Published: 26 May 2015

ONE would have expected dancing in the street – or at least an acknowledgment – after the news that Tasmania may have dodged a bullet. Hidden in the Federal Budget papers is Tasmania’s projected share of GST for the next three years at $500 million more than expected a year ago. The Hodgman Government’s response has been remarkably subdued.


Our good fortune will be made apparent when the State Budget is unveiled next Thursday. A better than expected fiscal outlook will no doubt be sold as a triumph for good management. 

In any event it’s a life saver.  The gradual rundown in our cash reserves together with our inability to service further borrowings meant a hand-to-mouth existence was likely for a few years. Now there’s a little breathing space. 

The recent tantrum thrown by Western Australia when it discovered its GST share for next year was only 30 per cent of what it would have been on a strict per capita basis, compared to Tasmania’s 182 per cent, served to highlight our special treatment. 

But to consider only GST and not other payments for specific purposes (such as education, health, skills and workforce development, housing, disability and infrastructure) overstates our overall share of federal funds. 

The Commonwealth Grants Commission assesses funding assistance for each state then deducts specific purpose grants to derive the share of GST.

  Because the specific purpose grants are relatively evenly spread across states on a per capita basis the balancing adjustment via GST is much higher for a state like Tasmania.

A budget should be more than a shopping list, a list of goodies handed out like Santa


Tasmania’s total funding assistance is 147 per cent compared to the per capita average. With specific purpose grants we get roughly 100 per cent the same as everyone else but then get 182 per cent of the GST pool to make it 147 per cent overall.

It’s a big jump from 136 per cent in the previous year. That’s why there’s been a windfall adjustment via GST.

Of the extra funds overall, roughly a third compensates Tasmania for not having as strong a revenue base as other states. Wages are lower therefore payroll taxes are too.

The other two thirds compensates us for the extra costs of delivering services, due to all sorts of factors such as age and demographic status, geographic dispersion and lack of scale.

Overall, this indicates that it costs us 30 per cent more to deliver equivalent services.

That’s the overall picture. This percentage varies between spending areas – health, education, housing, infrastructure for instance.

But the crucial question is how much is it actually costing us in each area? Is it more than the assessed percentage when compared to other states? Are we overspending in some, or all areas? Are we over-delivering? Or maybe we are underspending in some areas or diverting funds elsewhere.

It’s a continual source of frustration not to be able to ascertain this crucial information and potentially identify areas that require specific scrutiny and reform.

Extra spending will always be welcome but we should be careful not to repeat the disaster of the 2010-2011 budget handed down in May 2010 where hopes that we had turned the corner of the global financial crisis, led to a spending spree.

A budget should be more than a shopping list, a list of goodies handed out like Santa.

It’s not simply about whether there’s a deficit or surplus. Fundamentally, it’s about delivering outputs and more importantly outcomes, not just spending the money.

The additional GST from the Australian Government means that we will now be receiving two-thirds of our income from that source.

It is incumbent on us as a member of the federation to ensure extra funds we receive deliver comparable services relative to comparable regions in other states.

We are given extra to deliver comparable services so why are we continually told that services are falling behind and our outcomes are either poorer or not measured or recorded? Something’s wrong and it’s time we sorted it out.


One crucial aspect of the [Commonwealth Grants Commission] advice on funding relativities between states, is that states are never penalised if they misspend. It’s a problem that needs to be addressed.



When our Premier joins other state leaders on a retreat with the Prime Minister to discuss federalism, in particular the planned $80 billion reduction in specific purpose grants to states announced last year, he will be in a better negotiating position if he can demonstrate that Tasmania is pulling its weight.

If he can show that Tasmania has managed to deliver an equivalent level of services, demonstrated by improved outcomes, with the extra funds as assessed by the CGC and that it has not been wasted through inefficiencies or by diverting funds to wasteful non-core areas, he will have a case. While he’s at it he can also confide in the people of Tasmania.

The State Budget is almost immediately followed by the theatre of Budget Estimates hearings where we parliamentarians get to drill down into to some of the spending areas.

But it’s akin to searching for a needle in a haystack.

There’s an oft repeated belief that government employee costs are too high, but against what benchmark?

Budgets are supposed to deliver outputs that are measured in term of outcomes, particularly in the areas of health and education.

There is lots of information about how much the outputs will cost but little on exactly what those outputs are, whether the level of outputs is at a level for which federal funding is calculated and what outcomes have been achieved.

One crucial aspect of the CGC advice on funding relativities between states, is that states are never penalised if they misspend. There is no reporting or feedback mechanism as to whether outputs have been achieved.

There is no requirement to show how outcomes have been achieved and actually delivered benefits to the people who access services funded through this process.

Without this, none of us really knows whether these funds are being spent wisely.

It’s a problem that needs to be addressed.

This article was published by the Mercury newspaper on 25 May 2015

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