Election 2024: Revenue

 

This blog tales a closer look a government revenue particularly the vexed question of our own source revenue.

The 2023/24 Revised Estimates Report presented revenues for the Budget year 2023/24 plus the three years of forward estimates:

 

 

Revenue doesn’t change much, from $8.5 billion this year 2023/24 to $8.9 billion 3 years later.

In real terms revenue is static. As we saw in the fiscal sustainability blog, revenue is failing to keep up with outlays.

The fall in returns from government businesses (dividends, tax and rate equivalents) is because the special dividend from Tascorp representing the annual drawdown of the $730 million of Mersey Hospital money received in 2017 intended to last 10 years will fall a little short in the tenth year. Roughly $100 million per year has been/will be drawn down in the first nine years. Only $27 million will be left for year 10 in 2026/27. The new government will have to work out how the revenue shortfall will be fixed in future years.

At least the no- worse off GST guarantee which was due to expire in 2026/27 has been extended for another 3 years. The Albanese government wasn’t prepared to get off-side with WA voters by trying to revise GST arrangements which handed a massive boost to WA in the Morrison years and decided instead to kick the can down the road for another 3 years by giving other States an extended no-worse off guarantee.

But slowing population growth in Tasmania relative to Australia as a whole will tend to reduce our share of the GST pool over time. Which will be a problem going forward especially as any extra GST already received as a result of population share increases, had zero effect on addressing the needs of the additional population. The gap between the demand and supply of all services has continued to grow.

Now to have a closer look at own source revenue. The grants in the above table include all grants from the Feds, the general-purpose grants (GST share) plus all the specific purpose grants split comprising both capital and operating grants. The balance of revenue is own-source revenue, all reasonably self-explanatory.

One of the current government’s fiscal targets is for not less than 37 per cent of government expenditure be funded by own-source revenue. Proposed expenditure figures from the RER plus revenue as per the above table split between grants and own source revenue, enables us to check the percentage figure in each year. This is shown below:

	23/24	24/15	25/26	26/27
Grants	5,535	5,698	5,656	5,845
Own source revenue	2,958	3,020	3,082	3,090
Total revenue as per RER	8,493	8,717	8,739	8,935
Expenses as per RER	9,014	9,009	8,877	8,987
Own source revenue as % expenses	32.8%	33.5%	34.7%	34.4%

 

At first glance it looks as if some progress is being made. But there are a few important caveats:

·        In real terms there is no increase in revenue.

·        A replacement for Mersey money is yet to be found.

·        Much of the improved % is due to a fall in expenses.

As noted in the blog on spending plans, future expenses assume $300 million of Budget Efficiency Dividends are found. Even if some are eventually discovered the likely additional outlays required to meet election promises will likely swamp any savings very quickly.

With zero real growth in revenues the reason for the downward slide in real operating outlays before debt servicing costs is glaringly apparent.  

Paying for infrastructure and debt servicing costs whilst trying to slow down the inevitable increases in borrowings, leaves no alternative but austerity implied by the RER. The gap between necessary services and what will be delivered will only widen. It’s difficult to draw any other conclusion.

The next blog will draw together some loose ends and try to reconcile the expected flows (spending, debt servicing and revenue) with our increasing stock of debt.