Legislative Council, Tuesday 31 May 2022

Ms FORREST (Murchison) - The Government deserves plaudits for achieving a better result for the year about to end, the 2021-22 year, than was expected in the 2021-22 Budget when it was handed down last August. The better bottom line is principally due to extra general purpose grants from a bigger GST pool, higher receipts from state taxes, which includes extra stamp duties of $64 million, and extra payroll tax of $32 million. It must be noted that extra specific purpose grants also helped to cover the extra pandemic costs.

Not wanting to detract from the Government's achievement, and I acknowledge the good, we nevertheless need to remember that these are windfall changes or 'parameter changes' if we use the budget jargon, not the effects of any policy change. Most pleasing was how much was spent on capex, purchases of non-financial assets to use the budget jargon, which principally includes the Government's infrastructure spending.

In the 2020-21 Budget, the Government said it intended to spend $776 million in 2021 22. The estimated outcome for the 2021-22 year in capex spending was $807 million, an extra $31 million. For a long time, there has been a chronic failure to spend capex in a timely manner to address the critical need for more infrastructure via projects that have been pushed aside as the Government has tried to get the Royal Hobart Hospital upgrade monster under control, a monster that has been devouring so much of the capex in recent years. Let us hope that the Government is able to continue with this pattern of doing what it says it will do in a timely manner.

I will have a bit more to say about infrastructure spending in a moment but I first wanted to touch on this year's Budget and the context of the Budget as a plan for a sustainable Tasmania. As I said in my recent state of the state reply - which was very recent - there has been a noticeable toning down of backslapping rhetoric from the Government that they have righted the ship and fixed the budget mess inherited from their errant predecessors. Only a couple of lines mentioned the prospect of a net operating surplus.

The Treasurer said in his Budget Speech that in 2023-24 we will return to a net operating surplus of $19.1 million with $32.2 million in 2024-25 and $30.5 million in 2025-26. What he did not say is that even if net operating surpluses are achieved, there will be cash deficits every year. This Budget, plus the three years of forward Estimates, will see cash deficits totalling $3.8 billion. That is, cash deficits: $3.8 billion of cash deficits.

The projected net operating surpluses are a mirage, as I keep saying. We are spending more than we receive when all spending is included and there is no sign that this will change. In case members have not read Saul Eslake's instant analysis of this year's Budget, I urge you to do so. He zones in on the cash deficits, as I have done and have been doing for years, as the only way to get a realistic grasp of our financial position.

The net operating surplus is irrelevant when it does not include all outlays. Even so, no one cares if governments make profits. Their job is to deliver services sustainably, not profitably, according to some arcane accounting standard. The Treasurer did mention our ballooning debt, but he is still categorically resisting stating that we are spending, and will continue to spend, more than we are receiving.

It is not until this really sinks in that we can begin the task of fixing the problem. We have to acknowledge and accept the problem in the first instance. The Treasurer then made an attempt to indicate the problems ahead when he said in his Budget Speech, 'I have also tasked Treasury with providing advice to me on strategies to ensure our debt levels remain within manageable limits into the future so we can again use our balance sheet to shield Tasmanian jobs and families should external shocks to our economy occur in the future'.

The budget papers also make mention of the problem when discussing the Budget's fiscal strategy on page 31 of Budget Paper No. 1. I notice, however, there may be conditions attached to the search for a solution. On Sunday 29 May, the Mercury reported Mr Ferguson's comments. It said Mr Ferguson signalled that tax reform could be on the agenda in Tasmania, only if the Albanese government ensured Tasmanians would not be disadvantaged beyond 2026. 'Before we start talking about tax reform, I actually want to lock-in the GST we depend on to ensure the guarantee is secured long term,' he said.

I presume the Treasurer is being accurately quoted in this. If so, what he said is ridiculous. We cannot wait any longer to address the issues that we face. We have wasted too much time already. It is the same with every issue this country is facing, whether it is climate change, living cooperatively with our Pacific neighbours, the housing crisis, or the government spending more than they receive with no idea how to fix the problem without crashing the economy - we stuff about.

It is a sad indictment of failed processes and the longer we leave it before we take real and targeted action, the larger the task and, possibly, the pain that may be experienced for some. But act we must. The short-term election cycle and the risk of electoral backlash, lest any party makes a suggested policy change, means we never get to move forward in a sensible fashion.

The only progress is achieved when we are dragged, kicking and screaming, in the face of reality. The problem of our GST share beyond 2026 is due to an incredible handout given to Western Australia, and I have spoken about that numerous times in this place. Given the massive swing to Labor in that state in the recent federal election, that is unlikely to change any time soon. They will not bite the hand that fed them.

So, do we wait with fingers crossed for a few more years before we do something? Is that what the Treasurer is suggesting? Whatever happens, we will still have the problem to fix. Why not start now? We should have continued what we briefly started 14 years ago, those of us who were here at the time, when the last tax reform process got underway.

Ever since the fall of Lehman Brothers in 2008, turning the world upside down, state government sustainability has been a problem. The Liberals, once they took over in 2014, basically were trying to put lipstick on a pig, but in 2019 it was obvious to everyone that we were falling behind in delivering the services that people not only want, but desperately need in many cases.

Then COVID-19 struck, which added to the woes, but it did not cause our current woes, it exacerbated them. It is not the Liberals' fault. It is a Tasmanian problem and we all need to own it. I sincerely hope the sanctimonious in the Labor party do not try to remind us that when they were evicted from office the debt was not near as bad as it is now.

As we can see from the two major parties, the commentary on this vitally important issue is more tit-for-tat, and we simply do not move forward. We have been on the same inexorable slide for well over 10 years, regardless of who has been sitting and occupying the Treasury benches.

So, let us be nonpartisan about this. As a first step, let us all acknowledge we have a problem and we need to do something about it. This Budget does not categorically state the extent of the problem. It merely makes passing reference to the debt problem and the need to find a solution, which the Treasurer appears to qualify by demanding the GST transition guarantee of 'no worse off' be continued indefinitely.

It is difficult to give the Treasurer a pass mark for his first budget. I hope that Treasury is serious about the need for change but I am always sceptical about Damascene conversions. As the finance minister a few short months ago, he was responsible for one of the most egregious acts of failing to act in the state's best interest when he rammed through the outrageous handouts to the gaming industry. It would have been possible to extract another $25 million a year from the industry, still leaving participants making better returns than their colleagues in the rest of the hospitality industry.

The jobs arguments presented in support of the changes were bogus, as well as the selection of a North Queensland template to justify the tax rates. It was a shameful handout to mates. The most prominent - Federal Hotels - was already swamped with $40 million of Jobkeeper awarded by the Australian Government which it did not actually need, and which resulted in the company posting its biggest ever profit. By trampling poker machine changes in the way he did, the Treasurer committed the state to borrow an extra $25 million a year. You can all do the sums. That is $500 million over 20 years. There is a lot of money at stake, and it is also a lot of money for a small state such as ours.

Then we look at the most recent land tax changes. I know we passed them through this House and I did not oppose them. This year's Budget sets out clearly the effects on our finances of these changes. The Policy and Parameter Statement on page 51 outlines the effects of the land tax changes. Under parameter changes we see the extra land tax that would have been collected with existing taxes - a total of $172 million over three years. Under the policy changes on the same page but further up, a total of $125 million over the same three years, which would continue indefinitely at the rate of almost $50 million each year thereafter. The Treasurer chose to give property owners a handout, happy that the Government could easily borrow an extra $40 to $50 million each year to cover this. Barely two months later, the Treasurer is admitting to asking Treasury to present ways to keep our borrowings at a manageable level.

I am staggered by this chronology of events. Our problems have been glaringly obvious since the first Fiscal Sustainability Report in 2016. It is not as if the Treasurer was unaware of our ballooning debt when he gave $25 million a year to the gaming lobby, and $45 million a year to property owners - predominately those who own investment properties. The argument for the land tax reductions was that it would assist those property owners to lower rents. There is very little evidence this likely to occur; just like the gaming handout, it was basically based on voodoo economics. The effect of the land tax changes will be, as I pointed out in my second reading contribution at the time, that property yields will rise and as a consequence property values will follow suit, which will then lead to even higher rents and an even greater distortion between the haves and have-nots in the housing market. Is that really what we want?

How are we ever going to do tax reform? It is akin to the climate denialists being put in charge of the climate policy. It simply is not going to work. I am sorry to be so blunt - or maybe I am not; but attitudes and understanding need a giant shake-up to make it to square one of any reform process. We have wasted 10 years with unedifying nonsense about a return to surplus being around the corner, when the cash deficits were all but guaranteed but which nevertheless were still not enough to service the needs of Tasmanians.

We have a crook system, in as much trouble as aspects of our health system. The fiscal strategy, specifically Strategic Action No. 3, covers the role of state taxes: to be fair, simple, stable and sustainable. The commentary on Strategic Action No. 3 is that we rank second last when it comes to raising revenues had we applied the Australian average level of effort to our available revenue base. In other words, we should be raising more from the tax base we have. Should we not first get our own house in order before demanding that others make change?

The fiscal strategy also contains Strategic Action No. 4, which is that government businesses will be required to deliver services to Tasmanians at the lowest sustainable cost, while also providing an appropriate financial return to the Government. What follows is a commentary that nominates Project Marinus and Battery of the Nation as, presumably, assisting us to achieve this strategy.

I will be keen to hear how these two projects will assist this noble aim. I do not want to hear about what else Marinus and Battery of the Nation might achieve, such as jobs, jobs, jobs and a return to investors. Let us stick to Strategic Action No. 4, and how that will be actually achieved. How will we lower electricity prices here, when we are now 100 per cent self sufficient? Will Marinus drive down local prices more than the extra burden that Marinus costs? What are the expected returns to Government of these two projects, as required by Strategic Action No. 3?

It has been a while since the Government updated its fiscal strategy, so it is timely to look at the other strategic actions. There are six of them and so far, I have mentioned strategic actions numbers 3 and 4. Strategic actions 1 and 2 are also worth review. Strategic Action No. 1 covers the need for growth in operating expenses to be lower than revenue growth.

The Government gives itself a tick for this strategy, but I question whether this measure is misleading given that net debt is increasing - which means we are spending more than we are receiving. Only operating expenses are considered, which seems a little pointless given that delivering infrastructure is just as crucial and does the measure of revenue used to assess the strategic action include capital grants from the Australian Government? If so, it would be misleading at best. The point I am making, is that there is an element of self-assessment about fiscal strategy which might help to hide some of its shortcomings.

The final strategic action I wish to mention is Strategic Action No. 2, which specifies an aim to keep interest on borrowings plus employer contributions to the Government's unfunded superannuation schemes below six per cent of General Government cash receipts. I always comment on this, if not in my budget reply then certainly during the Estimates process.

To date, the concern has always been about the unfunded superannuation requirements, but these are always fairly predictable and likely to remain so. It is the increase in the interest costs on borrowings which is now looming as a concern. I acknowledge the inclusion of some very helpful additional detail in Budget Paper No. 1, under Assets and Liabilities. I believe this may have been included in part to enhance the reader's understanding of these important matters, particularly around our debt and our borrowings.

At this point, I compliment Treasury on the new charts and supporting commentary, particularly in the area of net debt servicing costs comparison with other states and their respective gross state products, which I found to be most informative. This helpful level of detail and some of the information provided relates to questions I have been asking over the years, so I thank Treasury officials.

The idea that our net debt might be low compared to other states is always misleading. When our proportionately larger unfunded superannuation liability is added in, we do not fare as well and it will get worse as the budget papers explain. Net interest as a percentage of revenue will quadruple over the forward Estimates, from 0. 5 per cent to 2 per cent. That is clearly laid out on page 135, Budget Paper No 1, and is another matter we will chase up next week.

If interest rates exceed revenue growth, then this percentage will keep growing. It will grow even more if we are running cash deficits - which is all but guaranteed. We will have to borrow just to pay the interest. When do we reach the tipping point? That is the question.

I am not concerned about the debt per se, only the compounding effects of unpaid interest and the continuing cash deficits. As I mentioned in my recent response to the Premier's Address, some of the state government debt is owned by the Australian Government via its wholly owned bank, the Reserve Bank of Australia. Notwithstanding the independence of the RBA, it is still a wholly owned subsidiary of the Australian Government and should the latter wish to write off some of the debt of all states currently owned by the RBA, it would only require the stroke of a pen or in these days, the click of a mouse.

That might sound like plan Z, and perhaps it is; but right now, there are no other plans on the table. Complacency is leading to delusions. Let us do something about them before they reach the epidemic stage.

I will briefly go back to infrastructure spending now. As I noted, above budgeted capital expenditure (capex) spending was, or will be, achieved for the 2021 22 year. Policy change in the capex space were negligible for the 2021 year, and the parameter changes were minimal.

I am interested to know whether this means all projects were brought in on time and on budget, or whether some projects were deferred and the funds thus saved were applied to fund cost blowout in the remaining projects. We know there have been cost blowouts, for a variety of reasons. I suspect there may be a bit of the latter, as we know how much building costs and construction costs have risen in recent times.

I also ask, with the recent federal election, and the change of government, will any of the government funded infrastructure projects, listed on Page 123 of Budget Paper No. 1, be impacted by the change of government? That is a matter I can follow up next week, if the Leader cannot address it in her reply.

Certainly, one of the most pressing projects in my electorate is the Montello Primary School upgrade. That is a matter I will comment on further, that was announced in former premier Mr Gutwein's swan song budget last year. Still the same start date of 2021, and the same finish date of 2024, and the same estimated cost of $7.1 million - even though most of the spending has been pushed back a year.

How does that work? When do the rising costs get included with projects that are pushed back?

I notice on the Policy and Parameter Statement on page 64, there are $214 million of parameter changes, including capex spending for the budget year of 2022 23, most in State Growth - that usually means road spending - and $220 million in the year after. I ask what these are. Are they cost blowouts, or deferred projects that have been shifted?

If they were deferred, will they not show up as parameter changes in the year of deferral; say, in the current 2021 22 year? Maybe the parameter reductions for deferred projects in the 2020-2021 year are offset by the parameter increases for the remaining projects tackled during 2021 22.

I am keen to understand what is happening - to what extent record budgeted infrastructure spending is due to deferrals, and cost blowouts. Are we getting more done, or does it just look that way?

Mr President, as I said, I will pursue these matters more fully next week, and I hope the Treasurer will have clear explanations around this important matter.

I move from Budget Paper No. 1. No-one will be surprised that I wish to comment on the first Gender Budget Statement.

I congratulate the Government for accepting the reality that we should be providing a gender impact statement. I also thank the Minister for Women, who is not in the Chamber at the moment, for her commitment to her portfolio and seeking to make a real difference. I am very happy to work with her to do just that.

One of the first things I might work on is providing a little bit more advice and constructive input into what a gender impact assessment actually looks like.

I acknowledge that the member for Rosevears, the minister for Women, only took over the role of Minister for Women a very short time ago, and would have had little time to have a great deal of influence on this process to date.

The primary objective of a gender impact statement is to promote gender equality. The European Institute for Gender Equality and the Victorian Commission for Gender Equality in the Public Sector are two of the many excellent organisations where you can find a range of resources that could be adapted and utilised to support the work of the Tasmanian Government and departments in this important work.

I do want to note the work already commenced, and we possibly all knew that the first Gender Budget Statement would not be all we had hoped. I accept that.

The purpose of a gender impact assessment, when adopted across government, enables departments, agencies and organisations to think critically about how policies, programs and services will meet the different needs of women, men and gender diverse people, and create better and fairer outcomes, ensuring all people have equal access to opportunities and resources. It is through the assessment of well intentioned policy that unequal gender benefits can become apparent, and more targeted funding may be identified as needed.

The reality is that the needs of men, women and gender diverse Tasmanians can be affected differently, through the same policy. If we do not consider and assess the policies that would, at first glance, appear to assist all Tasmanians, we can unintentionally reinforce inequality.

It may seem like a daunting task, but there are many countries that have fantastic tools to assist us. We do not need to reinvent the wheel.

As I stated, the Victorian Commission for Gender Equality in the Public Sector, and the European Institute for Gender Equality (EIGE) provide many tools and information that can be of assistance. The EIGE states on their website:

The central question of a gender impact assessment is: Does a law, policy or program reduce, maintain or increase the gender inequalities between women and men.

The European Commission also notes on its website:

Gender impact assessment is the estimation of the different effects (positive, negative or neutral) of any policy or activity implemented to specific items in terms of gender equality.

Further:

The final aim of a gender impact assessment is to improve the design and the planning of the policy under consideration, in order to prevent a negative impact on gender equality and to strengthen gender equality through better designed, transformative legislation and policies.

They have a whole lot of information there, Mr President. I also encourage any of our female members in this House to attend our Commonwealth Women Parliamentarians (CWP) Conference in Brisbane in July. We will have Dr Ramona Vijeyarasa speaking about her gender legislative index that she has developed, which is another amazing tool.

Mr President, there are many great resources available to guide this work, and I am pleased to see that work has begun.

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