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Economists have warned there is no easy way out of Tasmania's dire budget situation, after the treasurer delivered an "interim" budget with little in the way of concrete solutions to the state's debt and deficit. Eric Abetz's first budget forecasts debt reaching $10.4 billion in 2028-29 and a return to a tiny net operating surplus in the same year, but no major policy measures outlining how that will be achieved. Independent economist Saul Eslake described Tasmania's budget position as "less worse" than had been foreshadowed in the budget that failed to pass parliament in May, but still "pretty dire". "And unfortunately this budget, although it foreshadows action down the track, doesn't really include any new budget repair measures and makes some very conservative assumptions, very optimistic assumptions about the extent to which the government will be able to control government spending over the next four years." 'No easy way out of this' Cedric Hodges from Deloitte Access Economics said nothing could be off the table to bring the state budget under control. "There's no easy way out of this. There's going to have to be some combination of spending restraint and revenue measures for us to address the issues in a significant way and at a more accelerated pace than what we can see in this most recent budget," he said. Mr Hodges said there had been an element of complacency in the Tasmanian community, after the economy performed reasonably well post-COVID and house prices were booming. "The current fiscal position is bad enough that we need to be quite up front with the Tasmanian community about what needs to be done over a relatively accelerated time frame." Economic position worst in the country, Eslake says Mr Eslake said Tasmania's economic position was the worst of any state or territory when two key budget measures were looked at. He pointed out the non-financial public sector as a whole, which includes government business enterprises (GBEs), is expected to incur cash deficits of $8.7 billion over the four years to 2028-29, and net debt is forecast to rise to about $19 billion by mid-2029. Mr Eslake said that debt was larger, as a percentage of gross state product, than that of any other jurisdiction. The state's net financial liabilities, which take into account debt carried by the GBEs (such as Hydro Tasmania, TasNetworks and TT-Line) and Tasmania's unfunded superannuation liability, are projected to rise from $22.8 billion this financial year to $28.5 billion in 2028-29. "The government is still proposing to take a large percentage of the profits which Tasmania's GBEs earn by way of dividend and tax equivalent payments, but those profits — at least in the near term — are going to be smaller than foreshadowed in previous budgets," Mr Eslake said. Tasmania's dividend, tax and rate equivalent incomes are estimated to be $254 million in 2025-26 — a decrease of about $95 million from last financial year's preliminary figure. This drop is primarily attributed to a lower forecast dividend from Hydro Tasmania because of dry weather in 2024-25, and lower power generation. The budget forecasts higher returns from Hydro and TasNetworks over the next four years, based partly on assumptions that there'll be more rain following last year's dry conditions, and "forecast improvements" in TasNetworks' profitability. "Weather forecasts, particularly over long periods, are at least as risky as economic forecasts," Mr Eslake said. "So, as the budget papers rightly note, this is a source of downside risk to the government's expectations that it will return to a so-called operating surplus by 2028-29. Tasmania's state-owned businesses are already facing challenges. Hydro Tasmania has growing debt and the government has just increased TT-Line's borrowing capacity by $400 million and given it a $75 million equity injection amid questions about whether the Spirit of Tasmania replacement fiasco has pushed it close to insolvency. Government has 'missed an opportunity' Mr Eslake said the "interim" budget was a missed opportunity. "If there had been a change of government at the last election, it might have been more understandable, but there's been no shortage of advice on which the government could draw … from Treasury and other places." Mr Hodges said Tasmania's increase in debt needed to be arrested soon. "As that debt accumulates, so do the interest payments and the interest payments are money that we spend every year that don't create a single job, they don't provide a single hospital bed, they don't educate a single Tasmanian."
