Tasmania's State Budget: A Bleak Outlook Amidst Financial Woes

The week before a state budget is normally a time to drop good news.

With around $10 billion a year to be spent, there's bound to be a couple of exciting things to get the Tasmanian public in a good mood.

A new grants program for small businesses, record investment in hospitals, maybe even a cut to car rego if you're lucky.

It's a bit bleaker this year.

On Sunday, Tasmanian Health Minister Bridget Archer sent out a press release trumpeting a $776 million investment in ambulance services.

But don't be dazzled by the big number — it's actually a cut.

The last budget included $782 million for ambulance services.

Last Monday, Housing Minister Kerry Vincent held a press conference to spruik a "significant" investment into housing and homelessness services.

The government later clarified that this means the current funding level will be sustained.

If we're celebrating keeping the same investment — or even just a small cut — into ambulance services and housing, how bad is the rest of the budget?

Finances to 'rapidly deteriorate', according to Treasury

First, a reminder on the dire state of Tasmania's finances.

Come the end of this financial year, the state will have just over $7 billion of debt.

Wrap in the debt of government businesses and the unfunded superannuation for the public service, to get the 'net financial liabilities', and you're looking at around $15.8 billion.

Treasury's Fiscal Sustainability Report has warned that on this trajectory, total net debt could reach $146 billion by 2040.

Eric Abetz's first "interim" budget, handed down in November, didn't include the bulk of promises made at last year's election campaign, because of the short turnaround.

Even without that, it still predicts a fiscal deficit (which includes infrastructure spend and interest payments) in 2028-29, the furthest year out in the forward estimates.

Like all governments, the state's spending rocketed during COVID.

In 2018-19, back when nobody thought about nose swabs or JobKeeper, the state spent $6.31 billion.

We now spend more than $10 billion a year and haven't had an operating surplus since.

The challenge of righting Tasmania's finances cannot be underestimated.

It's time to pay up.

And we're all going to feel it.

'Credible' pathway needed

Independent economist Saul Eslake said he wanted to see a fiscal surplus projected for the 2029-30 year, or preferably the year earlier.

Pointing to the state's poor track record in keeping to spending targets, he said the first thing he would look for in the budget was a credible pathway to the numbers it projected.

"Are they backed up?" he asked.

"Those estimates of what I assume will be slower growth in spending — are they backed up by announced policy decisions that give you reason to be confident that spending will [be] in line with the forward estimates?"

The government has a track record in underestimating its growth in spending and regularly revises them up.

It's normally saved somewhat by failing to meet its planned infrastructure spend.

"To what extent, is any improvement in the budget bottom line that the treasurer unveils, the result of conscious policy decisions — either to reduce spending, operating or capital spending, or to increase revenue?" Mr Eslake said.

"The precise mix by how they get there is probably less important than whether they get there because it essentially reflects political choices."

Economic growth, increases in GST spending, or spending less on infrastructure than forecast, won't balance the budget.

Now is the time for tough political choices that have been put off for too long.

How deep will cuts be?

So, is Eric Abetz the man to balance the budget?

You could argue there's nobody better in the government, or the parliament, for the task.

The arch conservative has been as direct as possible about his distaste for debt.

In his maiden speech to the Tasmanian parliament, Mr Abetz said "debt to pay for our regular expenditure is both unsustainable and ultimately immoral".

So too new taxes, which look to be contained to the short-stay accommodation levy promised in the 2024 state election campaign.

Budget cuts it is.

The government has stopped guaranteeing that frontline jobs like nurses and teachers won't be cut, and admitted it will be tough.

Mr Eslake says he has "no doubt the treasurer gets it".

"I'm absolutely confident that Mr Abetz understands how serious Tasmania's financial problem is, and that he personally has the political will to fix it."

So how much skin does the government have to lose?

Some crucial services will undoubtedly lose funding at a time when many are already on the edge.

Labor's already painting these cuts as the cost of "13 years of Liberal mismanagement".

A new opinion poll from EMRS has shown there's a new player on the scene, with One Nation attracting 19 per cent of voters, mostly defecting from the Liberals.

The government's own messaging is already clear.

Some version of "we are strengthening services while balancing the budget" will appear on repeat for the next week.

These cuts will be justified as responsible action to stave off deeper cuts down the line.

But that will be cold comfort to someone waiting for an ambulance or losing their job.