Published: 02 June 2015

 2015 will no doubt bring challenges, surprises and the inevitable good with the bad. Tasmania’s future will continue to be uncertain until there is a shared understanding of the problems the State faces. It will be easier to solve problems together if we can develop such an understanding. 


Steve Walsh from Unions Tasmania presented his views on Tasmania’s predicament in a recent opinion piece published in The Mercury, saying now is not the time for austerity measures. 

Austerity has been shown to be harmful for recovering economies around the world which means Mr Walsh’s proposition may well be true for Australia as a whole but unfortunately that doesn’t make it true for Tasmania as a part of the Federation. This is predominantly due to our financial dependence on the Australian Government. 

Next year 2015/16 will see only 35% of State Government revenue raised locally, a 15 year low. The balance of 65% will come from Australian Government grants. Grants which will come under pressure in future years if: 

Australian Government revenue growth slows. This is entirely possible as it seems to be the worldwide pattern;

the Australian Government imposes more austerity; 

other States’ GST amounts are increased following formulae changes to the way the Grants Commission splits the GST pool; and/or  

other States’ GST amounts are increased under the existing formulae particularly as the mining States are compensated for falls in their mining royalty income. 

If one occurs it will be a blow. If all four happen it will be the perfect tsunami. 

Tasmania is not in a sound fiscal position despite Mr Walsh’s claims. The State does indeed have low debt compared to other States, but this is in part due to the fact that debt has been loaded into government businesses. And overall debt in our Government businesses continues to grow. 

In addition it must not be forgotten that Tasmania has a relatively higher unfunded superannuation liability than many other states and this is not included in the calculation of Tasmania’s Government debt. 

Even if debt and liability levels were more favourable, the simple reality is the Tasmanian Government cannot service additional debt. 

Cast aside all the talk about net operating balances, underlying fiscal positions or whatever term is used to confuse rather than explain, the simple reality is that in cash terms, i.e. money in and out, the Liberal government plans to add another four years of cash deficits to Labor’s record of six consecutive cash deficits. 

Coinciding with Mr Walsh’s opinion piece The Mercury also printed a note from the Premier suggesting we are headed in the right direction. It would have been preferable if the Premier had taken more time to outline the challenges facing us in the upcoming year. 

So it seems we’re flying blind... apparently in the right direction. 

Mr Walsh’s sins of omission were that he failed to distinguish between the roles responsibilities and possibilities of the State and Federal governments. 

Mr Hodgman tacitly accepts that austerity at the State level is the only way forward, which if one adopts a voluntary revenue constraint, is probably true. 

The austerity solution as presented unfortunately blurs the distinction between boosting the economy and restoring the fiscal position of the Government.

The links between a stronger economy and increased State Government revenue is a little tenuous, not least because of the narrow base of many of our State taxes. 

What is of real concern is that we can’t even be sure there will be significant cash savings flowing from public sector job cuts. Savings should be measured as net cash savings. Late last year I asked the Government for the estimated cost of superannuation payouts for departing employees. They were unable to provide a figure. For long serving employees the savings between paying a pension and paying a salary may be quite small. 

There is a real risk that inappropriate cuts can cost more than the savings proposed, especially if outsourcing is required to fill the gap. In addition ill-considered cuts to staff positions can result in the undermining of service delivery in the quest to demonstrate measurable cuts or savings simply because these attract media attention. 

The need for a lean and efficient public sector is clear. In achieving this we need to be mindful that efficient delivery of government services is not simply doing more with less. It also involves allocating resources to doing the right job, and being constantly ready to adopt new ways of doing the right job. 

I’ve long believed and suggested that a Parliamentary Budget Office (PBO) should be established in Tasmania. The PBO would be responsible to Parliament rather than to the Executive. 

The PBO would prepare robust nonpartisan analyses and summaries detailing the financial performance of government departments, agencies and businesses. This would provide a much needed supplement to the information already provided by the Auditor General. 

If the PBO were also charged with describing the areas where reform was needed and setting out the options, then the necessary well informed public discussion would enhance the possibility that we will find a common solution. 

While Tasmania will always survive, it may well be despite not because of the State Government. 

I cannot recall a more crucial time to reshape the future of our State than that presented by the current joint reviews of the federal system and the tax system. 

If we don’t manage to agree on a non partisan way forward it will be a heroic wasted opportunity. It will be an indictment on all concerned if we allow Tasmania’s submissions to be finalised behind “closed doors in the Premier’s department” with the occasional spin enhanced leak. 

If it ends up being a take-it-or-leave-it proposition similar to the Government’s attempts to impose wage restraint then I’m fearful for our future. 

I am gradually persuaded by the view that we don’t have the necessary shared understanding and agreed processes in place to facilitate any meaningful change. We live in a developed society with intricate social infrastructure networks.

Yet our ability to change and move forward together has deserted us. 

Having a majority government is neither a necessary nor sufficient condition for implementing change. Community consensus is. This cooperative approach needs to start in the Parliament. No one person or one party is custodian of all good ideas or solutions to the challenges we face. We must find and pursue the right direction with open eyes and minds.

Hon Ruth Forrest MLC  Independent Member for Murchison     NOTE: This opinion piece appeared in the Mercury Newspaper on 15 January 2015 and was titled 'Parlous condition of state coffers demands a consensus approach'.    

Go Back