A summation:

Michael Aird’s first Budget fully delivers on the Lennon Government’s election promises, but over the next four years operating expenses (wages and salaries of public sector employees, grants and subsidies) will be at least $500 million higher and capital expenditures at least $230m higher than envisaged before this year’s state election.

The Budget provides for more than $500m of additional “operating expenses” which will fund, among other things, an additional 450 staff at the Royal Hobart Hospital, a new emergency department at the Launceston General Hospital, two new ambulance crews, and a $20m package of improvements in dental care. Health also gets an extra $114m of capital funding over the next four years for, among other things, new medical equipment for the RHH, LGH and NWRH and 100 new ambulances.

The Budget also provides $50m in additional recurrent and $45m of additional capital funding for education (including 60 new primary school teachers, 29 Year 7 teachers over the next five years and $30m for the new Kingston High School); $40m in additional recurrent and $43m capital funding for public safety (including 12 extra police officers); and $23m for programs to assist the agricultural sector.

In total, operating expenses will rise by 7% in 2006-07 — the third consecutive year in which operating expenses have risen by at least this amount — but are then projected to slow to an average of just 1.7% per annum over the following three years.

As a result, the Tasmanian general government sector will incur operating deficits (operating expenses in excess of revenues) in each of the next four years (2006-07 through 2009-10) and fiscal deficits (that is, after accounting for capital expenditures) in each of the next three years — in breach of the new five-year fiscal strategy announced in the Budget.

Apart from the ACT, Tasmania is the only State currently planning to run operating deficits in each of the next four years (NSW is expecting an operating deficit in 2006-07 but on the projections in its most recent Budget will return to operating surpluses in 2007-08; South Australia is yet to bring down its 2006-07 Budget).

On the other hand, most States and Territories envisage running fiscal deficits (that is, after providing for capital expenditures) over the next four years. And Tasmania’s average fiscal deficit over the next four years is equivalent to about 0.25% of gross State product, smaller than those of any other State or Territory except Western Australia.

What the Greens reckon:

MEDIA RELEASE

Peg Putt MHA
Greens Opposition Leader
Thursday, 15 June 2006

TASMANIAN BUDGET IS ‘A GLASS HALF FULL’

Election Promises Apparently Funded, But Public Housing, National Parks Staffing, and Gambler Advocacy Miss Out

The Tasmanian Greens believe that on the face of it today’s State Budget is a genuine attempt to fulfil Government election promises, but serious gaps such as Labor’s total withdrawal from building new publicly-owned affordable housing reflect holes in Labor’s election platform.

Greens Opposition Leader and Shadow Treasury Spokesperson, Peg Putt MHA, likened the Budget to ‘a glass half full,’ with money into health and human services including dental and Sexual Assault Services, plus education and training looking promising, but big disappointments being no new publicly funded Housing; no extra National Park rangers; no sewage and drinking water package for the regions; and the failure to establish a Gambling Consumers’ Advocate.

The Greens also said that several of their previous Alternative Budget initiatives had been picked up, with the government’s SMART Farming package mirroring the Greens lead in this sector.

Ms Putt also welcomed the establishment of a Demographic Change Advisory council, saying this responds to a need for overall strategic planning which the Greens have advocated for some years.

Of concern is that total state sector net debt appears set to suffer in the short term with high debt levels in the government businesses like Hydro and TT Line, before this begins to fall,” Ms Putt concluded.

“We say this Budget is like a glass half full, what is there appears to be a genuine attempt to fulfil election promises especially in health and education, but there is plenty missing, including the failure to build any new publicly-owned affordable housing,” Ms Putt said.

“Labor failed to promise any new rangers for National Parks, new regional sewage and water upgrades, or to create a Gambling Consumers’ Advocate, so these pressing needs have missed out.”

“The saying is that imitation is the sincerest form of flattery, so we are pleased that our vision for a clean, green agricultural future expressed in our previous Alternative Budgets, and as an election promise, has been heavily borrowed in the SMART Farming package.”

“Overall strategic planning for demographic change is overdue and we welcome a long-term focus on our aging population and its needs, together with planning for skills and workforce development.”

What the Libs reckon:

Media Release

Tasmanian Liberal Leader

WILL HODGMAN, MHA

Thursday June 15, 2006

Budget a recipe for stagnation

The State Budget has ignored warnings by business and forecasters about the likely softening of the economy.

There is absolutely nothing new in today’s Budget to stimulate the economy and jobs growth or mitigate against the risks of an economic downturn.

That is despite the fact that unemployment is rising, the skills crisis is constraining businesses, economic and population growth is stalling, home approvals and exports are falling, companies such as the TT Line and Hydro are in financial trouble and tourism is waning. Just today we have heard that Qantas Link is ceasing operations into Burnie from August 1, the number of seats into Devonport will be cut by about 25 p.c. and in Launceston, the 737 service is being withdrawn and replaced with a Dash8 service. This will further hurt tourism in Tasmania.

Any downturn in the economy will affect the ability of the government to sustain services and public sector wages into the future, especially if growth in GST receipts falls.

Tasmanian Liberal Leader, Will Hodgman, said this Budget was the latest in a succession of Labor Budgets that completely ignored the need for tax reform to improve Tasmania’s business competitiveness.

In recent State Budgets, other Labor States have made Tasmania’s comparative disadvantage even worse by announcing significant payroll or land tax cuts, or both.

“The State Government has not addressed either of these - instead it’s going to significantly increase its take from the engine room of our economy - business.

This includes a $24 million increased take from payroll tax compared with 2004/05, and $17 million more in land tax over the same period despite cuts that took effect last July. State tax revenue collection has gone from $679.3 million in 2004/05 to $727.9 million in 2006/07.

There’s also nothing new of substance to address the skills crisis. Importantly, one of the requirements of the peak business body in Tasmania for increased infrastructure spending has not been met.

In fact the Budget is largely a bland rehash of Labor’s election commitments and reinforces the lack of a third term agenda that was highlighted in the Governor’s speech.

Tasmanian Liberal Leader, Will Hodgman, said the Liberals would be carefully analysing the Budget over the coming days. As with most things, the devil will be in the details.

However, on the face of it, the government’s commitments for health, children and young people, are positives. Whether they result in improved outcomes is another question altogether. The State Government has established a pattern now of throwing money at problems but not fixing them.

Planning for the challenges and opportunities of demographic change is also welcome, but the government has no vision for trying to broaden our demography through strategies that would encourage young people here.

The initiative also falls well short of the fully integrated comprehensive State strategic plan needed to tackle the many major and difficult challenges facing out state, such as our road networks, the possible need in the future for a new Royal Hobart Hospital and the need for a more coordinated regional development program.

 

 

By Saul Eslake

Here is ANZ Bank Chief Economist Saul Eslake’s assessment of the 2006-07 State Budget brought down yesterday by Tasmanian Treasurer Michael Aird MLC.

Download PDF: 200607_Budget_Report.pdf