Report of the Parliamentary Standing Committee of Public Accounts (No. 18 of 2026) Review of the Tasmanian Fiscal Sustainability Report 2026
Consideration and Noting
Legislative Council, Tuesday 1 September 2026
Ms FORREST (Murchison) – I move –
That the Council note the report of the Public Accounts Committee into the review of the Tasmanian Government Fiscal Sustainability Report of 2026.
Mr President, this is the third occasion on which the committee has examined a fiscal sustainability report, following its reviews of the 2016 and 2021 reports, and I want to acknowledge the work of Treasury preparing this important document, of Mr Gary Swain, Secretary of the Department of Treasury & Finance, Mr James Abbott, the Assistant Director of Economic Policy for their evidence at the public hearing on 31 March this year.
Members will know that the fiscal sustainability report is a statutory obligation under section 14 (a) of the Chartered Budget Responsibility Act 2007. Treasury is required to report on the long-term sustainability of the state’s finances at least every five years, with specific regard to the policies of the government and anticipated demographic change. This year’s report was brought forward to inform the multi partisan budget repair panel ahead of the 2026‑27 Budget.
Mr President, we should be clear about what this document is and what it is not. It is a projection, not a forecast or a prediction. It illustrates what would occur if historical revenue and expenditure growth trends continued without corrective action being taken. It carries no judgement about how likely that outcome is. It is an apolitical document free from influence or interference of the Treasurer or the government. They report the facts.
The committee’s first and most important observation is this. Tasmania’s fiscal position in 2024‑25 was already worse than the worst-case scenario modelled in the 2021 Fiscal Sustainability Report of that year. This 2026 report is explicit that the deterioration since 2021 has occurred at a much greater rate than any scenario contemplated five years ago.
It’s really important for members to get their heads around this.
When we looked at the 2021 report and thought, oh that would never happen. That really bad, worst-case scenario. Well, it has.
The reason it was not going to get worse was because the government wouldn’t let that happen. They wouldn’t allow that. They’d do something. Well, they sure did. They made it worse.
This means the deterioration in our financial and fiscal position has continued under this government’s watch and this parliament’s watch, despite the warnings. Some of us have been warning of this for years, mostly to be ignored or told we were wrong. It wouldn’t possibly happen. Budget reply speeches are full of it. We should all reflect on our roles in holding the government to account for this failure.
Government policy decisions over the intervening period have been a material contributor to the outcome. In 2021, we were told by the then treasurer that the worst case was one the government would not allow to happen. As I said, it did happen.
Members should reflect on what that tells us about the discipline required going forward. Under the historical growth scenario with no corrective action, general government sector net debt is projected to reach $129.5 billion in nominal terms within 15 years, with total non‑financial public sector net debt reaching $146.3 billion once the government businesses are included.
We were told back in 2021 we wouldn’t allow that to happen; we will do something. We’re being told that again. If we take the same approach, as a state, and this government take that same approach, that is where we could end up.
Now we know that the current Treasurer is making a number of cuts to the public sector at the moment, which could have, some might suggest unintended consequences, some might suggest they’re well-known consequences on service delivery, which then has its own costs of its own.
Debt servicing costs would grow from around 2 per cent of revenue today to more than 50 per cent, becoming the second largest operating expense after health. Remember how we all talked about how health consumed so much of the budget. Debt servicing costs would, more than anything else other than health.
Just let that sink in. Debt servicing costs would grow from around 2 per cent of revenue today to more than 50 per cent, becoming the second largest operating expense after health. We are in very challenging territory.
Treasury identified two markers for when the historical trajectory becomes genuinely difficult to correct. Debt servicing costs exceed 10 per cent of revenue modelled to occur in 2029‑30. That’s just literally around the corner. The point at which annual growth in debt servicing costs exceeds the growth in revenue model for 2032‑33. On the strength of that analysis, Treasury concluded that for a 5-to-10-year repair window to reach peak debt is credible and achievable, while a 15-year pathway carries unacceptable risk given the compounding nature of debt and Tasmania’s exposure to external shocks.
I do want to state clearly what peak debt means, because it’s been subject to some public confusion. Peak debt is reached when revenue is sufficient to fund all operating expenses, including interest and capital and equity investments, so that no further borrowing was required.
Sitting suspended from 1 to 2.30 p.m.
Ms FORREST (Murchison) – Just before the lunchbreak, I was speaking about peak debt and what it actually is, according to the definitions that have been provided, but I’ll just repeat what I said as context for what I go on with. Peak debt is reached when revenue is sufficient to fund all operating expenses including interest and capital and equity investment so that no further borrowing is required, so we’re able to pay all our bills without any further borrowing. It’s a point of stabilisation, not a target for debt repayment. It doesn’t mean our fiscal problems are solved and that sort of was the rhetoric being used, you know, ‘Hallelujah, we get to peak debt and all the problems go away.’ They don’t.
The fiscal sustainability report deliberately makes no assumption about paying debt down. Treasury has treated that as a matter for future governments. Three repair pathways were modelled. Reaching peak debt, and by that definition I’ve just provided, in five years requires a cumulative correction of $3.3 billion relative to the historic growth scenario. In 10 years, it requires a $6.5 billion correction. In 15 years an $11.3 billion correction. Treasury’s new computable general equilibrium modelling found that all three pathways are consistent with positive real economic growth and that the least disruptive combination of measures is to pursue expenditure reduction, revenue increases and smoothing of capital and equity contributions simultaneously, rather than relying on any single lever.
Notwithstanding the rigour of the analytical framework, the committee identified two significant gaps, and this is the heart of why the committee is making recommendations to the parliament. First, the repair scenarios have not been translated into practical terms. The report does not quantify the number of full-time equivalent positions that would need to go, the specific revenue measures required to achieve the modelled revenue uplift, nor all the capital projects that would need to be deferred or abandoned. So, whilst it gives you a headline number, it doesn’t tell you how many people need to be let go, what capital projects might need to be deferred or abandoned, or what revenue models or uplifts are required in revenues to deliver on those modelled scenarios. On this point, Mr Swain said to the committee that work had not been done and could not be done, given Treasury was preparing the fiscal sustainability report concurrently with the revised fiscal strategy and the fourth state budget in two years. Now, I acknowledge that they’ve had a busy time, I think we all do and it’s a reasonable excuse, if you like, for not having done that work. But, members should understand the scale of what we’re talking about here. Mr Swain confirmed that labour costs make up 46‑47 per cent of general government sector operating expenditure. Any significant reduction in operating expenditure achieved through that channel alone implies a materially smaller State Service. I and the committee do not consider it acceptable for parliament and the community to be asked to support a budget repair task of this magnitude without visibility of what it actually means in practice.
Second, the committee notes that the report’s methodology, while defensible, may not fully satisfy the act’s requirements, specifically with regard to the policies of government. Treasury has taken the view that government policies implicitly embedded in the historical compound growth rates used, rather than incorporating the budget’s forward Estimates explicitly. Mr Swain explained the reasoning to the committee candidly. It was quite interesting actually because I hadn’t looked at it quite the way he did perhaps, but he said incorporating forward Estimates risks double-counting a policy response that’s not yet been delivered. That is a reasonable methodological choice, but it is a choice. I think, when we’re being asked to approve budgets – and this was done leading up to the election and then subsequent delivery of a budget – we need to understand the scale of the task and what it looks like in practical terms.
The committee welcomed the inclusion for the first time of government businesses’ borrowings, in this fiscal sustainability report. Previously, it had just been the general government sector that was considered but – and this is a matter we’d raised in the pack previously, noting the previous fiscal sustainability reports that, to get a true picture, you need to look at the total state sector. TT-Line, TasNetworks and TasPorts together represent a material and growing fiscal risk. This is something that I’ve called for in the past and I was really pleased to see it included, to provide a better understanding of the total state sector and the task ahead. When we’re relying on some of our GBEs to provide the money to do the things we like and need, others are costing us more money, hand over fist, every time we look around.
Whether that material on growing fiscal crystallises as additional debt on government business balance sheets, or as an equity call on the general government sector, the effect on the total state is the same. As we know, there’ve been times when we’ve put equity transfers to prop up some of our government-owned businesses. A lot of them are not meant to be profitable businesses, some of them are entirely for service delivery. That’s not an unreasonable thing, but we need to be clear about it. The report includes a $500 million reduction in public non‑financial corporation debt as a sensitivity, reflecting the commitment made during the Macquarie Point stadium debate. We’ve just given TT-Line $500 million, over the next few years. How they removed the $500 million, and I spoke about this in my budget reply, was to take out the Cethana Project, which was considered nowhere near advanced enough to include. They didn’t remove debt; it was debt that wasn’t even there in the first place.
In evidence, Mr Swain acknowledged that achieving such a reduction – that $500 million reduction in PNFC debt – given the equity and debt pressures already facing our government businesses, would more realistically require extending delivery timeframes and moderating ambition across the sector, rather than debt reduction as such. I believe this reinforces the case for a statewide approach to capital and equity prioritisation across the general government and the government businesses sectors together, rather than case-by-case decision‑making. Treasury indicates it’s moving in that direction. I also note the equity requirements to keep TT‑Line afloat add to this challenge, with TT‑Line receiving $506 million equity injection over the next four years in the last budget. Of that total, $200 million will be allocated in this current financial year, specifically with the remainder then spread over the following years to 2029‑30. This is in addition to the $75 million bailout provided in November’s interim budget and the $400 million increase to TT-Line’s borrowing capacity approved during the 2025 election campaign. This absolutely highlights why state-owned companies need to be included.
The PAC report was finalised before the disruption to global oil markets arising out of the conflict in the Middle East. The committee heard that Treasury does not yet know which scenario Tasmania faces, a short-term price effect, a broader inflation risk shock or a supply constraint requiring rationing. I’m not sure anyone else knows, though things continue to change. There’s many interesting things occurring around the world in this space as we speak, but I don’t think anyone else knows with any certainty what this conflict will do to the world economy, as well as to our own state economy and further Treasury analysis may be needed once the picture becomes clearer. Given the state’s financial buffers have already been depleted, the committee considered this an area requiring close and ongoing attention.
The committee made two recommendations. First, that the state government request Treasury update supplementary modelling translating the fiscal stainability report’s budget repair scenarios into practical terms, including the indicative workforce implications, specific revenue measures and capital deferral or smoothing requirements associated with each scenario. What we saw in the last Budget was just cutting expenditure and the FSR was really clear: you have to pull three levers if you’re not going to cause harm to one part of the general government operations.
The second recommendation was that any such supplementary modelling be tabled in this parliament. I would hope that the funding is provided to Treasury to do that work well before we get to dealing with the next budget.
These are modest and, effectively, procedural recommendations. They don’t ask the government to commit to a particular pathway. It’s not asking them to pull all three levers, even though that’s what their own Treasury said they should do. It’s not asking for a particular mix of expenditure cuts, revenue‑raising measures or particular decisions around capital project reprofiling or abandonment. What the recommendation asked for are only that the practical consequences of choices already described in the Fiscal Sustainability Report be made visible to this parliament and to the Tasmanian community, so that the debate ahead of us can be conducted on a more informed basis rather than in an abstract concept with no real clear understanding of what we might be agreeing to. This is needed well before we consider any future budget or other appropriation of funds. If there’s to be a supplementary appropriation bill, for example, I would need to see that information before that.
These recommendations, as I said, were settled before the 2026‑27 Budget was delivered as well. So, having now had the opportunity to examine the budget papers and the policy and parameters statement in detail, I want to place on the record why the correction actually offered in this Budget falls well short of this report itself says is required and it goes directly to why the committee’s recommendations matter. The Fiscal Sustainability Report’s own modelling states that even the fastest credible repair pathway, five years to peak debt as defined, requires a cumulative correction of $3.3 billion, equivalent to 25 per cent of projected expenditure on government services. The government has instead committed to peak debt by 2028‑29; that is a three-to-four-year pathway – more aggressive than the FSR’s fastest modelled scenario. Yet the policy and parameter statement shows total identified savings across the forward Estimates reaching only approximately $440 million by year four.
This is not just a shortfall around the margins; it represents a small fraction, well under a fifth, of what Treasury’s own modelling says the considerably less ambitious five‑year pathway requires, let alone the compressed timeframe the government has actually announced. It seems to me that the budget was set without any consideration of Treasury’s document and the clearly laid out task in the Fiscal Sustainability Report.
Nor are these savings the sound base as they are presented. On my reading of the policy and parameter statement, approximately $300 million of the parameter expense movement is simply the reversal of last year’s productivity and efficiency dividend; savings that were assumed rather than identified in the 2025‑26 Budget that did not materialise and that Treasury have now had to reimpose explicitly as a policy line. Part of what is presented as a new correction is the same correction being asked for the second time. At the same time, the Budget carries unfunded and unquantified pressures that this report’s own framework would treat as parameter risk rather than policy choice.
Wages are funded at 2.5 per cent, while known enterprise agreement outcomes are running around 3 per cent or higher. On Treasury’s own sensitivity figures, that gap alone is worth in the order of $235 million across the forward Estimates, equivalent to some 400 to 500 further positions before a single deliberative workforce decision is made. Non‑salary indexation is capped at 2 per cent against the Budget’s own economic chapter, which projects CPI at 4.5 per cent in the near term. There is no budget or provision for the cost of separating the workforce that the savings task implies. Redundancy payments of up to 48 weeks’ pay, leave liability crystallisation, and the transition costs this FSR itself warned are real, even when unquantifiable or unquantified.
I know some of the people who have been let go. Some of them have been there a very long time so, whilst in the budget period we were told, ‘Well not everyone’s going to get 48 weeks’ pay’, well there will be some, but none of them are budgeted for and those that will get 48 weeks’ pay are probably fairly well up the tree in their salary levels. None of its budgeted for.
A $7.4 million shortfall in the Tasmanian Risk Management Fund. That’s unfunded.
A human resource information system, now the human resource transformation project that was the HRIS was the project the Auditor‑General confirmed in his report on this matter will not be completed this year, is funded only until 2026‑27, not the out years and that left a gap in the order of $40 to $50 million. This is on top of all the other gaps, now being, as I said, represented as the Human Resources Transformation Project in DPAC, but still underfunded in the forward Estimates. Doesn’t make it go away.
The revenue side is no more robust. Government business enterprises returns are down $151 million across the forward Estimates, with Hydro Tasmania’s dividend recovery from an underlying profit collapse of 98 per cent in 2024‑25 to projected $515 million profit. That’s $515 million profit by 2029‑30 resting on Basslink, the eggs of coal and wholesale prices I’m sure are at best contestable and I’d perhaps call them fanciful.
The GST, now a soft guarantee which these reports own sensitivity analysis shows it’s worth about $2.8 billion to peak debt outcomes is scheduled to expire in 2029‑30. I haven’t had a chance to fully read the Productivity Commission’s report into this, as Saul Eslake says, the worst public policy decision in our history and this is the very year the Budget’s Fiscal Strategy assumes stabilisation.
Well, let’s see what happens because the Prime Minister has said he will not change the GST allocation for Western Australia under his watch. The next election is not till a few years away, couple of years anyway, so something’s got to give.
The headline $500 million reduction in the public non‑financial corporation debt cited by the government as delivery of a commitment made during the Macquarie Point Stadium debate has been achieved not by retiring debt, as I mentioned earlier, but by removing the Cethana Project from Hydro Tasmania’s borrowing projections. A project that this very report, the FSR – Fiscal sustainability report – found should not have been included in Treasury’s projections in the first place. You remove something that shouldn’t have been there. What a nonsense. They said this should never have been there because it had not reached final investment decision, remains speculative at best.
This is not $500 million of fiscal repair. It is the correction of a projection that on Treasury’s own evidence to the Public Accounts Committee, should never have been there. I raise this because their fiscal sustainability report is unambiguous on the point that matters most to the committee’s recommendations. No single class of intervention is likely to be sufficient and a combination of expenditure control, revenue raising and capital measures, reprofiling or abandonment of capital projects is required.
What was before the Parliament in the 2026‑27 Budget was in substance the savings target pushed through one lever. Largely unidentified operational efficiencies without the workforce, revenue or capital modelling that we all need to make decisions and which this Committee has recommended be provided before we make any further decisions in regard to expenditure of public money. It’s all without a margin in the budget for the unfunded and contingent costs that I’ve outlined.
On the figures Treasury itself has provided to the Public Accounts Committee the correction as currently constructed is not of a scale or a composition capable of delivering the outcome the government has stated or announced. That is precisely why the committee’s recommendation the government commissioned, and table supplementary modelling related to the Fiscal Sustainability Report scenarios into practical terms is genuine and absolutely necessary.
Without it, Mr President, parliament has no way of testing the government’s claims against Treasury’s own benchmark, and on the evidence before me today, the claim does not withstand that test.
Mr President, this report does not tell the government what to do. It asked for further information to help us in our decision making.
It tells us that on Treasury’s own independent analysis, what happens if nothing is done or the wrong things are done and it tells us that the window for orderly correction is measured in single digit years, not decades.
The committee’s findings and recommendations flow directly from Treasury’s own evidence, based on their own report.
Mr President, while the Treasurer claims he has an appetite for ‘turning the fiscal ship before it sinks’, I’m not sure he has the support or courage to do what is actually needed, and I say the support; he may have the courage, but he has to have the support.
We cannot continue to gloss over the cracks and try and alter and control the narrative to things like ‘it’s not that bad’.
We need honesty and transparency, and this is just what this this report is seeking, and I urge the government to ensure Treasury has the resources to do this work, and the government has the courage to act.
Mr President, I again thank the members of the Public Accounts Committee and our hard-working secretary, Simon Scott, for their work on this inquiry. I also commend the Secretary and his team for their candour of the evidence related to the Fiscal Sustainability Report and his appearance before the committee.
Mr President, if members haven’t read the Fiscal Sustainability Report, they should. Also, you should read it alongside the report of the Public Accounts Committee which gives a bit more colour and movement.
We have a huge task in this state. I think the next budget will be very telling. As I’ve outlined in my speech here, but also in my budget reply, there are huge gaps in the forward Estimates. Next year’s forward Estimate is the year we’re going to be looking at the next budget. We need more complete data to enable us to make well-informed decisions, so I look forward to other members’ contributions on this and particularly the government response to the committee’s recommendations.