Legislative Council, Tuesday 21 May 2024

Ms FORREST (Murchison) - Mr President, I congratulate the government for the speech prepared for the Governor. I believe it is possibly the first speech in this parliament to be prepared by AI. AI is such an amazing tool. If you feed in a wish list, instruct the ChatGPT bot to access every possible motherhood statement in cyberspace and press the button and what you will get is what the Governor read out last Tuesday.

My comments are not a reflection on Her Excellency the Governor in anyway. As we know, she reads out what the government gives her. She would have been more likely to use the word electrician rather than 'sparky' if she had the opportunity to alter the speech in anyway, let alone all the other bits. It really was an amazing speech, completely disconnected from the reality facing us. There were no details whatsoever to our current fiscal position and not one mention of where funds will be coming from to do everything listed.

It continued the pattern of the election campaign, which highlighted a conspicuous lack of discussion about our current budgetary position. The only thing that mattered was pitching proposals for more spending. No consideration has been given as to where the funds are coming from. The Liberals were silent. The Labor Party's fiscal strategy was an absolute disgrace. A polemic rant that did not address any of the issues. I do not know if anyone took the time to read it but I would not bother. The Greens did not even bother with the fiscal strategy. The Jacqui Lambie Network went one better; they did not even trouble us with any policies.

So here we are, back in the land of the living, picking over a speech by what could and likely was prepared, at least in some part, by a ChatGPT bot. There was nothing particularly new revealed in the speech. It was more a wish list one would hear at an election campaign launch, not a program from a government entrusted to govern for another term. I expected more detail from the party in-charge for the last 10 years, which must be aware of every challenge. Even an indication of the plan to address these real challenges, the so-called 'Strong Plan', but no. Nothing.

It is not as if we have been ambushed by our fiscal problems. They have been evident for a long time now. The reality was revealed for all in the revised estimate report in February 2024 and confirmed by the pre-election Financial Outlook Report a couple of weeks later. What was revealed there is that we are spending more than we are receiving in revenue. In the current year 2024-25, there will not be enough operating revenue if capital grants are excluded to cover operating expenses, especially once the funds in the Supplementary Appropriation bill before the House currently, are spent.

This does not include interest on loans and payment of unfunded superannuation for retired members of the Defined Benefits Scheme. It does not even include that. Interest this year is expected to be $128 million, possibly more, given the supplementary appropriation bill had not been factored in. Unfunded superannuation payments are expected to be $352 million. That's another $480 million that needs to be borrowed. That is right - another $480 million that will need to be borrowed.

Then there is what the government plans to spend on capital expenditure. Fortunately, we do get Federal government grants to cover almost half the capital expenditure costs, but we still have to come up with the other $590 million from our own funds. That will mean another $590 million in borrowings. Then there is the cash that needs to be put into government businesses - another $317 million to be borrowed, according to the revised Estimates report. I am not making this up, Mr President, it is all in Treasury reports.

There is no respite on the horizon. The forward Estimates suggest lower cash deficits in future years, but that assumes the $300 million in budget efficiency dividends can be found. Even if they are discovered, one can only guess where the $1.4 billion in election promises are to fund and build a stadium, for example.

On the other point, we are yet to hear any more details of the government's plans for Macquarie Point 1.0. It was originally planned for the Macquarie Point Development Corporation to oversee the planning and delivery of the stadium. Stadiums Tasmania would become the owner and operator. That is clearly outlined on the Macquarie Point Development Corporation's website. However, a couple of weeks ago, there was talk about a new public/private partnership arrangement with Plenary Partners when Cox Architecture was granted a design contract for almost $40 million - for exactly what, we are not quite sure, but part of the $715 million stadium budget, we are assured. I will have a question about that later - but do not get alarmed folks, 'it is all under control'.

If this really was the case, why would you not tell us how we are going to do all this; or do we have to start asking directly? The answer is probably 'yes.' There are a few questions that I will follow up at another forum; but who are Plenary Partners and what are they doing? Just sniffing around? Or has the government started doing deals with them and signing agreements with them?

I thought the regular meetings with the Jacqui Lambie Network members would have already ensured a steady flow of information as to what is happening? Not yet. I have not detected any noticeable change in the amount of information that is coming out.

Getting back to the specifics of the Governor's speech, there was one matter that I thought I detected a change in the wind. I note from the speech - and it is a shame the minister for Energy is not here, although I appreciate he is unwell - it said:

In recent years, Hydro has drifted from its foundational principles. Hydro will return to those foundational principles with a new Ministerial Charter and directive that Tasmanian prices and Tasmanian jobs must come first.

What exactly does that mean, Mr President? It is a shame he is not here to answer the question, but I am sure he will have an answer when he comes back at a later time. I am sure he is watching what I have to say. What are the foundational principles? I hope that the minister does get the opportunity to reply to the Governor's address at a later time so he can make it clear what that is. The old Hydro built and owned generation facilities. The speech goes on to say:

Hydro will be directed to partner with energy generators to build and deliver energy products to market that benefit Tasmania.

That is not returning to the foundation principle, is it? That is what they did. It sounds like public-private partnerships are going to take over power generation, as well as the stadium. I ask the minister, who is probably listening: is that the case, minister? Is that what we are talking about here?

The biggest problem with public-private partnerships, as we all know, is that government ends up with the losses and the privateers end up with the gains. If you do not believe me, just have a look around the country to see how they mostly pan out. It does not make much sense, from my perspective, for the government to borrow to make losses alongside a private partner who borrows and makes profits. That is the classic problem for government borrowing for infrastructure. Not enough importance is given to getting a return for government. Most of the returns accrue privately.

The speech at one point said:

"We shall keep our economy strong so it can deliver the infrastructure and services Tasmania need and deserve".

We can only deliver the infrastructure and services Tasmanians need and deserve, if we get a return when we spend funds to improve infrastructure and services.

Will the stadium satisfy the government's Strategic Action No 9 in their Budget papers - part of the government's fiscal strategy?

Sitting suspended from 4.00 p.m. to 4.30 p.m.

ADDRESS IN REPLY

Resumed from above.

Ms FORREST (Murchison) - Mr President, before the short break, I was asking a question about whether the stadium will satisfy the government's strategic action No. 9, part of the Government's fiscal strategy, which is about the minimum cost-benefit requirements needed before a project proceeds. This is the government's own strategy; they were advised a number of years ago, as you probably recall. No-one yet has made it clear whether that will meet that strategy. Obviously, it is a matter that can be followed up at later time later this year with the Budget, because it will again be referred to there.

The revised Estimates report said, in February, that the standards are still being developed. I ask, how is that going? Can you give a green light to a project if you are yet to develop the standards by which the project needs to be judged? If a public/private partnership results in the government bearing the losses and the private sector making the profits, then how will the government be sustainable? Did we not learn that lesson from Basslink? If a public/private partnership results in the government bearing losses and the private sector making profits, then how will the government be sustainable? One thing is crystal clear, if the private sector cannot make a guaranteed return, then they will not become a partner. Because the government has shown its hand on this whole matter, it is not in a good bargaining position right now. We also know that they are perhaps not the best negotiators going around when making deals with our money, if the AFL agreement is any guide.

In this negotiation, everyone knows that the government is not even holding a pair of twos. He will not be able to bluff anyone, and it all suggests that we are about to get screwed. What has been interesting in some respects, and quite disconcerting, is the recent commentary about Tasmania's unfair treatment by the Federal Government. The Treasurer, Michael Ferguson, and representatives of his party at the Federal level, have chosen to point the finger at the Commonwealth, which is handing out grants to states, for the alleged mistreatment of Tasmania. Mr Ferguson accused the federal Treasurer, Jim Chalmers, of leaving Tasmania off the fiscal map, saying that state requests for funding for the Launceston General Hospital Masterplan, the Greater South East Irrigation Scheme and the Burnie Court Complex have fallen on deaf ears. Those are his words.

I argued in a recent Mercury opinion piece that this was a bogus proposition, as those grants will be quickly clawed back via reduced GST distribution. Senator Duniam reportedly called out the 'unfair' decision to exempt the Brisbane Olympics sporting infrastructure from GST calculations, while the Macquarie Point stadium was not being afforded the same treatment. He said the move was 'a crippling blow' to Tasmania's finances. With GST flows being the state's single biggest source of revenue, we are getting ripped off, he reportedly added.

One of the biggest advantages Tasmania has enjoyed is having a body like the Commonwealth Grants Commission determine the way the GST pool is distributed between the states. It has been a blessing, particularly for Tasmania, to have a clear set of rules predicated on the unquestionably fair desire to see all states being able to deliver equivalent services to their populations; and being a small population state, that is critical for us. Whether we, as a state - or any state - spend that to deliver equivalent services to their population is another issue. The Grants Commission's remit is to give every government equally the opportunity to do so.

What is the alternative, if we just ignore that, as is being suggested? A sports rort, as was perfected by the Morrison government perhaps? Introduce a spreadsheet with colour coded electorates to replace the system based on revenue raising ability and measurable need. The latter, a system based on revenue raising ability and measurable needs, is what the Commonwealth Grants Commission does. It is a fair system, and it has served Tasmania remarkably well. The idea that we will be better off if specific purpose grants are not considered when splitting the GST pool is based on a flimsy understanding of how it works.

I asked members to imagine for a moment that all specific purpose grants were quarantined - grants like Macquarie Point Urban Renewal funds, for example - and quarantines not considered during the Commonwealth Grants Commission's assessment of our relativities. Tasmania would get a lesser share of the GST pool. If all specific grants were quarantined, Tasmania would get a less share of GST. That may sound counterintuitive, but it is true. Tasmania would get this lesser share because the GST is divided. A chunk is given to states to square up after specific purposes or grants are assessed.

More specific purpose grants, including National Partnership Payments, work out at roughly to be the same on a per capita basis. I am not saying they are done on a per capita basis - it is far more complicated than that; the basis for each grant varies. But taken as a whole, specific purpose grants work out roughly equal per capita basis across the commonwealth.

If specific purpose grants were instead allocated based on the Commonwealth Grants Commission assessed relativities, states like Tasmania would receive more. Hence, states like Tasmania get a top-up, sourced from the GST pool, to square it up.

This is complicated. It is hard to understand. There are not many people who fully understand it. I certainly do not; but there are people in our Treasury who do. I have worked very hard to try to get my head around it and we have had our Committee A look at this in the past as well. I am saying that we get a top-up of untied funds to use as we like to square that away, and Tasmania's a recipient.

We get about a $1.80 at the moment, for every dollar, because of our relative disabilities.

GST funding is untied - we use it for what we decide as a government through parliament and ultimately through the Budget process. These are funds used for healthcare, education, public safety, et cetera. We surely will want more of that. A crucial point in understanding the system, is that if all specific purpose payments were quarantined - in other words ignored by the Grants Commission - Tasmania would get a lesser share of the GST pool. What some of the Liberal members are asking for - including the Treasurer here - is for us to get a lesser GST share out of the pool. I am not sure he is not actually asking for that, but that is the implication of what he and other members have been saying publicly. There would be less to square up and we would have less of a share of the GST pool that is untied funds to the state.

Ms Rattray -There is no way you can split those two buckets or items?

Ms FORREST - The GST pool is the whole system that works. I will come to that more and that might make it a little bit clearer. It is clear as mud for most people. I honestly do not think many of those arguing for these grants to be quarantined, realise this reality. Otherwise, I am sure they would not be asking for that.

Why would you essentially demand we get a lesser share of the GST pool based on how it works? The more grants are quarantined from the GST assessment, the less of the GST pool we will receive. It is a squaring away after those things are. That is why the specific purpose grants are not quarantined, except in extensional circumstances. There is a whole paper on the Commonwealth Grants Commission website if you would like to have a look and happy to forward to anyone. That includes the treatment of the Brisbane Olympics.

Ms Rattray - Is that called an exceptional circumstance?

Ms FORREST - It is a national and an international event, so considered differently. It explains how and why. For those arguing for grants to be quarantined, they are actually playing a risky game. For me, it is dumb politics. It is white anting a system that has served us well. It is not a wonder the Department of Treasury and Finance in the submission to Committee A's inquiry into the horizontal fiscal equalisation was unequivocal when it stated in its submission. This is on our website:

"Treasury does not support the quarantining of Commonwealth payments except in exceptional circumstances".

We have had some exceptional circumstances and will come to those. However, as a corollary, if more specific grants are handed out by the Commonwealth that are not quarantined, we will receive a bigger share of the GST pool as a larger top-up, because that will be needed to give us the fiscal capacity to deliver the same service as the other states.

If anyone wants to go back and read this afterwards to make it clear in their heads, it is counterintuitive to start with but the more grants there are, the bigger the squaring away and the top-up needs to be for small states like Tasmania who have a greater level of disadvantage. Again, that might sound counterintuitive but it is how it actually works and there are a lot of fantastic information on the Commonwealth Grant Commission website if you are interested in learning more about it. They do write an accessible way on an obviously complex topic.

Those agitating for the Commonwealth to spend less on specific purpose grants need to realise that this in turn is more likely to lead to a lesser share of the GST pool coming to Tasmania to achieve the principles of horizontal fiscal equalisation and balance the gap. I cannot think of any reason apart from dumb politics, why we cannot have a nonpartisan agreement to do all we can to support the current Commonwealth Grants Commission approach.

The preferential treatment of Western Australia has had a deleterious effect on the integrity of the system. We should not be suggesting making it worse. Claiming that the non quarantining of the urban renewal grant or any urban renewal grant is ripping off Tasmanians is not actually much different from Western Australians claiming they were being ripped off by receiving a lesser share of the GST pool than they might have been entitled to without their mineral riches. If mineral royalties rise, Western Australia's GST share remains unaffected. The extra pay to Western Australia ends up being a quarantined grant as part of the deal that was made with Western Australia.

How can we rail against the injustice of Western Australia? I must admit I do, from time to time. Being handed a quarantined grant each year but at the same time claiming they should do it for us. If it undermines the system, why would we undermine it further? It seems that our memories are short. Tasmania has done well over a number of deals done, that saw large amounts of money granted to the state quarantined. This is those exceptional circumstances. Whether other states agree with them or not, we certainly agree with them because they were extraordinary.

The first one that I will bring to members' attention is the $735 million Mersey money, we call it, that was provided by the federal government to last 10 years to run the Mersey Community Hospital. It was received seven years ago and it was fully quarantined. That was received, transferred over to TASCORP to manage it, so it did not create a huge blip in the government's financial reports. That will run out in 2026-27. Then what? Not quite sure what will happen then, but that is a matter for Treasury to exercise their minds and I am sure, the Treasurer as well.

There was also the $200 million or thereabouts for the restructure of the forestry industry about 12 years ago via the Identity Governance and Administration (IGA) process, that was quarantined. Now some may think that was a poor decision, but for Tasmania it was an important decision and one of the reasons they actually managed to get the deal up, in my view.

Too much quarantining would cause the downfall of the whole system and we would effectively end up with a sports rort with colour coded spreadsheets.

The sports grants are not specific purpose payments. They fall into the COPE category, which stands for Commonwealth Own Purpose Expenditure. The Commonwealth Grants Commission does not consider COPE amounts; they are excluded. With hindsight, this was a loophole that allowed the Morrison government to utilise the sports rorts methodology, knowing it would not affect states GST shares. There was a loophole there that created that. Maybe it should consider those payments under COPE payments. It might make it fairer. It certainly was not very fair when that happened, if members remember correctly.

It is important to be careful of what you wish for. As elected members, we must seek to understand how the system works and how it actually benefits Tasmania before seeking to undermine it. It is disappointing when our own Treasurer's comments effectively undermine it.

The Governor's speech stressed the need for certainty. The government should practise what they preach. The people have elected quite a different looking parliament and other members have spoken about this. It will take goodwill from all sides to ensure the people of Tasmania are well served.

We need the government to be much more open and transparent. For example, why was the extra $80 million to TT Line for the new vessels not actively disclosed? We all understand the pressures facing all those in the construction sector, from houses to boats or ships. Cost increases, staff and skill shortages, supply chain challenges - it is not news to anyone. I sincerely hope the government is true to its word and its partners and the Jacqui Lambie Network members and proactively provides the truth about the state of the state's finances and other matters, including not tucking away $80 million off to a government business, easy to hide away, and wait for someone to uncover it, to lift the rock and think, 'oh hello'. We should not have to do that. I will not hold my breath, but I will hold the government to account.

I do not intend to raise many other matters in this reply. There will be many other opportunities to do this. Before I move on to my final point that I want to discuss, I want to acknowledge the contribution of members who are no longer in this House, who have gone to the other place, particularly the former member for Hobart who has retired. He was watching today because he started texting me as soon as I quipped about that. He said it is a bit hard to step away entirely, and it must be extraordinarily difficult. He was here, he was dedicated to the place and I have just moved into his office. I thank him for his contribution for many years of public service.

What annoys me about that, the same as the former member for Windermere, when he missed his opportunity to do a valedictory speech because parliament was prorogued early and an early election was called. The same thing happened to the member for Hobart. He had made a decision not to recontest, to retire, and he was offered no opportunity to make a valedictory contribution in this place. After all those years of service, he was not afforded that opportunity. I know the government calls elections when it suits them, but two of our long serving members have both missed that opportunity to make their final comments in this place. That is a travesty. I want to focus on the key issue of our financial position as this is not sound and how can we continue to deliver the services people need?

We hear far too often of the delays in accessing healthcare, the lower than average national educational outcomes, our higher rates of homelessness and the shocking frequency of family violence. These areas are all crucial to each of us and core business for this government.

When people do not have a roof over their head, food on the table, are safe and warm, we are not doing our job well enough. There are many pledges in the government's election commitments and reflected in the government's address and to us, they are all admirable in terms of what they say they seek to achieve, there is no indication at all as to how much of this critical work will be funded.

We already have a very high reliance on the Federal overnment, but we also need to take some responsibility as a state. I hear and have heard absolutely nothing during the campaign, nor in the Governor's speech as to how this is to be done, rather than just put another $1.4 billion on the tab.

As I recently wrote in an opinion piece, all is not rosy with the state's financial position, yet again, after the opportunity to be open and transparent with the people about how the government will address these very real challenges, what do we hear? Crickets.

Whilst the Commonwealth this year, 2023-24, says it will achieve a cash surplus of $9.6 billion on operating revenue of $689 billion or $0.96 for every dollar raised, the same cannot be said for the state. The federal budget reports deficits will return in 2024-25 when $1.04 is expected to be spent for every dollar of revenue, swapping around moving into deficit. In the 2024-25 year, estimates show that the Tasmanian government will be spending $1.11 for every dollar of revenue.

That is actually a figure been made known before the 2024 election spending commitments and the other boondoggles are included. How would it actually look after all these costs are included? We know it will not look any better.

We know that the federal government has many more weapons at its disposal in terms of dealing with these fiscal pressures.

Ms Rattray - Like looking at the tax.

Ms FORREST - Yes, they have a tax and transfer system and they also own the Reserve Bank. I will come to that. Despite all the talk about the level of Federal government's gross debt, its net debt is at a comfortably low figure, as roughly one third is held by the Reserve Bank of Australia, the bank we own.

As I wrote in the opinion piece in 2021-22, the value of the Commonwealth's consolidated debt fell by over $100 billion when the RBA bought most of the government bonds it now owns and has not moved much since inflation, as inflation has reduced the fair value of the debt, despite a few more bonds being issued. Who said there are no winners with inflation? The RBA assisted the Commonwealth Government through the COVID storm and gave enormous support to the banking system, but the states, the crucial service deliverers, were given far less support.

What this means for the Tasmanian government strong plan for 2030's future is that it is being built on very shaky foundations. Our lifeline, the Federal government, is slowly becoming preoccupied with its own survival, especially as the next Federal election looms, and it is less likely to prioritise helping the states.

The fact the states have done little help themselves makes it easy for the Commonwealth to keep its distance. It is crystal clear that economics is struggling to explain the new world, with 10 out of 12 predictions most recently being wrong.

Most economists first spotted the rising interest rates in their rear vision mirrors, while cheerily endorsing the use of interest rates to reduce inflation, despite having no credible theory explaining how or when it occurs or how COVID changed everything.

Mr President, we have a Federal system that is not fit for purpose. We, as a nation, led by our state leaders, need to work together honestly, openly and transparently to not only acknowledge the problems, but take a much broader view. State and Federal relations as part of the federation, are important. The world has changed, and we need to change with it. As I conclude in my opinion piece, every time we see a problem or see an approaching storm, we have been turning a blind eye and praying for a rainbow. It does not work.

The people of Tasmania have elected a different mix of people to represent them and we owe it to them all to work together as a state and as a nation, and we need to start by being a bit more honest with ourselves.

Mr President, I note the Governor's Address.