ruled out all three options and is now searching for a magician to find another.

It begs the question why it bothered with a target when it immediately ruled out most ways to achieve it.

The only conceivable way the government can raise own revenue equal to 37 per cent of outlays is to reduce spending. Plan C.

That’s what is happening.

Despite the Premier saying the government rejected a slash and burn approach, spending on current operations excluding debt servicing costs is projected to fall in real terms. This is the only way the target for outlays as a percentage of own source revenue will be reached.

But the latest Supplementary Appropriation request for another $467 million to cover budget blow outs this year, with more bound to follow in the upcoming budget, means the target is further under threat.

What to do? Plan D. Sell assets.

But this only makes a modicum of sense if debt can be reduced so servicing debt and paying current needs and past liabilities don’t require more debt.

That’s a most unlikely scenario. There are no foreseeable cash surpluses.

As a business, bus operator Metro has negative value when one considers the grants needed to provide this vital service. Just like Tas Rail’s privatisation was a dumb idea.

In the case of TasNetworks there is a specific clause in the Electricity Companies Act preventing its sale or disposal (including lease). Even so $1.3 billion in sale proceeds, the value of the company essentially determined by the Electricity Regulator won’t be enough to stop our debt from continuing to increase.

Imagine if the proceeds were used to offset unfunded superannuation. Whereas now the government must pay 80 per cent of any future super benefit as it arises, that amount may become around 70 per cent. We are past the point at which asset sales are going to make much difference even if they otherwise may make good policy sense.

The other government business flagged for possible sale is MAIB. This entity is literally the goose that lays golden eggs. It’s a tidy well-run company which has paid returns to government totally $895 million in the past 10 years.

With the sale of government businesses, the government will forgo not just dividends but income tax equivalent payments. In MAIB’s case over the past 10 years that’s $323 million which will be lost to the state entirely if MAIB passes from government ownership. Has this been thought through and understood?

Things are desperate when government trots out plans to cut red tape, review efficiency and search for non-essential jobs to eliminate.

Perhaps the starting point may be to look at the firebreak of ministerial minders who have shielded their bosses from reality, by helping mislead us, by refusing to acknowledge the difference between operating results and overall cash outcomes, by pretending debt is manageable, by claiming a surplus is just around the corner, by kicking the can down the road to the point where all that is left are pathetic plans that mimic the worst of what’s happening around the world.

The Mercury, Monday 10 March 2025