Balancing the Budget well – nigh impossible in future, given falling revenue from Government Businesses.
Tasmania enters 2026 facing not only a general government fiscal crisis, but a system-wide deterioration across the entire Public Non-Financial Corporation (PNFC) sector. For decades, government businesses quietly stabilised the State’s finances. Dividends and income tax equivalents consistently exceeded grants and equity injections, delivering a net positive contribution to the budget. The government has long acknowledged their importance: its Fiscal Strategy even requires government businesses to make a positive cash contribution each year.
Yet the 2025/26 Budget marks a historic low, with the PNFC sector forecast to subtract $421 million from the general government. What alarms observers is not just this collapse, but the implausibly sharp turnaround projected over the Forward Estimates, driven largely by optimistic assumptions about Hydro Tasmania’s future returns. In a state where government businesses are essential to economic and community wellbeing, the PNFC sector should be central to any discussion of fiscal sustainability. Instead, it is treated as a footnote.
The uncomfortable truth is that many government businesses are increasingly unable to pay their own way. In some cases, the label “business” stretches credibility. TasRail, TasRacing and Sustainable Timbers Tasmania cannot service borrowings under their current models. Others face escalating capital demands, rising debt and structural revenue constraints that make long-term viability uncertain. Any credible fiscal repair plan must include full transparency on net cash transfers between the general government and its businesses.
Hydro Tasmania illustrates the scale of the challenge. Its era of arbitrage profits is over. The future is one of regulated interconnectors, Basslink, and eventually Marinus, where returns are subdued and tightly controlled. Hydro also faces enormous capital demands: the Tarraleah redevelopment, the proposed Cethana pumped hydro scheme, and the ongoing cost of maintaining ageing dams. Whether Hydro can justify or sustain this debt is unclear, and the claimed $470 million annual benefits from Marinus remain highly questionable.
TasNetworks faces its own structural pressures. Declining returns have coincided with a steady build-up of debt, driven partly by a dividend policy that extracted high after-tax profits and left the business short of cash for essential capital expenditure. Borrowing filled the gap. The situation has deteriorated to the point where the North West Transmission Developments which are core to Marinus, now require a government equity contribution. TasNetworks’ ability to fund future capital programs without further support is increasingly doubtful.
TT Line is in even more precarious shape. Its existing cash flow cannot cover even the annual rent on the Geelong terminal without incurring a loss. Interest on the new ferries – around $48 million – was capitalised while the vessels were uncommissioned. In 2025–26, ferry interest will hit the P&L, and the following year the full cost of the long-delayed Berth 3 will land. Solvency risks are real, and further equity injections are inevitable.
TasPorts faces mounting capital pressures, particularly around the Macquarie Wharf 6 redevelopment, where cost overruns remain a significant risk. Its business model is stretched, with limited capacity to absorb shocks without passing costs to users or seeking government support. As infrastructure ages and climate-related demands grow, more equity contributions are all but certain.
The Macquarie Point Development Corporation is exposed to escalating risks from the stadium project. Cost overruns are emerging, and the business case remains weak, with a benefit-cost ratio of just 0.5. The likelihood of the government “capturing” stadium benefits as revenue is low; far more likely is a one-way stream of public outflows.
These PNFC pressures sit atop a broader collapse in expenditure discipline. Since 2022/23, overspends have reached $2.3 billion – nine times the COVID-era total. Over seven years, departments overspent $3 billion beyond parliamentary approval. Three elections since 2018 delivered $4.4 billion in promises. COVID showed what disciplined spending looks like; early elections in 2022, 2024 and 2025 suspended Parliament and paused committee work, removing oversight when it was most needed.
Rejecting the Budget Accountability and Oversight Committee was a historic missed opportunity. Those warning about debt voted against transparency. The committee had no binding powers – only the ability to publish findings and require government responses.
Real fiscal repair requires five actions: establishing agreed fiscal facts; developing a five- to eight-year repair strategy mixing restraint, revenue and federal-state reform; treating budgets as binding contracts; creating an independent Parliamentary Budget Office; and conducting comprehensive governmentowned business governance reviews.
Tasmania did not arrive here through misfortune. Deliberate choices created this crisis: announcements over delivery, optimistic assumptions over rigorous analysis, political advantage over fiscal responsibility. Treasury warned us. Credit agencies downgraded us. The Public Accounts Committee documented the failures. TT Line faces insolvency. The stadium proceeds on fantasy economics.
Meanwhile, declining PNFC cash flow has gone largely unnoticed. Businesses with regulated income or constrained pricing – like TT Line and TasPorts – no longer generate enough cash to replace assets, service borrowings or pay returns to government. The PNFCs are now likely to be a far greater net drain on the budget than in past years.
The question is whether the government will confront reality or continue pretending that equity injections can fix structural insolvency. Tasmania must choose fiscal truth over political convenience. The consequences of failure will be borne not by today’s decision makers, but by the next generation.