A ‘Glide Path’ approach to economic recovery
If people were getting excited about this year’s State Budget being a visionary document, then they are going to be severely disappointed – what we have is a cautious and conservative document that seeks to offer in a sea of uncertainty – stability.
Premier Treasurer Peter Gutwein has delivered a belt and braces approach to the 20/21 State Budget and with the COVID-19 pandemic still raging throughout parts of the world, this comes as no surprise.
By Treasury’s own estimates, if a second wave were to hit the state it would cost Tasmania some $500 million dollars in necessary restrictions simply to save lives.
This year there will be a record $1.1 billion deficit, dropping to $281 million next financial year, with a wafer-thin surplus thereafter.
However, over the forward estimates net debt will blow out to a shocking $4.38 billion.
Interestingly while GST revenues will take a hit down some $347 million over the next four years, state revenues will fill the gap with increases predicted in land tax, stamp duty and payroll tax highlighting the continued resilience of the Tasmanian economy.
This revenue flow, coupled with significant deficit spending will see record funding for infrastructure spending at $5 billion over four years, with an ambitious goal of creating 25,000 new jobs building schools, houses, hospitals, roads, sewerage treatment plants and bridges.
On top the subsidy for apprentices, young people and trainees will continue, hoping to create a further 4,000 jobs, while there will be money for the peak organisations to support their member base, with the hospitality sector, along with community sector being earmarked for significant support.
Tourism gets the follow through on a number of initiatives including $10 million for international arrivals at Hobart Airport, while the push towards energy renewables in hydrogen and pumped hydro continues.
The commitment to the replacement of the Spirit of Tasmania vessels has been confirmed, with some $218 million earmarked for their replacement, commencing in 2022/23 – with a commitment to maximise Tasmanian jobs from this investment.
Elsewhere in the budget we see record spending for health services at $9.8 billion over four years, while education sees $7.5 billion over the same period.
The promise of 1000 new affordable homes over three years has been funded with a $100 million while there is a commitment to making the government vehicle fleet all electric by the end of the decade.
There is $30 million for waste and resource recovery initiatives, including $9.5 million for a container deposit scheme and the waste action plan, while a waste levy for industry will be introduced.
Overall, the economy shrunk by half a per cent last financial year, this financial year it is predicted to contract by 1.5 per cent and return to a normal 3.75 per cent by 21-22. But despite all this and the jobs triggered from the budget spend, by that stage, unemployment is predicted to be over eight per cent.
Given these figures and the fact the COVID-19 pandemic continues to ravage economies throughout the rest of the world, it is not surprising the Premier has played a steady hand, attempting to prime the economy, while at the same time continue to deliver on health, education and roads.
Thankfully interest rates are low, and there has never been a better time for government to loan cheap money to stimulate the economy through building growth creating infrastructure.
2020-21 State Budget – at a glance
- Tasmanian economy shrunk 0.5 per cent in 2019-2020 and is predicted to contract 1.5 per cent for the current financial year.
- GST revenue down $347 million over the forward estimates, but local taxes such as stamp duty, payroll tax and land tax likely to fill the gap.
- Unemployment projected to remain and to peak at 8.5 per cent in two years’ time.
- This year there will be a $1.1 billion deficit, dropping to $281 million next financial year, and wafer-thin surplus from there.
- Net debt expected to be a whopping $4.38 billion in four years.
- Compensating for this debt is some $5 billion in infrastructure spending, hoping to create some 35,000 jobs.
- Spending for front line health and education to continue to increase.