As Treasurer Michael Aird likes to tell the Tasmanian public, the economic and fiscal circumstances surrounding the state are tough.
Taking the Budget bottom line as a measure of fiscal health, it is hard to disagree with the Government's "times are tough" narrative. The 2009-10 Budget reveals a $117 million operating deficit this coming financial year, following a $102 million deficit the previous year.
The Bartlett Government has made much of the fact that a reversing economy has slowed revenue growth. The State Treasury expects gross state product to slip by 0.75 per cent in 2009-10, and that jobs will be lost as the unemployment rate rises to a painful 8.25 per cent in two years' time.
However, the narrative of Budget pain brought into Tasmania from outside only goes so far. This is because the Budget figures show that general Government revenues will grow by almost 2 per cent to $4.2 billion in 2009-10.
While the tax take from big-ticket items such as stamp duties is projected to go backwards, the Government expects more revenue by stealth from less visible sources such as patient and student fees, department recoveries, and various fines and fees.
Indeed, apart from a welcome payroll tax rebate, there seems little in this Budget to get the state's businesses investing and growing again.
That the growing revenue base for Tasmania has not averted Budget deficits shows that the State Government has been spending beyond its means. During the previous year recurrent expenditure growth increased by almost 10 per cent, far outstripping the 4 per cent growth in revenue.
For its part, the Government has announced a raft of measures to fix its own budgetary damage and return the Budget back into surplus. These include a reduction in the number of senior public servants, wage restraints, cost savings through abolishing the Department of Environment, Parks, Heritage and the Arts, an efficiency dividend requirement from agencies, and cuts to Government travel costs and advertising.
Such initiatives are a necessary first step to bring the Government back to a size more appropriate to the Tasmanian economy.
However, instead of taking stronger action to quickly put the state on an even fiscal keel, the Bartlett Government has chosen instead to delay most of the savings measures until well after the next state election.
It is from now until the next election that the integrity of the State Budget is at most risk, with political parties most inclined to outspend each other, therefore risking more Budget black holes.
Speaking of black holes, the Government is putting additional claims on the future by increasing state debt over the next few years. The balance sheets provided in the Budget show that total public sector net debt will increase by 87 per cent to $2.4 billion by 2013.
Treasurer Aird has made a virtue of extolling the infrastructure to be built by this debt, without revealing the net economic benefits.
The Government is also trying to take credit for Prime Minister Kevin Rudd's capital spending splurge on items such as toilet blocks, home insulation, scoreboards, pool chlorinators and picnic tables.
Even though credit ratings agency Standard and Poors has not downgraded Tasmania's rating, the important ratio of net financial liabilities to revenue will remain uncomfortably above the Government's own 110 per cent threshold mark over the next three years. This heightens the state's vulnerability to future economic shocks that erode the revenue base.
The Government also seems unwilling to take more immediate action to redress its growing unfunded superannuation liabilities, letting it keep on growing until 2014-15, while at the same time giving itself a big advance tick for extinguishing it by the impossible date of 2035.
The lacklustre 2009-10 State Budget is a legacy of the cumulative failings of the Lennon/Bartlett Government to keep costs under control and maintain a low public debt profile.
It is little wonder the Government has insisted that this Budget is one of hardship.
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