Fiscal Fiction and Waiting for a Miracle
For years Tasmania has been governed by a budget process that seems designed not to confront reality but to defer it. The latest Revised Estimates Report (RER) for 2025-26, released this week, is the clearest example yet. The Government is not repairing the State’s finances, not recalibrating the forward estimates, and not making the decisions required to stabilise the budget. Instead, it appears to be waiting for a miracle.
This drift has been visible for some time – well before November’s “interim budget,” a term with no meaning in any recognised fiscal framework, simply a label signalling another exercise in can-kicking. Last year, the Treasury Secretary publicly stated that Tasmania’s path to fiscal sustainability was a “mathematical impossibility” under current settings. That was not a political statement. It was a technical one. It meant that, even with optimistic assumptions, the numbers simply do not add up. Expenditure is growing faster than revenue, structural pressures are intensifying, and debt is rising at a pace that cannot be offset by cyclical improvements.
A revealing sentence in this RER appears on page three: “No policy variations are reflected in this Report.” Despite both credit rating agencies downgrading Tasmania in the last year and pages documenting risks in the Budget papers, the Government made zero policy decisions.
Yet the Government has committed to some of the largest capital projects in the State’s history. It is proceeding with Marinus Link and the new stadium. The true financial position of Hydro Tasmania is clearer, no thanks to the Minister for Renewable Energy and Obfuscation. The very entity relied on to generate dividends needed to help rebuild the State’s finances is no longer a fiscal anchor.
Against that backdrop, the 2025-26 RER should have been the moment to reset the conversation. The State received a substantial GST windfall – the kind of revenue upgrade that gives governments breathing room to stabilise the operating position, slow the growth of net debt, and begin repairing the structural deficit. Instead, the entire uplift has already been absorbed. Not by policy choices, but by parameter adjustments.
The Policy and Parameter Statement tells the story. There were no policy changes – none. Parameter adjustments are supposed to capture non‑policy revisions such as indexation and reclassifications. In practice, they have become the Government’s preferred hiding place for structural cost growth.
Health alone receives $45 million in parameter adjustments in 2025‑26, with similar amounts across the forward years. These are not administrative tweaks. They reflect rising hospital activity, emergency demand, wage drift, and cost escalation. These are structural pressures that should be transparently acknowledged and built into the forward estimates. Instead, they are buried under a technical label.
The pressures are not confined to Health. The Department for Education, Children and Young People requires an additional $159 million over 4 years for Out‑of‑Home Care, yet we are told this “is expected to be managed within current Budget allocations without additional funding.” The Tasmania Prison Service faces $131.2 million in cost pressures. Police require $60 million more for workers’ compensation. These are not marginal variations – they are system‑wide signals of a budget under strain.
Then there is the overarching statement that parameter variations “include additional expenditure to reflect the risk that agencies may be unable to continue delivering services,” followed immediately by the extraordinary caveat: “The inclusion of these variations does not represent a commitment by the Tasmanian Government to provide additional funding and does not constitute a policy decision.” In other words: just because it’s in the forward estimates, don’t assume the Government intends to fund it. That is an astonishing admission.
Meanwhile, the Department of Police, Fire and Emergency Management ‘saved’ $43 million per year due to a revised accounting treatment for payment for the Tasmanian Government Radio Network. Some ($22 million) was shifted to borrowing costs yet that figure barely moved. We’re in deep delusion territory. If someone told me the Treasurer measured the track for the Hobart Cup I’d be tempted to believe them.
Strip away the technical movements and the picture is simple: the GST windfall has been entirely consumed by real cost growth and we haven’t even started the reform process.
The acid test for any RER – is it sufficiently robust to serve as the statutory base for a Pre-Election Financial Outlook (PEFO)? The answer is no.
Last year, Treasury could not use the Government’s 2024/25 RER as the PEFO base because forward estimates hadn’t been properly revised and key demand-driven pressures had not been quantified. Treasury went back to the 2023-24 actuals. The resulting PEFO showed a worse fiscal position than the Government had been presenting.
The same conditions exist today. Forward estimates have not been recalibrated. Structural pressures have been buried. Accounting reclassifications have smoothed the optics. And no policy decisions have been made to address the underlying imbalance.
A RER that would not serve as the basis for a PEFO has failed its most important test. It adds nothing to transparency and does nothing to address the “mathematical impossibility” identified by the Treasury Secretary.
The Government would prefer Tasmanians focus on the headline deficit for the general government improving from $1,008 to $917 million. But the Underlying Net Operating Balance – stripping out one-off Commonwealth infrastructure grants – tells the real story: a structural deficit of $1,337 million. Keep reading the RER and you’ll discover the Net Debt for the overall Non-Financial Public Sector which includes government businesses barely moved.
The 2026-27 Budget looms as a moment of truth. The Government will need to include deferred election commitments, address unfunded agency pressures, make decisions on government business support, and deliver $150 million pa in efficiency dividends with targets yet to be chosen.
Tasmania does not need another document that waits for a miracle. It needs a government willing to confront reality.