Tasmania the ungovernable State

There was a touch of irony during last week’s tortuously long deliberations by Tasmania’s Upper House on the contentious Tasmanian Forests Agreement Bill when it paused for a moment to consider the Mental Health Bill. Many Tasmanians would have been happy to see the latter Bill amended to make Parliament a proscribed organisation and closed.

The second best solution was to call a halt to proceedings. Bogged down with a continuing stream of amendments the Members forgot where they were up to and the Government Leader was forced to postpone matters until mid April.

Since December the Upper House has spent more time considering the Bill than it normally spends in full session for an entire year. More than forty days has been spent discussing an industry comprising less than 2% of the State’s economy and workforce whilst the remaining 98% is ignored.

A pious self serving group of Members are determined to thwart the Bill regardless. The Bill designed to remove 500,000 hectares from the unprofitable and unsustainable native logging industry resulted from a deal between various interest groups, including representatives of industry, unions and ENGOs, in return for $380 million of Australian Government handouts and a peace offering from ENGOs.

Tasmanians conveniently overlook that if all States were to receive matching per capita grants then it would cost the Australian Government $17 billion.

Few are completely happy with the deal. Many see it as a way forward. Others from both sides of the debate are keen to return to the barricades to continue the war of attrition.

The $380 million Government sweetener offered has been accepted, $100 million of which has already been received and spent, over half to prop up insolvent companies like Gunns which subsequently passed into the hands of liquidators, and to pay undeserving if not fraudulent claims by exiting forest contractors.

A common occurrence in Tasmania is to accept a tied grant then  cry “blackmail” when there’s an insistence the preconditions, in this case the passing of the Bill, are met. Tasmanians think they can stuff about forever and the Australian Government will always come to the party. An Abbott Government with a large majority won’t necessarily give much attention to bleating Tasmanians as there are likely many others wanting a share of the spoils of victory.

This week also saw the resignation of the head of Treasury, Martin Wallace after only two years trying to stem the cash bleeding from State coffers following previous Premier Bartlett incorrect call that the GFC was over in 2010 and the time was right for a post election spendathon. The enormity of problems he (Bartlett) helped create coincided with a sudden realisation that his young children needed more fatherly attention and led to his departure in 2011. This was followed less than a year later by Treasurer Michael Aird who after six years in the job but only a year since his election to a safe Upper House seat, decided the time was right to pursue an alternative career. Chair of the Tasmanian Devil Advisory Committee is the only publicly announced job. Confirmation of the Peter Principle perhaps or insurmountable problems ahead?

It seems an unlikely coincidence that personal reasons caused the exits from public policy for all three involved in plotting a way forward for the State.

The State government in February released its Mid Year results. General Governments are essentially cash businesses. Politicians and bureaucrats will always attempt to obfuscate with terms like ‘net operating result’ and ‘fiscal deficit’ but a fairly good snapshot of what is happening can be gleaned from cash flows.

In the case of Tasmania it’s not a pretty picture.

If one included amounts for those defined benefit employees whose superannuation is not required to be paid until retirement and excluded benefits paid to retired employees as representing payments for past liabilities, the current operating cash flow is in deficit. There is not enough to pay for new plant equipment and infrastructure (investing) or to pay any loans and other liabilities (financing).  Whenever cash is tight investing is deferred or even abandoned. The Government’s only cash on hand are prepaid capital grants from the Australian Government for the Royal Hobart Hospital rebuild and the Hobart Railyard redevelopment but these are now being used to pay ordinary operating expenses such as wages and salaries. It is an unsustainable situation. Yet the Labor Government and the Greens both interpret the situation as being on track and the Liberal Opposition offer a belief that the confidence fairy and the lollipop lady with an ‘open for business’ sign is all that is needed to get the State moving.

The Grants Commission has just determined that next year’s GST relativity will be less than expected. Tasmania will get $1.61 whereas $1.64 was expected. (an equal per capita split implies $1). Tasmania’s fragile fiscal position is largely predicated on receiving $1.76 in subsequent years. Just as a fall in coal royalties saw Queensland’s GST relativity rise from $0.98 to $1.05, any future downward adjustment to WA’s iron ore royalties will necessitate a rise in its relativity from 45 cents inevitably meaning other States will get less from the GST pool.

The GST pool is not growing as expected either (see report in The Age ).

A few years ago full financial statements appeared in the main part of Tasmania’s Budget Papers. Today as a concession to disinterest and poor concentration spans they are tucked away in an Appendix where few eyes pry.

If one takes a step back from the current Forests Agreement Bill imbroglio, the broader bird’s eye view is of football supporters brawling in Bay 13 mindlessly unaware that the ump is about to abandon the game.

Everyone is ignoring future challenges.

The Upper House must shoulder some blame for choosing an interminable course designed to delay and frustrate. Lip service was given to helping solve problems but the selection of witnesses at the recent House inquiry and the subsequent Dorothy Dixers reeked of intellectual dishonesty. As for assisting public policy formation, the opposite has occurred. The Upper House has acted as a double agent to undermine the system even further, making any future reform less likely.

Tasmania is becoming ungovernable.