State budget luck

THE sudden turnaround in the state’s fiscal fortunes as revealed in Treasurer Peter Gutwein’s Budget this week has everyone wondering.

Is it good management or good luck?

Only one more deficit, in 2015-2016, before we return to surplus in 2016-2017. Can this be true?

It depends on how one calculates a deficit. If one does so on a cash basis as the Federal Government does, then Tasmania will be in deficit for the next two years at least.

To most observers it is misleading to proclaim a surplus when cash outlays exceed cash receipts. That’s what Mr Gutwein has done. Cash outlays are 2 per cent more in 2015-2016 and 1 per cent more in 2016-2017.

With the State Government operating a cash in/cash out operation, it’s the only sensible prudent way to assess our situation. Thereafter cash surpluses are predicted.

But with each successive year the reliability of the forward estimates diminishes exponentially.

Even with blue sky forward estimates, the Government’s actual cash position only improves by $90 million over the next four years.

Failing to find path to credibility

Prime Minister Menzies was never pilloried for running seventeen successive deficits and risking burdening my generation with onerous amounts of debt.

Times changed and deficits became taboo.

The latest budget shows deficits are here to stay. Even the uncertain projections of later years reveal deficits.

The talk is now of having a creditable path to a surplus.

Arguably the more pressing need is to find a credible path to credibility.

Never has there been such a radical shift from one budget to the next, from fixing a debt and deficit disaster to living with a wing and a prayer twelve months later.

The Budget is predominantly a political reaction not an economic plan.

MIS post mortem

In response to an invitation by the Senate Economics Committee chaired by Sam Dastyari (with members including Nick Xenophon Bill Heffernan and Peter Whish-Wilson) to make a submission to their inquiry looking at forestry MISs the following brief overview of what happened during the MIS debacle was submitted.

Problems with MIS have been written about for a few years but with the dust almost settled following insolvency of the three MIS companies which operated in Tasmania  (Gunns FEA and Great Southern) which represented about 50% of the total national MIS  scene, it was important to explain that the aftermath is of Hiroshima proportions and needs remedial action lest travesties reoccur in the future..

Contents

Issues

1.      Motivation and drivers

2.     How much was lost?

3.     Reasons for failure-the product

4.     Reasons for failure-the model

5.     ATO’s role

6.     ASIC’s role

7.     Yields

8.     Overview of past MISs

9.     Is div 394 the answer?

10.  What now?

Appendix: MIS wind up notes for Great Southern, Gunns and FEA

Terms of reference