Our less than honest politicians continue
to rely on an endemic misunderstanding of State government debt when spruiking
their credentials as economic managers.
Rebecca White harks back to 2014 when general government net debt was absent. But there was plenty of unfunded superannuation liabilities and borrowings by government businesses, some of which were needed to pay returns to government, that she conveniently sidestepped.
Jeremy Rockliff’s advertisements have
a fleeting glimpse of a chart showing net debt across states with Tasmania
having a small amount compared to other States. A disingenuous comparison given
we’re the smallest State.
Treasurer Ferguson when defending the
level of debt in his 2023/24 Budget the day after the budget was handed down in
May 2023 told us our net debt is
quite low:
“…our borrowings are very, very small in comparison to other
jurisdictions per capita, just have a look across the waters that Victoria what
they are doing……..I wouldn’t want to be in their shoes.”
There’s plenty of metrics to suggest our predicament is not much different to Victoria, perhaps even worse given we are still deluding ourselves about our true position, and about to be lumbered with another round of unfunded election promises no matter who wins.
It’s more than reasonable if
comparisons are to be made to include not just borrowings but unfunded liabilities
of defined benefit schemes which have been left unfunded with all parties using
the cash savings for other purposes to fund government rather than undertake more
borrowings.
Using per capita measures is one way
of making comparisons across States. Another fairer measure would be to compare
the debt requiring servicing with the size, in economic terms of each State.
Gross State Product measures what states produce and gives an indication of the
capacity of a state to service debt.
Most discussion focusses on general
governments which operate departments and agencies to deliver services. But all
government to varying degrees own and operate businesses. All states differ. Tasmania’s
principal publicly owned businesses are the electricity companies. In Victoria it’s
the water companies. Some government activities are flicked off into wholly
owned businesses in one State but not in another, sometimes for management
reasons, sometimes possibility to escape scrutiny. One thing all States have in
common is that government businesses deliver services and the debts of the
businesses are guaranteed by government. And, as noted above governments have used government businesses as ATMs to fund their operations, hence measure of debt which include government businesses are appropriate.
Thus it is eminently reasonable when
looking at comparisons across States we look at government businesses as well
as general government. Government accounting conventions require States to issue
financial accounts for the Public Non-Financial (PNF) sector, so it is not too
hard to do interstate comparisons. They are most revealing.
If we look at net debt in the PNF sector as a % of gross state product, Tasmania has comparatively less debt than Victoria. But the gap is narrowing if we look at figures from the latest budget update for both States.
Victorians get reminded every day
they are a ‘basket’ case. But we aren’t much different.
In fact things are worse when one
looks at debt plus unfunded defined benefit liabilities as a % of gross state
product.
Tasmania has higher debts requiring servicing
than Victoria relative to the size of our economy. We are a clear leader and
the gap is widening. It’s likely to
widen further after this election.
The Liberal’s 2030 Strong Plan for
the Future is a cruel hoax on Tasmanians who deserve better. Labor’s fiscal
strategy is an absolute disgrace. It doesn’t even deserve a terminating pass at
the remedial level. The Greens have yet to have any of their policies costed
and are yet to issue a fiscal statement and the JLN don’t feel a need to burden
us with any policy detail.
How will this nightmare end?
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