Tuesday, 13 April 2021

Election plans avoid the fundamental issues


THE Liberals swept to power in March 2014 with a proposal to solve Tasmania’s problems.

Someone in the party had discovered the wizardry of an Excel spreadsheet and had shuffled a few numbers in the then government’s four-year budget and pronounced the result a Plan for a Brighter Future.

The cornerstone savings were from a more efficient public service, which meant downsizing by 500 saving $155m over four years.

The Brighter Future was heralded by the proposal to spend $76m in elective surgery to “ensure that Tasmanians stuck on waiting lists for years can get their operations sooner, with up to 15,000 extra procedures”.

As Martyn Goddard observed in these pages on April 2, “When the present government came to power in 2014, there were 7610 people on the statewide elective surgery waiting list. The most recent figure was 12,086, an increase of 59 per cent.”

No doubt hoping that most people might have forgotten previous failed promises, Premier Gutwein has now pledged to spend another $154m over four years to deliver an additional 22,300 elective surgeries and endoscopies.

The more things change, the more they stay the same.

Thursday, 19 November 2020

Budget denialism


WHEN Premier Gutwein undertakes not to sugar-coat the message, you can guarantee that’s what he will do. Introducing the 2020-2021 Tasmanian state budget he said: “This year the deficit will be $1.1bn, before improving to a deficit of $281m in 2021-22. Importantly as our economy returns to growth, there is a pathway back to the black with a return to a modest surplus in 2022-23.”

Announcing “the largest and most significant infrastructure program in the state’s history” then failing to include that spending in the deficit calculation is deceptive. The actual cash deficit for this year will be $2.1bn. In 2021-22 the cash deficit will be $1.07bn followed by $656m the year after. That’s a whole lot different to what the Premier might like us to believe. The Premier uses the generic term “deficit” for the Net Operating Balance figure. As its name suggests the latter only includes operating expenses, wages for instance, not capital outlays, roads and schools for example. This is not a semantic quibble. The point that needs to be understood is that a positive Net Operating Balance does not mean there will be cash surpluses to reverse the growth in net debt. There is little prospect of that occurring any time soon.

“In this budget we will continue to leverage our strong balance sheet to stimulate our economy,” the Premier said. More sugar coating. The balance sheet at June 2020 was the smallest for more than 15 years and it’s about to get a whole lot smaller. By June 2021 the government’s net worth will be $6bn. Of that figure, $4.7bn is the net worth of government businesses. Aside from them the government’s net worth will only be $1.3bn, smaller than the Hobart City Council. So let’s not pretend we have a strong balance sheet when a cursory glance reveals the exact opposite.

Thursday, 5 November 2020

Mending payroll tax


Tasmania’s state budget next week is a wake-up call that our tax system won’t deliver the revenue we need.

Even before COVID-19 the budget was in trouble. For the past three years, spending has exceeded receipts despite a relentless pattern of infrastructure deferrals and underfunding of crucial services.

The recent federal budget sent a clear message that the Feds were content to leave states to fend for themselves whilst they pursued their own plans to direct most budget assistance to private businesses to resurrect the flailing economy.

Encouraging businesses to buy new plant and equipment is ill directed when existing plant is idle due to insufficient demand. A lot of new plant will be labour-saving and sourced from overseas. The stimulus effects will be muted. The jobs recovery is premised on shaky assumptions.

Lower personal taxes are also seen as the way for people to spend more with local businesses. Unfortunately, this misses the crucial point that what a lot of people would prefer is more public goods, like better health, aged care and social housing. Not only that but more jobs will eventuate as the multiplier effects are superior.

All states are facing similar revenue shortfalls. Payroll tax is the largest contributor to states’ taxation revenue, comprising about one-third. The origins, history and the underlying rationale of payroll tax have largely been forgotten as it has evolved to only apply to larger employers at a higher rate.

To make matters worse, the taxable base now includes superannuation contributions as well as ordinary labour remuneration.

If payroll tax is a disincentive to employ, as most people believe, it’s only because a fair and efficient tax has been spoiled by policymakers. It is not a coincidence that the voluminous 2010 Henry Tax Report included payroll tax in the chapter on Consumption Taxes. Despite using labour income as its tax base, a uniform tax on all labour income is a pre-consumption tax. As a tax it is more closely related to GST than most people think. With a low rate it would be fair and efficient.

Thursday, 29 October 2020

Hydro's shrinking balance sheet

 HYDRO Tasmania’s recently released 2019-2020 annual report revealed a significant write-down of generation assets due to reductions in future expected revenue.

The business case for Marinus, the second Bass Strait interconnector, which is based on estimates of future electricity prices, will need to be revised.

Thursday, 8 October 2020

Downturn demands bigger spend


The penny has finally dropped that increased public debt is not a burden, but spending in this year’s Federal Budget should have been better directed.

Sunday, 27 September 2020

UTAS a law onto itself


As published in The Mercury 26th September 2020. It's an abridged re-write of the previous blog Where to UTAS?)

IF annual reports were marked like university assignments, the University of Tasmania’s latest effort would receive one out of 10.

UTAS reports on a calendar year basis. The Auditor General signed off the 2019 report in February. The Board (known as the Council) adopted the report in May and sent it to the government as required. The government released the report in late August, eight months after year’s end. Were it a listed company it would have been suspended.

Apart from the financials it’s a pretty skinny report. The overview for the year occupied only six pages. Even then it contained a cut and paste from a previous offering, a Strategic Plan dated July 2019. UTAS is “not long-term economically sustainable and being economically sustainable is no easy task … At an operating level, we break even. Still, there is no surplus to see our facilities renewed for the next generation.”

The brief review continued with a pastiche of proper nouns and acronyms which only an insider could possibly comprehend. Four paragraphs on risk management described how UTAS had worked collaboratively, reviewed, planned and implemented recommendations. Exactly what was implemented to address what risks wasn’t disclosed.

Essentially UTAS’s chosen transition to sustainability requires more students and that requires more student accommodation. Property development is now the tail wagging the education dog.

Sunday, 30 August 2020

Where to UTas?


The University of Tasmania’s 2019 Annual Report has finally been released.

The university reports on a calendar year basis. The Auditor General signed off the 2019 report in February 2020. The Board (known as the Council) adopted the report in May and sent it to the government as required by its governing Act. It’s been sitting in someone’s in-tray for the last 3 months. Another Covid victim no doubt.

Apart from the financials it’s a pretty skinny report.The overview for the year occupied only six pages. Even then it was a cut and paste from previous offerings, from the now outdated Strategic Plan 2019-2024 dated July 2019 for instance. UTas is “not long-term economically sustainable and being economically sustainable is no easy task…….At an operating level, we break even. Still, there is no surplus to see our facilities renewed for the next generation.” If there were sustainability questions in July 2019, they would have been more evident when the Council signed the report in February 2020. Even more so today in a pandemic world.

Serious as it was, sustainability didn’t get another mention. The rest of the overview degenerated into a public relations pastiche with more proper nouns and acronyms that you could poke a stick at…… The Ways of Working project, the People Strategy and College People plans, the Academic Leadership Development Program, which led to the Lean (sic) and simplification momentum continuing to build across the University via a new process improvement tool called Go-See-Fix, the unsuccessful attempt to satisfy the international Athena SWAN charter atho’ UTas did get a Bronze Award accreditation and is committed to continue commitment to the SAGE initiative. It might as well have been written in Swahili. If a student served up drivel like that in an assignment, you’d fail them. Irrelevant twaddle especially when there are pressing matters of sustainability.

The brief overview concluded with two pages describing UTas’ building program which is fitting perhaps because more than ever UTas is a property developer with a side hustle in education.

The financials confirm this.