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.

It highlights the 2014 plan wasn’t meant to fix things but to win the election. It wasn’t an accounting document. It wasn’t updated to reflect the massive fiscal deterioration in the last year of the Giddings government. The costs of redundancies weren’t included and all-important infrastructure spending totally ignored. But it won them the election.

The major problem now facing the state is not addressed by any of the major parties.

The government sector as it currently operates is unsustainable. Our GST allocation (general revenue grants) compensates us for our smaller state revenue base and for the extra costs to deliver the same services as other states.

But we don’t raise the amount of revenue the Grants Commission reckons we should, so the extra we get to deliver the same level of services as elsewhere gets spread even thinner. That’s why, as Martyn Goddard often points out, money received to compensate for the extra costs of health services gets diverted. The only revenue measures proposed in the 2014 Election Plan was an extra $15m over four years from fines and the proceeds of crime. It would be funny if it wasn’t so pathetic.

With the demand for so many government services exceeding the supply and with the cost of many services, health say, rising faster than revenue growth, problems will only worsen under current settings. Many government services are labour- intensive and by their nature there is little room for productivity improvement. As economist William Baumol observed, it still takes four to play a Mozart string quartet.

Governments are required to produce a Fiscal Sustainability Report every five years. The 2016 Report was sent back for a rewrite after shortcomings became obvious. The rewrite, renamed the 2019 Fiscal Sustainability Report outlined sustainability problems under virtually every scenario. We will need to spend more than we receive and we are yet to figure out a way for a revenue source to grow as fast as the predicted increases in government services, particularly health.

The 2021 Report is all but completed (by Treasury) and is expected to see the light of day shortly after the May 1 election.

How convenient to have an election discussion without a serious examination of our situation. It’s a sham process.

Oppositions are supposed to hold governments to account. Not this time. They are active participants in the sham. They turn a blind eye to our fundamental problems.

For all the talk about Left and Right factions, the only cliques that independent observers can identify on a two-dimensional grid are dumb and dumber.

At a time when there is a crying need for more revenue the Labor Party has agreed to the owner-operator model for pokies. If the existing system were perpetuated it would be worth $100m to pub owners. The changes agreed to by Messrs Gutwein, Farrell, Lennon and Old add another $150m to the gift.

The Future Gaming Market Reform was supposed to find an appropriate split between operators, the community and players.

The latter have been forgotten and the Labor Party has now agreed to hand the community’s share to the operators.

Sensible public policy, if pokies are to continue, should allow operators to make a 10 to 15 per cent return as per the norms in the hospitality industry and that excess returns should revert to players or to the community via higher taxes or up-front licence fees.

The same applies to Keno. Why should this activity only attract a tax of 6 per cent? Keno is a de facto lottery and they’re taxed at more than 80 per cent. South Australia taxes Keno at 41 per cent with the proceeds being paid into a hospital fund.

If the constant stream of promises from all parties isn’t bad enough, what we’re not being told is even worse.

 (Published in The Mercury 13th April 2021)


  1. You wrote:
    "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.”"
    My comment and question: The numbers, "12,086" and "7610" - the bigger is either nearly twice as large as the smaller, or the smaller is a bit more than half the larger.
    Is it not, then, the bigger is one-and-a-half times the smaller or 158.8%?
    My primary question is, Why is 59%a more appropriate representation of the change than 159%?

    1. This comment has been removed by the author.

    2. The increase is 59% ie 12086-7610 = 4476 increase. 4476 as a percentage of 7610 is 58.8% Yes the recent figure is 158.8% of the original but it's not accurate to say that the increase is 158.8%


  2. Could it be that a rise of 59% in the number of surgeries not done sounds more palatable to the electorate than a rise of 159%?
    That would be just a tad too cynical ... of course!

  3. John how does this budget update sit with your analysis? https://www.treasury.tas.gov.au/Documents/Pre-Election%20Financial%20Outlook%20Report%20-%20April%202021.pdf

    1. Most of the improvements listed in the pre election update just released by Treasury relate to an increase in the GST pool and the increase in Tassies share of the pool. The increased pool is entirely expected, resulting from a quicker pickup in consumption spending than anticipated. The Grants Commission issued the updated relativities in March. The Premier knew about the GST boost when he called the election. The Mid Year update in Feb contained hardly any changes from the original budget handed down in November. The good news was reserved for the pre election update.

      Our GST share bounces around a bit…… it’s not only the size of the pool which determines our share but how many other specific purpose grants have been handed out .Counterfactually the more specific purpose grants that are handed out, which tend to be more on an equal per capita basis across the Federation, the bigger our share of the GST pool.

      In my view the good news in the pre election update doesn’t alter the long run picture. I doubt Treasury will be rewriting the draft of the 2021 Fiscal Sustainability Report.