Time to be honest about the challenges and work together, before it's too late. The 2024-25 Tasmanian state budget is a catastrophe.

There is no plan to stop debt servicing costs eating up more and more of revenue each year. By 2027-28 almost 10c in every dollar of revenue will be devoted to debt servicing.

Which leaves less and less each year to provide services.

Even with debt servicing costs, operating expenses are projected to fall over the forward estimates.

Exclude them and adjust for inflation and the fall in real terms is 13 per cent.

Forget all the talk about record spending. In real terms the amount to be spent delivering services will fall by 13 per cent over the forward estimates.

The fall in revenue is not quite as acute. It is projected to fall by 5.6 per cent in real terms over the same period.

Does this mean we're slowly closing the deficit gap between revenue and expenses?

Absolutely not.

Apart from falling operating expenses, debt-servicing costs are increasing, general government infrastructure spending is set for record highs, government businesses like Macquarie Point Development Corporation will need massive cash contributions, as will servicing all the past liabilities, such as unfunded superannuation and the entirely appropriate compensation for sexual abuse of children in state care.

In the current year there's an estimated operating deficit of $793m. But the overall cash deficit is $1.1bn higher at $1.9bn.

That will be the increase in net debt for the year.

Each future year will show a similar pattern, so while the operating figure may approach break even in 2028-29, as the Treasurer Michael Ferguson has hinted, because of all the other intended outlays more and more borrowings will be needed.

The Treasurer has indicated at this point debt can be "normalised".

That's a weasel word hoping the reader will be misdirected to think 'stabilised'.

Unfortunately not. When it comes to debt the sky beckons.

In the first Ferguson budget the so-called surplus was going to be delivered in 2023-24. The next budget saw the surplus being deferred until 2025-26. In this year's budget speech we were told the surplus won't occur till 2029-30. Discovering the end of a rainbow is more likely to occur than achieving a surplus. Even so it's meaningless from a sustainability viewpoint due to all the other outlays not included in the surplus calculation. There is no pathway to sustainability in the Treasurer's budget.

In this year's budget, $595m of infrastructure spending on Macquarie Point has been removed from the general government's infrastructure program.

No, that doesn't mean the project has been abandoned, not yet anyway, rather it's been reclassified. A total of $615m has been added as proposed cash injections into Macquarie Point Development Corporation. That way it's largely removed from the general government's budget outcome. It will still need borrowed funds but it won't affect the fiscal balance figure, which is one of the vital measures in the government's fiscal strategy.

Some cynics say it's just an accounting trick so the inevitable stadium cost overruns won't impact the government's already perilous fiscal balance.

Most of the targets in the government's fiscal strategy, which cover debt management and financial sustainability, are well under water at this stage. As yet the government has provided no detailed plans for achieving targets, apart from reference to delusional surplus figures, which makes the overall strategy little more than a motherhood statement at this stage.

The only target that may be achieved, that own source revenue be 37 per cent of outlays, is paradoxically possibly achieved because outlays are projected to fall.

Unfortunately outlays in this instance include borrowing costs, which will make the task harder.

The target will either be achieved due to austerity or fall short because of borrowing costs.

It's a lose-lose situation.

Which sums up Tasmania's current dilemma.

We are currently on a downward spiral. It's about to become a vortex.

It's true that Covid caught everyone unawares. Liability for institutional failures possibly less so. But the liability for unfunded super was entirely predictable, 30 years ago in fact. It's not as if it's been suddenly sprung on the government, like say building berthing facilities for new ferries that were to be delivered in five years' time, though one could argue this was adequate time to complete that job.

As bad as this budget is, the latest fiscal strategy unveiled by the Labor opposition at the recent state election is worse. It must rank as the most deficient public policy analysis it has been my misfortune to read.

We seem to have forgotten the government's role. It's not just a safety net welfare provider. It provides vital services that add social value to all of us, which are many multiples of any dollars spent.

We need to overcome our wilful ignorance, guard against crass self-interest, stop finger pointing, blame shifting, sugar coating and cherry picking and be the leaders the people expect us to be.

We need to honestly face up to what the figures have been trying to tell us for years.

We need to be honest about the challenge and work together before it's too late.

The Mercury, Wednesday 18 September 2024