Image for Not the GFC: 12 years of Labor neglect, Stupid

Jim Bacon had a vision for Tasmania.  True, it only revolved around football, forestry and ferries, but we were all clear on where he stood.

I’m not sure whether Lara has a vision.  If she does, I suspect it’s something like `there are monsters outside.  We’d best close the curtains.’

For weeks, we’ve endured media speculation about what the Budget, Lara’s first attempt at rescuing the State from a slide into economic irrelevancy, would contain.

So here’s the brief picture:  more footy, but fewer schools.  More speed cameras, but fewer police.

I’ve little interest in the Budget minutae - our mainstream media well be explaining for days who gets what, when and where.

I’m more concerned with the macro picture, and it isn’t a pretty one.

Lara’s monsters outside the door are real.  Most national economic indicators are well-summarised by Treasury in the Budget documents.

That data paints a picture of a State with little employment growth, consumer spending paralysed by uncertainty, rising interest rates and a business environment still adjusting to a post-industrial world.

Left unchecked, those factors inevitably lead a sluggish economy, with little to inspire business investment.  Perfect conditions for a recession.

This is where political leadership steps in.  Traditionally, a conservative response would be to take the knife to the public sector, slashing programs, jobs and services until either economic conditions improved, or an election was due.

Past Labor Governments have responded by raising taxes, and/or borrowing until the crisis passed.

Lara’s found a new way.  Unwilling, for idealogical reasons to implement new taxes, she’s simply handballed the responsibility for rescuing the Budget position to Government agencies themselves.

Fully two-thirds of the `savings’ detailed in the Budget documents will result from the work of change managers and efficiency teams within the public service.

Given the historical failure of those very agencies to drive efficiencies and change from within, that strategy (if it could indeed be called a strategy) is troubling.

Lara does have a fiscal strategy though - a brand new one.  Labor Governments in Tasmania like fiscal strategies, so much so they scrap them every couple of Budgets and invent a new one.


This one isn’t so much a fiscal strategy as a dumbed-down list of goals.  Important data like fiscal balances and management of unfunded superannuation liabilities has been removed.

Instead, we have goals like `making the State net-debt free.’ 

At least the new focus on Budget operating balances rather than the more accurate measure of fiscal balance will give the Labor faithful something to crow about, even as the fiscal deficit (and consolidated fund deficit) trend towards oblivion.

2010/11 will see Tasmania book a fiscal deficit of $500 million.  The position in the coming year looks more optimistic, according to the Budget at least.  I have my doubts.

When I’ve had the opportunity to peruse the finer detail over the weekend (a new shipment of Moet arrived this morning, so an enjoyable few days of drinking and reading await), I’ll add more.

But for now, here are three reasons why Lara’s monsters at the door are real:

1.  Tasmania’s dodgy rail system seems to be turning into a sort of Magic Pudding in reverse.  That is, Federal and State Governments pour hundreds of millions of dollars into the rail network, just to make sure newer, shinier trains are derailed on a regular basis.  Except football-happy Lara has handballed this one too.  From now on, Transend will be paying $20 million each year into Tasrail.  Confused?  Well after being told for years that GBE’s were independent businesses, it finally emerges they are just another cash-cow.  Perhaps I should have predicted this after TT-Line was directed to buy into the footy business ( HERE ), but Transend’s $100 million rail injection (over five years) is on another scale altogether.  Potentially, this merger of all Tasmania’s GBE’s could see Aurora forced to hike power bills to meet Forestry Tasmania’s financial obligations.  Or Hydro paying money to Tote Tasmania.

2.  $800 million.  A lot of cash by most standards, and that was the rise in our unfunded superannuation liability in the current year.  That’s a big monster at the door, but one easily and conveniently swept under the carpet.  We’re assured when the finances approve, we’ll start paying those bills again, to make sure we can extinguish the debt by 2035.  Until then, the Budget warns there is hardly enough cash to pay current retirees, let along the crop that will hang up their boots over the next 30 years.

3.  The Queensland Treasurer doesn’t like Tasmania much*.  Neither do the Treasurers of Western Australian, Victoria, South Australia or NSW.  You see, they all believe Tasmania gets a bigger cut of GST revenue than we deserve.  The Federal revenues in the Budget aren’t the work of Treasury fiction writers; they are Federal numbers. That allocation is currently under review, so there’s the potential (I believe it’s not a major risk) that a Federal Government could decide Tasmania is politically expendable, and change the allocation model to our detriment. On the flip side, if the national economy returns to boom times, then the GST money will again flow, and we’ll all be rich.  Even without a pulp mill.

All that said, for a first attempt, Lara’s Budget isn’t all bad.  If I’m wrong and she’s right, then the Budget will return to a sustainable position in three years without sacrificing thousands of public sector jobs.

But I don’t believe I’m wrong.  The cost savings, on which the success of her Budget depend, are unachievable.  She’s raiding our publicly owned companies to pay Government debts.  And she continues to put our future prosperity at risk by ignoring Labor’s elephant in the room - that $5 billion superannuation bill.

She’s failed her first test as Treasurer, and more importantly, hasn’t demonstrated the leadership needed to put the good ship Tasmania back on some sort of sustainable course.

But as a politician, she’s one of the best.  Who else would have the nerve to announce widespread school closures, then handball the problem to her old political nemesis, the Greens?

* Michael Stutchbury, The Weekend Australian: The comparison encouraged Fraser’s running Tasmanian gag this week, in part aimed at the installation of island-bred Brisbane mayor Campbell Newman as Queensland opposition leader even before he has been elected to parliament. Promoting Queensland as the lowest taxing mainland economy, Fraser suggested Tasmania wasn’t a real state. “If you’re a first-home buyer, if you’re sitting in Tasmania freezing cold, then if you want to come to Queensland there’s $17,000 that goes in your pocket,” he said of his increased subsidy for housing construction. Read the full article, HERE

• Herald-Sun: Tasmania is not a state that matters, says Queensland Treasurer Andrew Fraser, HERE

Pictures below by Rob Walls, of public servants’ protest: :





Dave Groves, HERE

• Angus Livingston, The Examiner

They’ve overspent $500m ... now we pay
17 Jun, 2011 09:12 AM

SCHOOL closures, job cuts, limited pay rises - Premier Lara Giddings did not take a backwards step in yesterday’s budget.

In a budget seemingly aimed at annoying everyone, Ms Giddings made cuts in the politically sacrosanct “teachers, police and nurses” area.

The cuts added up to $1.4 billion over the next four years, but Ms Giddings still faces a battle to keep spending under control.

Consolidated Fund expenditure was meant to be $4.5 billion in the 2010-11 financial year.

The most recent estimate showed it had blown out to $4.987 billion - almost half a billion more than predicted.

That was on top of overspends of more than $200 million and $330 million in the previous two years.

Ms Giddings laid down a stern warning to her department heads, telling them there was no money left to cover for any waste.

“It’s time for agencies to understand that the budget they’ve got is the budget they’ve got,” she said.

However, while she said she would be strong on accountability, there were no details on how spending would be kept in line with the budget.

Also light on the details were the departmental plans of how the planned savings would be achieved.

Some departments revealed where the savings were coming from, but details from the Health Department were still light on.

They will be dictated in part by the national health reforms.

How the departments were meant to find the equivalent of 1700 jobs worth of savings was left to them.

Yesterday’s budget clearly harked back to former treasurer Michael Aird’s 2009 budget, when he predicted three years of gloom amid job cuts.

However, Mr Aird and former premier David Bartlett did not stick to their guns and let the budget blow out when the economy improved.

Ms Giddings said she expected to see about 600 people move on in the first year.

She said the Police Department’s cut of up to 100 positions would be mainly achieved through natural attrition.

The Examiner HERE

• John Lawrence: Lara, Will ... and the Corner Store