Wednesday 13 March 2024

Election 2024: Tas vs Vic - the battle for the Basket

 

Our less than honest politicians continue to rely on an endemic misunderstanding of State government debt when spruiking their credentials as economic managers.

Rebecca White harks back to 2014 when general government net debt was absent. But there was plenty of unfunded superannuation liabilities and borrowings by government businesses, some of which were needed to pay returns to government, that she conveniently sidestepped.

Jeremy Rockliff’s advertisements have a fleeting glimpse of a chart showing net debt across states with Tasmania having a small amount compared to other States. A disingenuous comparison given we’re the smallest State.

Treasurer Ferguson when defending the level of debt in his 2023/24 Budget the day after the budget was handed down in May 2023 told us our net debt is quite low:

 “…our borrowings are very, very small in comparison to other jurisdictions per capita, just have a look across the waters that Victoria what they are doing……..I wouldn’t want to be in their shoes.”

There’s plenty of metrics to suggest our predicament is not much different to Victoria, perhaps even worse given we are still deluding ourselves about our true position, and about to be lumbered with another round of unfunded election promises no matter who wins.

Tuesday 12 March 2024

Election 2024: The Labor Fiscal strategy

 

Just when one thinks things can’t get any worse the Tasmanian Labor Party put out its Fiscal Strategy Statement with an accompanying media release declaring Treasurer Ferguson “simply has no idea what he’s doing.”

It’s a classic case of a kettle being called black by a particularly sooty pot.

The Fiscal Strategy is a statutory requirement of the Charter of Budget Responsibility Act 2007. Opposition parties need to lodge a Strategy with the Treasury Secretary ten days after an election is called.

The Tasmanian Labor Party outsourced the preparation of its fiscal strategy to its media minders. As a consequence, the strategy is a flawed document replete with dubious and at times incorrect assertions.

Tuesday 27 February 2024

Election 2024: End of the UTAS dream?

 

Reading between the lines of the Liberals’ statement vowing to block the sale of UTAS’ Sandy Bay properties, one gets the feeling it’s a PR masterstroke from UTAS. They’ll now be able to say they were forced to change course rather than having to admit it was a crock of an idea in the first place.

Sunday 25 February 2024

Election 2024: UTAS issues

 

The Clark electorate in Hobart is particularly crucial. If major parties only manage to get two seats each at the State election on March 23rd they will need four seats in the other four electorate to achieve a majority in the new parliament. That’ll be a tough ask.

Given the poll 18 months ago revealing three quarters of Hobart City electors are opposed to UTAS’ move into the City it is a little surprising there hasn’t been a greater willingness by third parties and potentially key independents vying for the three remaining seats to discuss their views with voters.

Friday 23 February 2024

Election 2024: The debt balloon ahead

 

In the previous four blogs we looked at the fiscal landscape confronting Tasmania and the major flows in the current government’s budgets  - revenue, operating expenses and debt servicing costs. This blog will try to reconcile these flows with the increasing levels of borrowings that awaits any future government.

Thursday 22 February 2024

Election 2024: Revenue

 

This blog tales a closer look a government revenue particularly the vexed question of our own source revenue.

The 2023/24 Revised Estimates Report presented revenues for the Budget year 2023/24 plus the three years of forward estimates:

 

 


Revenue doesn’t change much, from $8.5 billion this year 2023/24 to $8.9 billion 3 years later.

In real terms revenue is static. As we saw in the fiscal sustainability blog, revenue is failing to keep up with outlays.

The fall in returns from government businesses (dividends, tax and rate equivalents) is because the special dividend from Tascorp representing the annual drawdown of the $730 million of Mersey Hospital money received in 2017 intended to last 10 years will fall a little short in the tenth year. Roughly $100 million per year has been/will be drawn down in the first nine years. Only $27 million will be left for year 10 in 2026/27. The new government will have to work out how the revenue shortfall will be fixed in future years.

At least the no- worse off GST guarantee which was due to expire in 2026/27 has been extended for another 3 years. The Albanese government wasn’t prepared to get off-side with WA voters by trying to revise GST arrangements which handed a massive boost to WA in the Morrison years and decided instead to kick the can down the road for another 3 years by giving other States an extended no-worse off guarantee.

But slowing population growth in Tasmania relative to Australia as a whole will tend to reduce our share of the GST pool over time. Which will be a problem going forward especially as any extra GST already received as a result of population share increases, had zero effect on addressing the needs of the additional population. The gap between the demand and supply of all services has continued to grow.

Now to have a closer look at own source revenue. The grants in the above table include all grants from the Feds, the general-purpose grants (GST share) plus all the specific purpose grants split comprising both capital and operating grants. The balance of revenue is own-source revenue, all reasonably self-explanatory.

One of the current government’s fiscal targets is for not less than 37 per cent of government expenditure be funded by own-source revenue. Proposed expenditure figures from the RER plus revenue as per the above table split between grants and own source revenue, enables us to check the percentage figure in each year. This is shown below:

23/24

24/15

25/26

26/27

Grants

5,535

5,698

5,656

5,845

Own source revenue

2,958

3,020

3,082

3,090

Total revenue as per RER

8,493

8,717

8,739

8,935

Expenses as per RER

9,014

9,009

8,877

8,987

Own source revenue as % expenses

32.8%

33.5%

34.7%

34.4%

 

At first glance it looks as if some progress is being made. But there are a few important caveats:

·        In real terms there is no increase in revenue.

·        A replacement for Mersey money is yet to be found.

·        Much of the improved % is due to a fall in expenses.

As noted in the blog on spending plans, future expenses assume $300 million of Budget Efficiency Dividends are found. Even if some are eventually discovered the likely additional outlays required to meet election promises will likely swamp any savings very quickly.

With zero real growth in revenues the reason for the downward slide in real operating outlays before debt servicing costs is glaringly apparent.  

Paying for infrastructure and debt servicing costs whilst trying to slow down the inevitable increases in borrowings, leaves no alternative but austerity implied by the RER. The gap between necessary services and what will be delivered will only widen. It’s difficult to draw any other conclusion.

The next blog will draw together some loose ends and try to reconcile the expected flows (spending, debt servicing and revenue) with our increasing stock of debt.

 

 


Wednesday 21 February 2024

Election 2024: Debt servicing

 

This blog takes a closer look at debt servicing costs which increasingly is becoming a crucial matter for service delivering government(s) afraid to raise more revenue lest voters shy away.