What's in Labor's plan to repair the Tasmanian budget and does it stack up?

Australia Broadcast Center

4 days ago

It's been given the stamp of approval by the business community, the unions and the community sector — so what is Labor's plan for budget repair and does it stack up?
Whoever forms the next government after July 19 will have to deal with the challenging situation Tasmania's finances are in.
That party will need to work out how to bring the state back to an operating surplus and address its growing debt.
In its 2025 Pre-election Financial Outlook (PEFO), Treasury forecast net debt would hit $13 billion by 2027-28.
The Liberals say they have already presented their financial strategy in the form of the 2025-26 budget, which put the debt at $10.3 billion by 2027-28.
In its outlook, Treasury said the budget required the government of the day to find more savings as well as increase revenue. Both were needed.
On Saturday, Labor announced its fiscal plan, arguing it can cut $1 billion in debt "immediately".
As for finding more revenue, Labor says it plans to do that through growing the economy, rather than by raising or introducing taxes or other charges.
That is despite Treasury already saying that "growing the economy" would not be enough.
In its fiscal strategy, Labor lists two main ways it plans to grow the economy:
The vast majority of the fiscal strategy is dedicated to how the party will find savings.
Part of that is just ensuring infrastructure spending remains in line with the rest of the country and growth in general government spending is lower than growth in revenue.
It also wants to introduce mechanisms to ensure state government departments and agencies adhere to their allocated budgets.
For the past few years, the state, particularly in health, has spent much more than it planned to.
Cuts to the public sector are referenced by Labor only on occasion, mostly about senior roles.
But given the outlook released by Treasury said the state's public sector is "unsustainable", cuts are likely an inevitable part of Labor's plan, even if it's playing down their likelihood.
"These are strategic decisions made without the resources of government and I'm sure there are many more savings to be had," Labor treasury spokesperson Josh Willie told reporters on Saturday.
The party will also establish a Review and Evaluation Unit (REU) so "failed programs and policies can be identified and ended". It is similar to the Liberal's Efficiency and Productivity Unit (EPU).
The fiscal strategy then goes on to break down how it will save $1 billion over the next four years, including through cutting government advertising ($40m) and a "hard cap" on departmental travel budgets ($50.8m)
However, the policies have yet to be costed by Treasury, and the Liberals have been quick to dispute some of the figures.
For example, Labor claims it will save $8 million over four years by cutting eight associate secretary roles, however, only three are currently filled.
The Liberals say it would save $3 million, not $8 million.
Labor also claims that cancelling the Treasury privatisation process will save $1 million, not taking into account that selling the Treasury building could have resulted in more money.
There are other identified savings that are vague enough that the party can likely come through with them, such as axing 25 senior executive service positions to save $25 million over four years.
The three largest savings come from the yet-to-be-built Marinus Link, the Motor Accidents Insurance Board (MAIB) and capital infrastructure.
Labor thinks it can save almost $200 million on Marinus Link.
It'll do this by selling Tasmania's stake in the project to the federal and Victorian governments.
And it will take $100 million from MAIB through a special dividend.
Of the $100 million, $50 million will come out in 2028-29, so Labor is assuming that MAIB will make a profit that year. That is not guaranteed; just three years ago the government business enterprise (GBE) recorded a loss.
Labor is also planning to dip into MAIB's profits by freezing car registration costs for Tasmanians, and halving them for apprentices.
Finally, there's all the money Tasmania spends on infrastructure.
Labor says it will save about $270 million on capital infrastructure. However, the only project it is actually planning to scrap is the fifth lane of the Southern Outlet, for which houses have already been compulsorily acquired.
That accounts for about $100 million, of which $80 million is federal funding, so Labor is hoping it can just reallocate it.
It will "save" the remaining $170 million by simply pushing some of the funding for other projects out further so the money is not counted in the forward estimates.
If it is still planning to spend the same amount on infrastructure projects can it really be considered saving?
Labor intends to also find further savings by convening a round table representing businesses, unions and the community sector.
It'll need to make some hard decisions and it is likely some of those suggestions won't be comfortable.
Tasmanian Chamber of Commerce and Industry's Michael Bailey wants all options on the table.
Unions Tasmania's acting secretary Tom Lynch is keen to come up with "shared solutions".
"We've called on the government to work with us to reform the public sector for years," he said.
"I think there are many ways we can make savings in the public sector
But the big pool of savings Labor claims to have found is already being chipped into.
The party is planning to fund its many election promises from its savings.
Promises include $20 million in capital seed funding to create RenewTas, or a plan to spend $20 million on upgrading or building new before- and after-school care centres.
Meanwhile, the $10 million tourism voucher scheme, which is listed as a saving, is simply being substituted for a $10 million sports voucher scheme.
When asked how much Labor would spend, Mr Willie said he was "not going to forecast" the party's announcements.
Given the extent of Labor's election spending is still unknown it is unclear exactly how much of that $1 billion will actually be saved.
But whether it's $200 million or $500 million, it will make a huge difference to the state's bottom line.
So why the praise for the plan? The general sentiment is that at least Labor is trying.
"It's a material step in the right direction," independent economist Saul Eslake said.
"It's not going to solve the financial problems that Tasmania is now facing, but at least it says that one of the major parties is facing up to the financial situation Tasmania now finds itself in and is prepared to make some potentially difficult decisions on the spending side.
"What they're proposing, if they deliver it and provided they don't offset these savings with new spending commitments between now and the election, will cap Tasmania's debt at below $10 billion, compared with what had been forecast in the budget for 2029."
Mr Bailey described it as "courageous".
"A very brave, very courageous and a very strategic approach."
The state of the budget was apparently bad enough Labor was able to convince crossbenchers to take down a premier 14 months after he had been re-elected.
Labor says voters are concerned and wanting to talk about the state's finances.
But the party is still going to need to convince voters after more than a decade out of power, they are the right ones to get the budget back on track.