Mid year prognosis

The Premier’s Mid Year update revealed an unsustainable budget position. No policy prescriptions were offered. Likewise Mr Hodgman’s plan, offers no solutions. The government plans to spend more in 2013/14 as a % of operating revenue than it did in 2012/13. The forward estimates reveal cash deficits in the future. The government hasn’t detailed how future deficits will be funded. The government is unlikely to meet any of its key performance indicators (KPIs) over the next 4 years. Nor has it announced any policy changes to help satisfy KPIs in the future. Mr Hodgman’s plan offers no comfort as 97.5% of outlays are the same as those of the government. He has refused to issue his revised costings following the Premier’s update. Both parties intend to spend an unacceptably low amount on infrastructure. Even with the most important election in a generation the Libs are yet to publicly announce their KPIs, their fiscal strategies, as required. Electors are being presented with alternative plans, neither of which will lead the government onto a sustainable pathway.

The Mid Year Report: What to look for

Premier Giddings releases the Mid-Year Financial Report later today. The following are five things to look for:

1.      For 2013/14 do government’s cash outlays still exceed cash inflows? How long will this continue?

2.      The government survived 2012/13 by cutting the capex budget. Does the revised budget for 2013/14 include further downward revisions of capex amounts (infrastructure, roads etc)? How long can this continue?

3.     As the Auditor General confirmed yesterday, the government has survived by internally borrowing amounts received for other purposes, the Royal Hobart Hospital for example. Does the Mid Year update confirm a rise in the level of internal borrowings?. What is the expected figure as at 30^th June 2014.

4.     When will we be able to start repaying the internal borrowings? In other words when will cash receipts exceed cash outlays?

5.     Have the capex outlays relating to the Royal Hobart Hospital ($500 million+) been rescheduled? Or is the upgrade still on track?

The Hodgman plan: Will it work?

 

Will Hodgman’s future plans are at last coming under a little more scrutiny.

The coming election, we are told, is a once in a generation event, a turning point for Tasmania.

The Liberals have, to their credit, unveiled a plan in each of the past few years in response to the government’s budget.

The latest plan titled a Plan for a Brighter Future issued in May 2013 contained the Libs’ plans for 2013/14 and the next 3 years of the forward estimates.

The plan is based on the governments’ budgets for those years. In essence the Libs are planning to cut outlays by about 1% and redirect about 1.5% of wasteful spending to other initiatives.

That’s all.

It’s sometimes touted the Libs have identified $500 million worth of savings. But that’s the four year total. Each year it’s about $125 million.

The government have no plan, we are told. Only the Libs have, a fully costed plan, a once in a generation change to fix the Labor Green Budget mess.

Will it work?

Mill shortfall

 

 

The plantation feedstock shortfall for the proposed pulp mill is still not widely understood.

Just consider the following, first a quote from Martin Ferguson’s recent Review of the Tasmanian Private Hardwood Plantation Estate and second an extract from the last detailed presentation given by Gunns.

Desperate times

When Gunns first entered voluntary administration 15 months ago it seemed as if the secured creditors (the banks) would get most of what they were owed. It didn’t much matter if the pulp mill permit was worthless; there was enough value in Gunns’ other assets to ensure the banks were repaid.

Creditors and shareholders wouldn’t get anything. KordaMentha the receivers in control of most of Gunns’s assets acted for the banks and didn’t care about others: growers, creditors, the people of Tasmania. Their mission was to ensure there was enough in the pool to cover their fees and to pay the banks.

But with every passing day throughout the insolvency administration period the banks’ shortfall has been increasing.

Missing millions and the law of triviality

Parkinson’s law of triviality briefly states says the time spent on any agenda item is inversely proportional to the sum involved.

Since 2007/08 cash deficits have been recorded in every year, totalling $1 billion, deficits that have been funded by plundering amounts set aside for other purposes.

Whilst it is commendable to boost aggregate demand by running deficits, the reality has meant Tasmania has been spending all available cash because it’s wedded to the idea that debt is undesirable while at the same time refusing to reform the unsustainable model to allow borrowings, which might provide scope to achieve more desirable economic and social outcomes in the future.

It’s a model we’ve been following for years. It’s about to reach its used by date.

A happy new year is unlikely

 

 

One lesson from the recent Federal election is that the successful campaign relied more on dissatisfaction with the incumbents than the alternative policies offered.

The State election campaign seems to be following a similar pattern.

When it comes to describing the State government’s position and prescribing alternative solutions we are yet to proceed beyond a few slogans.

The final State accounts for 2012/13 were issued at the end of October to an underwhelming response from the media and the alternative government. Talking about the State government’s financial position for a few days once a year at budget time in May is scarcely enough to run an informed discussion, a necessary prerequisite if ever we are to reverse our lemming like progress over the precipice.