Tasmania's Budget Cuts Face Skepticism from S&P, Support from Some

As Tasmania attempts to rein in debt and improve the state's fiscal position, credit rating agency S&P Global says the state's strategy to meet its budget ambitions "looks hard to achieve, in our opinion".

Tasmanian Treasurer Eric Abetz handed down the state budget on Thursday, with $1.47 billion in cuts to spending outlined over the next four years.

The treasurer's promise to return the state to a more sustainable position includes cutting about 1,700 jobs, but it's not yet clear which jobs will go, or what programs will be affected.

The government aims to return the budget to surplus in two years' time, a projected $192 million by 2027-28.

S&P Global said the state would need to get there through aggressive savings, job cuts, and department restructuring.

But it was blunt in its assessment of the likelihood this could be achieved.

"We believe the state will find it difficult to hit its targets given rising spending pressures, demographic obstacles, and limited revenue-generating capacity."

The credit rating agency also said it believed the state's forecast reduction in operating expenditure will be difficult to reach.

It found while the state's fiscal strategy and "ambitious savings measures" could bolster the state's finances, the Tasmanian government hadn't achieved its previously fiscal strategy.

"Tasmania aims to cut nominal operating expenses between fiscals 2026 and 2029, compared with growth of about 6 per cent per year historically," it said.

"This will be challenging, in our view, given inflationary pressures, its aging population, and rising demand from voters for health, education, and other social services.

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Despite his assessment that the budget's goals would be hard to achieve, independent economist Saul Eslake offered a more hopeful take on the state's plan to balance the budget.

"This year's state budget hopefully marks a turning point in the management of Tasmania's finances," Mr Eslake said.

"For the first time in a decade, Treasurer Eric Abetz has made a genuine, serious, and for the most part, credible attempt to impose some restraint on the Tasmanian government's spending and borrowing."

His caveat: the improvements in the coming years of deficits and debt were due more to "windfall gains" from federal government grants.

Mr Eslake warned the treasurer would need to ensure government spending was kept within projected amounts across the four-year 'forward estimates', and that the $1.5 billion in "operational efficiencies" were delivered.

And in order to meet the longer-term targets outlined in the budget, Mr Eslake said Mr Abetz would need to go further in next year's one: "Finding savings in operating expenses and in curtailing his colleagues' enthusiasm for launching new, expensive infrastructure investment programs".

He said it could still go wrong for the government.

"History suggests that some of those spending targets will slip, but I think a more determined effort has been made in this budget to exercise restraint in spending than I've seen in probably more than 12 years," he said.

A chainsaw to the budget, Labor says

Tasmanian Labor, along with peak bodies and unions representing the health sector, were scathing in their response to the proposed cuts.

"Premier Rockliff has put Eric Abetz in charge of cutting jobs and the services Tasmanians rely on — to pay for 13 years of Liberal waste," Labor shadow treasurer Dean Winter said.

"We thought the premier had handed Eric Abetz a knife to gut the public service, but today's budget shows he actually gave him a chainsaw."

Of particular concern for Mr Winter were the cuts to health, which, while remaining the highest spending priority for the state at 34 per cent of the budget, would also need to find an expected $131 million in cuts this coming year.

Over the next four years, that figure is projected to reach just over $700 million in cuts to health.

Australian Medical Association Tasmania vice-president Dr Meg Creely said she was "devastated".

"Anybody who has been near an emergency department or our health services recently knows that our services are buckling under pressure," Dr Creely said.

"To cut money from health is further going to see patient harm for Tasmanians."

For Australian Nursing and Midwifery Federation (ANMF) Tasmania secretary Emily Shepherd, the cuts to health, a sector which she said needed greater long-term investment rather than savings measures, were "simply horrifying".

Ms Shepherd said the sector was under-resourced and understaffed, and any suggestion that three quarters of a billion could be removed from an "already broken system" was outrageous.

Calls for clarity on cuts

Mr Abetz said the back end of departments would be a focus of the cuts, which would be made through natural attrition, negotiated voluntary redundancies and workforce renewal.

Around $216 million in operational efficiencies across the government will be brought in for this year.

The Community and Public Sector Union said back-line cuts would inevitably effect public services and called for further clarity around which areas would be affected.

"The treasurer needs to get real and actually outline: what is he cutting," CPSU secretary Thirza White said.

Meanwhile, the state's social services sector said the budget represented a mixed result, with Tasmanian Council of Social Services (TasCOSS) chief executive Adrienne Picone calling the government's extension of free bus travel, increased preventative health investment, and greater funding for Neighbourhood Houses encouraging.

Ms Picone said she remained concerned about the long-term impacts of reduced funding for community services more broadly — which would be hit with a cut of 13.6 per cent from last year's budget.

Education would be cut by just under $230 million over the next four years, with 155 job cuts to back-line staff within the Department of Education, Children and Young People.

Australian Education Union Tasmania president David Genford said he wanted "straight answers" on which jobs would be affected.

"There's not 155 jobs that can simply be cleared up like that, these are people that provide support to schools," Mr Genford said.

The Tasmanian Chamber of Commerce and Industry (TCCI) said it supported the treasurer's intent and ambition.

The chamber's acting chief executive Colleen Reardon said the challenge would now be the discipline required by ministers and department secretaries to deliver.