The financial position of Tasmania’s government departments and agencies has deteriorated over the last ten years and is set to get worse, according to an independent review.

Economist Saul Eslake submitted his Independent review of Tasmania’s state finances to Premier Jeremy Rockliff on Sunday, saying poor policy decisions were to blame for the current state of affairs.

“The Review finds that the deterioration in the financial position of Tasmania’s ‘general government sector’ … over the past decade is entirely attributable to ‘policy decisions’ by government,” the report concludes.

The review says in recent years Tasmania has been spending about $530 million per annum less than it needs to provide services similar to the average level and efficiency of all states and territories.

It also questions whether the island state will be able to afford its ambitious public sector infrastructure program over the next three years, which will be the largest relative to its economy of any state or territory in the country.

It finds Tasmania’s public sector finances have deteriorated significantly since the second half of the 2010s, with the state budget’s bottom line going from balance or surplus in the mid 2010s to growing deficits since 2018-19.

Based on publicly available information, by some metrics … Tasmania’s financial position will become worse than that of any other state or territory over the next three years.

Saul Eslake

The trend is partly related to Covid and the provision of compensation to survivors of child sexual abuse in State institutions, but the rot started before the pandemic and continued after it, Mr Eslake says.

There’s ‘unambiguous’ evidence that the financial position of Tasmania’s government sector will deteriorate further over the next three years, exacerbated by a deterioration in the financial position of the state’s  government business enterprises, Mr Eslake says.

“Indeed, based on publicly available information, by some metrics … Tasmania’s financial position will become worse than that of any other state or territory over the next three years.”

$16b worth of debt

According to the review, over the next ten years the Tasmanian government sector will see cash deficits of $12.7 billion and debt hitting $16 billion.

The report makes 26 recommendations, saying Tasmania needs stronger institutions and more robust rules around the management of its public sector finances.

They include lowering payroll tax thresholds for businesses, replacing stamp duty with land tax and increasing motor vehicle registration and mining royalties.

“The challenge of returning Tasmania’s public finances to a sustainable condition over the next five-ten years will require Treasury to be better resourced than it has been over the past decade, and a greater willingness on the part of the Government to seek, and pay heed to, its advice than appears to have been evident over this period,” he says.

Mr Eslake also recommends that the Parliamentary Public Accounts Committee investigate and report on how to enhance the independence of the Tasmanian Audit Office in order to bring it into line with ‘best practice’ in other jurisdictions.

Treasurer Michael Ferguson said the government would consider the contents of Mr Eslake’s review and provide a response in the September 12 Budget, but has ruled out any new or increased taxes.