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On Monday, a leading economist gave a pretty dire warning about the state of Tasmania's finances — but within hours, both major political parties had ruled out implementing its main recommendations.
The economist projected Tasmania was on track to be in the worst financial position in the country over the next three years, and in a decade's time would be paying $710 million a year — just shy of the estimated cost of the extremely contentious Hobart AFL stadium — just in interest.
And he found the state's journey towards the top of the fiscal cliff was caused entirely by government decisions.
It caused a fair bit of alarm, especially among the three Jacqui Lambie Network MPs who pushed for the report as part of the party's deal with the government.
But the major parties did not take long to reject enacting the economist's preferred solution.
Michael Ferguson said he would consider the contents of the review, but immediately ruled out increasing taxes. (ABC News: Luke Bowden )
The report, from independent economist Saul Eslake, makes clear that Tasmania does not have a spending problem.
Loading...In fact, he found the state needed to spend $530 million a year on government services — everything from industry assistance to spending on health and education — just to reach the average level of services delivered in other states and territories.
So Mr Eslake instead turned his mind to growing revenue.
The main way to do that is with new or expanded taxes, with Mr Eslake raising a few different proposals for consideration:
- Lowering the threshold at which companies pay payroll tax
- Scrapping stamp duty, and replacing it with a broad-based land tax
- Increasing motor vehicle registration costs
- Increasing mining royalties
But within hours of the report being released publicly, Treasurer Michael Ferguson had knocked all of those proposals on the head.
"We're not going to be increasing taxes, we're not going to be introducing new taxes," Mr Ferguson said.
"People who respect each other can disagree, and on that point with Mr Eslake I do disagree."
The report says Tasmania needs to spend $530 million a year on government services, including health, to reach parity with services delivered in other states and territories. (ABC News: Maren Preuss)
And Labor did not take long to follow, with Shadow Treasurer Josh Willie saying his party "does not support new or increased taxes".
They both preferred to focus on plans to grow the economy, and rein in spending.
Mr Eslake said it was "disappointing but not really surprising" the recommendations had been rejected so quickly, and it meant "one of three things".
"Either the government's planning to, and the opposition will support swingeing cuts in spending on a range of programs such as health, education, policing, housing and child protection, which account for the bulk of state government spending," he said.
"Or, alternatively, that they will continue to run large budget deficits and rack up increasing amounts of debt.
"Or, thirdly, perhaps that they're proposing to argue that my findings are completely wrong and that there isn't really a need to raise additional revenue."
"Now, they're welcome to argue any or all of those three things if they wish, but I personally think they'll have difficulty doing that."
Mr Eslake recommends the government employs a new medium-term fiscal strategy, with a focus on increasing "own source revenue". (Four Corners)
Report a 'timely reminder' of budget challenges
Deloitte Access Economics partner Cedric Hodges said Mr Eslake's report was a "timely reminder of Tasmania's fiscal position and where we could be heading with our policy change".
"There are obviously a number of revenue measures which Saul discusses which I think would be worthwhile having further analysis and modelling done so we could see the full impacts of those measures," he said.
In particular, Mr Hodges said he would like to see thorough consideration of scrapping stamp duty.
"Most economists would agree that that's one of the bigger reform options available to state governments, especially when it comes to … reform of taxes that they can control," he said.
He said relying on spending cuts alone to fix the budget position would be "incredibly difficult".
"For the budget to be repaired over time without changes to state government revenue settings, so any state government taxes to be changed, you would need to rely on restrained growth in government outlays," he said.
"Most of the things that governments are spending money on at the moment are things that are hard to restrain, like health and education spending, where those are necessary things for Tasmanians to live fulfilling and rewarding lives."
Cedric Hodges would like to further investigate some of Saul Eslake's proposed revenue-raising measures. (Supplied: Cedric Hodges)
The Property Council has also advocated for stamp duty to be replaced with a broad-based land tax, with its chief executive Rebecca Elston calling for a strategic review of property taxation.
"In the current economic environment, the government and all political parties have a unique opportunity to sit down at the table and discuss a way forward for our state that creates jobs, unlocks productivity and provides a more reliable revenue base for Tasmania," Ms Elston said.
"For years, we've known Tasmania desperately needs a more efficient taxation system that makes housing more affordable.
"Instead, the government continues to grab the windfalls from property taxes escalating year on year as a means to line Treasury's pockets," she said.
The report recommends scrapping stamp duty and replacing it with a broad-based land tax. (ABC News: Jacinta Bos )
Lambie MPs say response 'extremely disappointing'
Mr Eslake's report was commissioned after being included in the agreement between the state government and the three Jacqui Lambie Network MPs to provide confidence and supply to the minority government.
Braddon MP Miriam Beswick said the major parties' response to the report — which she said "can support some great policy decisions to get Tasmania back on track" — was "extremely disappointing".
Bass MP Rebekah Pentland said her party, unlike Liberal and Labor, recognised something had to change.
"The trajectory the state is on has us heading off a cliff," she said.
"We'll consult thoroughly on Saul Eslake's ideas to raise revenue and his recommendations around infrastructure spending."
Andrew Jenner, Miriam Beswick (centre) and Rebekah Pentland say they hope Tasmania can achieve economic reforms. (ABC News: Luke Bowden)
In his report, Mr Eslake questioned whether the current level of infrastructure spending could be maintained, finding Tasmania was "running the largest public sector infrastructure program, relative to the size of its economy, of any state or territory".
Lyons MP Andrew Jenner said the report confirmed "reckless" election spending by the Liberal Party had put the state in a "very dangerous budget position", but he had not seen anything in the response to give him confidence spending would be reined in during future campaigns.
Mr Hodges said the JLN's presence in state parliament meant Tasmania could finally have a mature debate about tax reform.
"It is easy to fall into the trap of believing that big reforms are impossible, but there is precedent for them happening over time both at a Commonwealth and a state level," he said.
"I don't want to give up hope that Tasmania can achieve some of those reforms, or at least have the conversation about doing some of these reforms."
The government says it will formally respond to Mr Eslake's report in next month's state budget.
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