The 2025-26 Tasmanian State Budget, which may never proceed following a successful no-confidence motion in the Premier is a stark reminder of the fiscal crisis we are facing. Despite years of warnings and clear evidence of the need for remedial action, the government has failed to address the growing financial challenges. This budget is not a roadmap to recovery; it is a red flag waving over a deepening fiscal chasm.
The current fiscal situation is worse than the worst-case scenario predicted in the 2021 Fiscal Sustainability Report (FSR). The debt level for 2025/26 mirrors the worst-case scenario for the same year in the 2021 FSR. What exacerbates the situation is the significantly higher interest rates compared to 2021, causing the debt to accumulate at an alarming rate.
It is evident that the government has ignored the warnings from past FSRs, as has the Opposition. The 2021 FSR highlighted the long-term constraints of high Net Debt, including limited fiscal flexibility and higher debt servicing payments. These constraints hinder the government's ability to fund essential services and respond to unforeseen events. Unfortunately, no corrective measures were taken, leading us to the disastrous position we are in today.
The 2025/26 budget predicts interest on debt at $700 million in 2028/29, nearly three times the worst-case scenario in the 2021 FSR. This is a recipe for impending calamity, especially if interest rates continue to rise as lenders demand higher rates due to falling credit ratings. Our own source revenue is now funding less than 30% of expenses, a proportion that has never been so low.
Despite the dire situation, there are no policy decisions to include any options for increased revenue. In real terms, spending on current operations is falling, with increasing debt servicing costs and past liabilities leaving less for ordinary operations, that is the delivery of services.
The government's Fiscal Strategy, adopted two years ago, comprised eleven strategic actions and targets. Two years later, most of the targets are out of reach, and there is no plan to achieve them. Setting targets without plans to reach them is pointless.
One of the targets relates to a framework for assessing large infrastructure projects. The target was to have a positive Benefit Cost ratio, but this goal is hardly ambitious. Surely we would not consider a project that had a negative benefit on the community!
The fiscal strategy still includes eleven separate targets, many of which are vague, redundant, or irrelevant. Only one target, that infrastructure investment exceeds depreciation, is being met which is hardly aspirational. There are no ten-year projections, no clear path to surplus, and no structural reform.
The government's policy of including efficiency dividends in budgets as bulk savings amounts is essentially a lipstick-on-a-pig exercise. These unallocated amounts get embedded in the budget over time, but we never discover exactly what programs are impacted or who is monitoring the savings. Rebranding a project from a Budget Efficiency Dividend to a Productivity and Efficiency Measure suggests more lipstick.
There are numerous avenues for cost blowouts on upcoming infrastructure projects. Public infrastructure planners seem to operate under the principle that the government will always pay, leading to projects being commenced with too many unknowns and inadequate planning and subsequent cost blowouts.
The government claims there is a sensible path forward, but everywhere you look, targets are hopelessly underwater with no hints about fixing them. The government is engaged in a wilfully misleading deceit of the people of Tasmania. There is no sensible path to surplus. We missed the boat years ago.
The government turns a blind eye to unfavourable reports and even attacks the professional integrity of those who provide them. We are in a sad and sorry state, and this budget shows where years of inaction have gotten us.
We are almost past the point of no return.
What options are there? Borrowing more won't work, as we can't service existing debt. Selling government businesses would provide only a temporary solution and quick sugar hit with nasty hangover afterwards. Cutting spending is the current plan, amounting to austerity, which is not what the people are demanding. Raising more own source revenue is essential, but the government is not prepared to take action to achieve it.
We need a rebalancing of our economy and any reform requiring cross-party support, which is currently lacking.
We must work with the Federal government on Federal-State financial relations in a proactive and meaningful way. Ignoring the warnings and misleading the public is disgraceful. This budget defers the reckoning, delays the repair, and denies the depth of the challenge. We can do better, and we must do better for the sake of our economy, services, and future generations of Tasmanians.
Hon Ruth Forrest MLC
Independent Member for Murchison
6 June 2025