Hydro Tasmania's rivers dry up?

The recent Budget confirmed Hydro Tasmania’s uncertain future.

After the unprecedented financial success of the past two financial years 2012/13 and 2013/14, Hydro’s earnings are projected to plummet.

Returns to government lag profits by a year and hence payments from Hydro for the current year 2014/15 will be based on the record profits expected to be announced next month when Hydro releases its 2014 Annual Report.

But thereafter the future is bleaker.

Budget reality

 

Most of the post budget responses have sadly failed to come to grips with the budgetary problems confronting this State.

Maybe the following graph will highlight the situation.

 

The first Liberal budget is similar in approach to Lara Giddings’ first budget . Cash on hand at that stage was almost $1 billion, but the outlook wasn’t great.

A cash deficit of over $300 million was predicted for 2011 budget with cash surpluses thereafter. This is shown by the red line.

However during Ms Giddings tenure, cash continued to run down to $362 million (excluding any temporary borrowings) by 30th June 2014. This is shown by the green line.

Enter Mr Hodgman.

The recent budget even if all measures are successfully implemented on time, will continue the cash drain until there won’t be anything left in four years time. See blue line.

With scarcely any cash in the final year of the forward estimates, the government hasn’t provided for any interest payable. It will be a masterful cash flow management achievement to run a $5 billion budget without a cash buffer or a line of credit. No more internal borrowings or money shuffles will be possible if there's no cash.

The cash run down is despite:

·       Special dividends from MAIB of $100 million and Hydro Tasmania of $75 million which assist the government cash flow by simply increasing the debt of government businesses.

·       Cash savings of at least $50 million per annum by not having to fund superannuation for the 7,500 existing employees who are members of the defined benefits fund.

·       Based on past experiences there are negligible chances of achieving forward estimates, forever framed using heroic assumptions.

This is a plan that won’t work. To say that more work needs to be done is a chronic understatement that gives the plan credit which it doesn’t deserve, and lulls people into thinking that a bit of tweaking is all that is required.

We have an unsustainable system that all plans from all parties over the past 5 years have failed to address.

Listening to legislators debate the budget leaves little doubt that the State government is almost beyond salvation.

Unfunded superannuation not the biggest problem

Judging by the budget reactions, there is still a common misconception that one of our biggest budgetary problems is the unfunded superannuation liability for government employees.

If there is one issue in the Budget the government addressed it was the unfunded superannuation liability for members of the now closed defined benefits scheme.