When Treasurer Eric Abetz delivered Tasmania’s 2025-26 State Budget promising “brightness and optimism,” both Moody’s and Standard & Poor’s have not changed Tasmania’s outlook from Negative. When both credit rating agencies put you on negative watch simultaneously that’s a financial fire alarm.
The Treasurer wants you focused on General Government debt reaching $10.4 billion, characterising this as “peak debt.” What he’s not telling you is that government-owned businesses are borrowing an additional $9 billion over the same period. Even in 2028-29, the year of supposed “peak debt,” these businesses increase borrowings by another $2 billion. Total government debt isn’t peaking at $10 billion. We’re approaching Everest Base Camp. The mountain lies ahead – $20 billion and still climbing.
Three years ago, Tasmania’s debt-to-Gross State Product (GSP) including superannuation ratio was marginally better than Victoria’s. This Budget shows us 4 percent worse. In three years, we’ve become the fiscal laggard.
The Budget shows a wafer-thin surplus of $5.6 million in 2028-29, barely material in a $10 billion budget, but politically crucial. This unachievable figure is manufactured through three sleights of hand.
First, the Treasurer’s Reserve has been cut from $50 million to just $20 million in forward estimates. Actual expenditure from this reserve in 2024-25 was $40 million. This reserve covers unforeseen circumstances. Removing it doesn’t reduce costs, it just pushes inevitable expenses to supplementary appropriation bills.
Second, $150 million in annual “efficiency measures” has been buried with no identified programs cut, no specific reforms, no actual services reduced. These are allegedly to be delivered through “technology investment and better management practices” – bureaucratic code for “we’ll figure it out later.”
Third, multiple programs are funded for only two years of four-year estimates. Police body-worn cameras get two years of funding, then stop. Either the costs weren’t included or funding will “magically appear” later.
The underlying net operating balance (NOB), which excludes one-off Federal grants and shows the true fiscal position, will be in deficit by $3.8 billion over four years. Treasury’s 2021 Fiscal Sustainability Report stated that “incurring debt to fund recurrent expenditure is not considered beneficial or sustainable.” Yet this Budget shows a $1.4 billion underlying deficit in 2025-26 alone. We’re borrowing not just for infrastructure but to pay public service wages, health system operations, and education costs. Previous NOB estimates have proved to be fanciful and unachievable begging the question – why and how can we believe this?
Tasmania’s economic growth for 2024-25 is zero percent. International exports declined 4.4 percent. The forecast for 2025-26 is just 1 percent growth. The “strongest-growing state economy” has stalled, yet the Treasurer devotes barely a paragraph to this fundamental shift.
The revenue projections depend heavily on resumed strong returns from government businesses. The problem? Hydro Tasmania suffered a 96 percent profit collapse. TasNetworks achieved only one of six performance targets, with net profit falling 75 percent short of projections. TT-Line is relying on government bailouts to avoid insolvency, with vessels sitting idle. The Budget excludes further equity injections, around $70 million annually, likely needed to keep TT-Line afloat.
If these enterprises can’t generate assumed dividend income, the revenue projections collapse. The credit rating agencies see what I see: a government counting on returns that have collapsed.
The Fiscal Strategy assumes a reduction of 2,800 full-time equivalent positions through “vacancy control and natural attrition.” Anyone with public sector workforce management experience knows this is fantasy. Natural attrition typically runs 5-7 percent annually. Achieving 2,800 FTE reductions through attrition alone would require years, feasible only if simultaneously reducing service levels, which the Budget explicitly claims it isn’t doing.
Getting anywhere near 2,800 reductions in the Budget’s timeframe requires compulsory redundancies on a scale not seen in Tasmania for decades. There’s no funding for redundancy payouts.
During this fiscal crisis, the Government commits $609 million for Macquarie Point Stadium, plus $22 million annually to operate the development corporation and pay interest. When you’re maxing out the credit card for groceries, buying a boat is not prudent financial management.
The Government attempts to blame COVID for fiscal deterioration. Between 2020-21 and 2024-25, the Government produced 13 estimates predicting surpluses but hasn’t achieved one. The dramatic deterioration occurs from 2023-24 onwards – after COVID, not during it.
The pre-COVID Treasury 2019 Fiscal Sustainability Report explicitly warned that maintaining fiscal sustainability would require “consideration of sources of revenue.” Despite Commonwealth Grants Commission assessments suggesting Tasmania isn’t fully utilising revenue-raising capacity, this government has made touching revenue completely off-limits.
The pattern from here is depressingly predictable. Within months, supplementary appropriations will be needed. Within a year, the 2026-27 Budget will push “peak debt” out another year. Within two years, we’ll face a genuine fiscal crisis making today’s problems look manageable. Appropriation bills are not money in the bank. They are an authority to spend that amount and come back for more when you run out. The 2024-25 Supplementary Appropriation bill was $489 million.
We face zero economic growth, $1.4 billion underlying deficit, debt heading toward $20 billion, credit ratings on negative watch, and a $609 million stadium commitment. These aren’t isolated failures but symptoms of a decade of deferred decisions and political cowardice masquerading as fiscal management.
When the reckoning comes, and it will, Tasmanians should remember we were warned. The numbers were there in black and white.
Hon Ruth Forrest MLC
Independent Member for Murchison
10 November 2025