Concerns, doubts over Tasmania budget cuts
The world’s biggest credit rating agency doubts Tasmania will deliver “ambitious” budget cuts and warns the island state faces a fresh downgrade if it does not.
S&P Global Ratings sounded the alarm on the minority Liberal government’s budget released by Treasurer Eric Abetz on Thursday.
Tasmania has been plunged into debt with a series of huge deficits this decade and 2026-27 will be no different, with a $597 million deficit forecast.
But Mr Abetz has created a surplus in 2027-28 – a year earlier than previous forecasts – with cuts of $1.47 billion over the next four years.
S&P has taken a skeptical tone, issuing a statement saying the “dramatic turnaround” business faces “high foreclosure risk” and that previous efforts to rein in the debt have failed.
“Tasmania aims to reduce nominal operating expenses between financial years 2026 and 2029, compared with historical growth of approximately 6 per cent annually,” it said.
“In our view, this will be challenging given inflationary pressures, an aging population and increasing demand from voters for health, education and other social services.”
Tasmania’s credit rating, which was downgraded by S&P for the first time in 32 years in the shadow of last year’s budget, became AA.
Credit scores also affect the budget situation as they affect the interest rate at which the government can borrow money.
The latest books show the debt has risen to $9.98 billion in 2028/29 and Tasmanians will pay $2.2 billion in interest on servicing that debt over the next four years.
But S&P believes debt will more than double and “likely exceed $A20bn” in 2028-29, in a frightening prospect for bean counters.
In such a case, a new rating downgrade may occur.
“Tasmania has promised ambitious fiscal results… delivering on them will be key to maintaining our state rating,” S&P said.
Mr. Abetz has ordered $216 million in savings next year; This means two-thirds of the healthcare system, which is already in a difficult situation.
Budget documents suggest savings will be achieved through more user-paid treatments, relocation of staff and hiring fewer short-term healthcare workers.
Front-line healthcare services are not prioritized for cuts, but the fact that they are on the table worries opposition parties.
Labour’s finance spokesman Dean Winter said: “We thought the Prime Minister had given Eric Abetz a knife to dismantle the civil service, but today’s budget shows he has actually given him a chainsaw.”
“There are no details of what they are, but $130 million in cuts to healthcare next year is the equivalent of laying off three nurses a day for an entire year.”
The Greens also condemned the budget and called on the government to abandon the new Hobart waterfront stadium and increase corporation taxes.
Both opposition parties have vowed to pass the budget and not repeat the risky policies that sent Tasmania to a snap election last year.
Last May’s billion-dollar deficit led Labor to move a motion of no confidence in Prime Minister Jeremy Rockliff; this vote was accepted and the election was triggered.
Mr. Abetz told reporters that the Liberals’ growing vote gave them a mandate for fiscal repairs.
“What we do is do the job that people want us to do: they want responsible government and they want balanced budgets,” he said.
The Australian Associated Press is the beating heart of Australian news. AAP is Australia’s only independent national news channel and has been providing accurate, reliable and fast-paced news content to the media industry, government and corporate sector for 85 years. We inform Australia.
