Tasmanian state budget flags big challenges, with major savings that must be found

Australia Broadcast Center

7 days ago

A self-described "ambitious reform agenda" that relies on cutting the public service and selling state-owned assets underlies Tasmanian Treasurer Guy Barnett's budget.
The 2025-26 budget makes it clear that debt is ballooning, and puts it down to a number of things including increased demand on the health system, implementing recommendations from the child sexual abuse inquiry and the ongoing financial impact of the pandemic.
With little new revenue on the horizon, the government is looking to sell off government businesses and find efficiencies in the public service.
The recently announced Efficiency and Productivity Unit (EPU) will play a large role in that.
It is in charge of finding at least $150 million in ongoing savings from the 2027-28 financial year.
But while the government is determined to speed up its pathway to surplus, that plan is largely reliant on future unknowns.
The government continues to have the same problem — spending more than it is earning.
This financial year, Tasmania is predicted to make about $9.5 billion in revenue, and spend $10.5 billion.
This means the net operating deficit is about $1 billion.
Remove the Australian government's one-off contributions to infrastructure projects and the figure is worse, with a fiscal deficit of $1.3 billion.
The state's net debt is expected to reach $7.3 billion in the upcoming financial year. In four years' time, it is projected to balloon to almost $10.8 billion.
The interest repayments on that debt are growing and expected to rise to almost $650 million a year by 2028-29.
GST remains the largest source of income for Tasmania, representing 40 per cent of government revenue in 2025-26.
Tasmania currently gets a 3.84 per cent share of Australia's GST pie. But that is shrinking slightly over the next four years to 3.62 per cent, partly due to a lower population growth forecast.
However, in dollar terms, the amount of money Tasmania receives will continue to grow, with the general GST pool expected to rise.
The state will still receive the no-worse-off guarantee payments of $384.4 million. That is not due to expire until 2029-30.
Around a third of the revenue comes from the government's own sources, like taxes and dividends from government-owned businesses.
The government has kept its promise not to introduce any new taxes.
As to where it is going, once again health sucks up the largest amount of money, representing 34 per cent of expenditure. Education represents about a quarter.
There is $3.5 billion in infrastructure spending budgeted over 2025-26 and the forward estimates.
About $1.6 billion of that is for roads and bridges, but the state generally underspends on this figure.
And, yes, there is money in there for the Macquarie Point stadium.
In his speech, Mr Barnett makes it clear the "divestment of some government businesses and surplus crown land" will be used to prop up the budget.
The government does not yet know which state-owned companies will be sold; however, it has ruled a number out based on two independent reports.
Independent economist Saul Eslake's report into the possibility of selling some publicly owned companies rules out a number of government business enterprises (GBEs).
The government has taken advice from Mr Eslake's report, ruling out the sale of:
The government has reversed its previous decision to privatise parts of the Public Trustee.
Meanwhile, Deloitte's examination of a mega merger between TasRail, TasPorts and TT-Line found merging either two or three of the entities would be "unfeasible" and present complexities around "misaligned objectives and minimal operational synergies".
As a result, Mr Barnett has not only ruled out the merger, but also the sale of Spirit of Tasmania ferry operator, TT-Line.
The government maintains it will not sell Hydro Tasmania.
Mr Barnett said the sale of the following state-owned companies "will continue to be thoroughly assessed":
Mr Eslake will hand the second part of his report to the government by the end of June. In it he assesses whether each GBE or state-owned company could be sold.
Deloitte also suggested that the government explore the potential sale of Devonport Airport and the Bass Island Line shipping service.
The budget and Mr Barnett's speech are peppered with words like "right shape", "right size", "right place" and "right tool" — many of them in reference to the public service.
They flag potentially major changes and losing about 2,500 jobs by 2032-33. But the government has not outlined how it will achieve them.
The Efficiency and Productivity Unit (EPU) which will help government agencies find areas for "improvement" either through programs, staff cuts and digitalisation.
Meanwhile, the productivity and efficiency measure — that replaces the efficiency dividend in 2027-28 — is still aiming to save $150 million.
Rather than each department having to find a set amount of savings, it will look at the public service as a whole, meaning more efficiencies might be found in some departments than others.
Given it doesn't know what savings can be found yet, the government is hoping to save even more than $150 million.
The Department of Treasury and Finance has also been allocated $3.3 million to help agencies identify savings strategies.