Tasmanian government's road to budget surplus appears built on dreams and optimism

Australia Broadcast Center

2 days ago

It's the Tasmanian government's yellow brick road — a pathway that will lead to all wishes coming true or, in this case, a surplus.
But just like the one in the famous tale The Wizard of Oz, Treasurer Guy Barnett's "sensible pathway to surplus" appears almost fantastical, or at least extremely optimistic.
It is built on the dream of selling public companies that may not be worth selling (or possible to sell); arguably unrealistic cuts to spending and a vague plan to reduce the public service.
Perhaps it would be more believable if the government had not promised to reduce spending in the past, only to fail dramatically.
But here are the undeniable facts.
Tasmania's net debt is expected to reach $7.3 billion in the upcoming financial year.
In four years, that debt is projected to balloon to almost $10.8 billion, at which point the interest repayments are expected to rise to almost $650 million a year.
Labor says that is more than we spend on ambulance and emergency services combined.
The forward estimates continue to see Tasmania operating in deficit, albeit reducing to $236 million in 2027-28.
And those forward estimates have not proven to be reliable.
Last year, the government planned to cap spending at $9.7 billion — and then out-spent that by another half a billion dollars, despite having an efficiency dividend and hiring freeze in place.
Independent economist Saul Eslake did not hold back in his assessment of the budget, describing it as presenting an "upbeat view" of the economy that "may not come to pass".
"The government is in the financial pickle it's now in because it kept increasing spending without giving any thought as to how that spending (however justified) should be paid for," he wrote.
"And this budget shows it still hasn't been able to break that habit."
The Tasmanian Chamber of Commerce and Industry likewise pointed out the pathway to surplus was only achievable if the government stuck to its spending promises.
"In recent years, the final budget result each financial year has proven to be much worse than the budget estimate," TCCI chief executive Michael Bailey said.
"At the very least, the Tasmanian government needs to at least stick to its budget and ensure it shows the fiscal discipline to make sure the final result is not worse than the already significant deficit forecast for 2025-26.
The problem with the government's plan to cut spending is, it may not always be realistic.
Take health — the main reason the government blew its budget this financial year.
There is growing demand on the health system, but the budget assumes next year's spending will be roughly the same as this year's, which rarely happens.
It also assumes in three years' time, overall government expenses will be less than they are this year.
And it leaves little room for surprise events like state elections.
Tasmania could barely afford big campaign promises back when elections were held every four years, let alone when they are called early.
Part of the government's plan to cut spending is through the recently announced Efficiency and Productivity Unit (EPU).
It will oversee the productivity and efficiency measures that will replace the efficiency dividend in 2027-28.
The EPU's task is to find $150 million in savings each year from then.
The difference is the way it will approach these efficiencies.
The dividend required every department to make cuts, whereas the new approach, which the EPU will drive, will apparently be a more targeted "evidence-based" one.
That received praise from Mr Eslake, although it came with a qualifier: "Assuming that EPU isn't a Tasmanian version of Elon Musk's DOGE."
The problem is, while the government is relying on efficiencies to help it get back on track, it has no clue where it will find them and is optimistically hoping to exceed its targets.
It wants to cut the number of public servants by 2,500, bringing the sector back to 2022-23 levels, a measure announced in last year's budget.
Unsurprisingly, it drew the ire of Jessica Munday from Unions Tasmania.
"It is just completely fanciful. If the government were looking for a road map to take Tasmania forward, this is not it.
"If you have tried to access one [of] our public hospitals, if you've got a kid in one of our public schools, despite the best efforts of workers, you know how much pressure they are under.
When asked about plans to cut staff, Mr Barnett spoke in the press conference largely about the COVID-19 pandemic, as though there are a spare 2,500 staff still hanging around on the public dollar with little to do since 2021.
He pointed out that in the past five years, the Tasmanian population had grown by just 5 per cent, and the public service by 18 per cent.
"We do need a right-size public service," he said.
"We've obviously been through COVID, we had to save lives, we had to save livelihoods, we did the job and I think most in the community would say we got there.
Selling assets is another part of the plan — but it is unclear which ones will be sold or if it is even possible.
Mr Eslake is no doubt relieved that the government has taken his advice on board this time, ruling out selling the same list he had in the 'no' pile, plus TT-Line and Hydro Tasmania.
He is now taking a closer looking at the potential sale of the remaining government business enterprises (GBE).
That does not mean he will suggest they are worth selling — there could very well be another 'no-go' list to come out of this report.
Assuming he can identify some that may do better in public hands, and benefit the budget, the government then has that pesky issue of being in minority.
That is a problem because many of those GBEs will need parliamentary approval to be sold and Labor, plus most of the crossbench, are dead-set against that idea.
There are some, including Aurora, that do not need parliamentary approval to be sold off — though Labor has plans to try and change that.
And it is not just GBEs on the chopping block.
The government will fill the coffers through the sale of Crown Land, not to mention the Treasury building.
The sale of all these, of course, may provide little more than a sugar hit. But perhaps this is all a bit too cynical.
Maybe it will work out?
There are likely a lot of inefficiencies that can be found in the public service (the problem is solving them will cost money up-front).
Maybe there are programs and jobs that are no longer needed and are just waiting to be cut?
Maybe companies like Metro and Aurora will be better off in private hands and the government will somehow convince the crossbench of that — and then the state will make a mint?
But it seems that only when we get to the end of this road (in 2029-30) will we know if that surplus was a mirage all along.