Budget to reveal state’s big debt recovery mission

Tasmania’s budget day will be dominated by one question and one question only.

How will the government, which has promised to tackle the state’s growing debt, do this?

This question, intertwined with the billion-dollar stadium to be built on Hobart’s waterfront, has dominated Tasmanian politics for the past two years.

Last May, the deficit and debt outlook, which reached $5 billion in 2025 and is expected to double in 2029, was so alarming that parliament voted no confidence in Prime Minister Jeremy Rockliff.

Following that vote, Mr Rockliff’s government, which won the snap election, has regrouped and will chart a path to sustainability with a new treasurer, Eric Abetz, at the helm.

It’s likely to be a long and difficult road.

Economic research institute e61 sees Tasmania as being on the “fiscal cliff”, requiring both tax increases and savings from current spending levels.

Last year’s deficit was 1.1 billion dollars and total income was 9.5 billion dollars, which alarmed economists.

“At some point or another, corrective action will need to be taken. Our hope is that this will begin in earnest on Thursday,” e61 CEO Michael Brennan said.

Statements in May paint a picture of a government poised to take on the nettle.

Often ministers spend the weeks before the budget is prepared making “pre-announcements” of what is on the otherwise secret books, hoping the public will be amazed by their spending plans.

There has been very little good news this year.

A $10 million Creative Industry fund, a $20,000 First Home Owner Grant and a $2000 rebate for women undergoing in vitro fertilization are among several measures to be stepped up by the government; This shows that the budget will not be the only expenditure.

The government will also cut 1,800 jobs in the public sector over the next six years.

Other pre-budget announcements were criticized as creative accounting masking spending downgrades due to be approved on Thursday.

The Labor opposition believes the announcement of $777 million in ambulance funding over four years is actually a cut, given that $186 million was spent on the system last year.

Mr. Rockliff also used this week to abandon his key election promise to create a state-owned insurance company instead of creating a regulatory authority.

The most significant announcement was made last Friday: a $506 million “equity injection” into TT-Line, operator of the important Spirit of Tasmania ferry services.

In other words, a new half-billion-dollar bailout for the state-owned company overseeing cost and timeline explosions on replacement ferries and port infrastructure.

It is because of cost overruns like this that Tasmania, which was net debt-free as recently as 2019, borrowed more per capita than any state bar, Victoria.

Mr Brennan said it was unfortunate that debt was rising at a time when global events were making borrowing more costly.

“It is the now familiar story of rising debts as debts are refinanced at higher interest rates (see Victoria),” he said.

“This leaves Tasmania facing long-term structural economic challenges.

“Tasmania’s situation is a result of past elections and the solution is to make different choices.”