Health bears the brunt of a stubborn refusal to borrow

Capital investment money being taken from day-to-day services, says Martyn Goddard

THE 2019 state budget has the potential to do to Will Hodgman and Peter Gutwein what the 2014 federal budget did for Tony Abbott and Joe Hockey. It’s that bad.

After five years in power, and having already implemented some of the most savage cuts to essential services in the state’s history, the Government still cannot balance its books without a still greater level of fiscal savagery than we have seen under this Government or its predecessor.

There is no need for this. The GST system ensures all state governments have about the same capacity to deliver services to their people, provided they manage their own affairs equally well. But the evidence shows our services, particularly health, are seriously underfunded when compared with those in other states. So why? When the Government came to power five years ago, it told us the state’s finances were in a dire state. But they were not.

They told us savage cuts to services were needed to put the budget back on track. But they were not.

Back in 2013 at the time of Labor’s last budget, the state was still recovering from a near-recession, partly induced by savage cuts to government spending two years before. But the budget was still in reasonable shape, with low borrowings and a budget deficit that was not only manageable but necessary at the time.

The new government had barely begun its program of slashing jobs and services when the GST redistribution process was reviewed and Tasmania benefited by hundreds of millions of dollars a year. In 2015-2016 alone, this state got $322 million more in GST than it had in the year before. But the cuts continued.

Most governments in Australia and overseas fund their infrastructure programs with bond issues. In other words, they borrow. So long as the economic benefit to the community from a hospital, school or road is higher than the cost of borrowing, it makes good sense. The only alternatives are not to build, to increase taxes or to take the money out of services.

The Tasmanian Government has gone against the crowd. Instead of borrowing, the capital investment has come out of day-to-day budgets of services. Disproportionately, hospitals have borne the brunt.

At the same time, successive treasurers have raided the pots of cash that exist in various areas of government departments and business enterprises. Those pots of cash are now all but exhausted.

On top of that, state taxes are too low. According to the Commonwealth Grants Commission, our low taxes compared with other states are costing the budget about $150 million a year.

So when some of the state’s economic forecasts on GST and stamp duty turned out recently to be overoptimistic, something that should not

have created a serious problem has instead become a crisis. If government finances had been managed more competently, we would not now be facing yet another round of crippling cuts.

The political danger to the government is obvious, and nowhere is it more acute than in its running of public hospitals. Already, too many Tasmanians are paying for the state’s budgetary mess with their health and, sometimes, with their lives.

Unless the Government relents within a very few weeks, and tips at least another $100 million into the health budget, administrators will have to quickly start sacking staff and cutting services. Most voters may not understand the complexities of government fiscal policy. But they understand that they have to endure worse services than those in any other state. And they pay much more attention to doctors and nurses than to soothing statements from the Health Minister and increasingly threadbare excuses from the Treasurer.

The next election is almost three years away. For the Liberals to lose, Labor will have to present a much more credible alternative than it did at the last poll.

They will need to convince the electorate not only of the Liberals’ reckless ineptitude — the Government is already demonstrating that with great and consistent eloquence — but answer some important and difficult questions about what they will do and how they will pay for it.

Shadow treasurer Scott Bacon, if he is to remain in that job, will have to become far more effective at countering Peter Gutwein, the dominant figure not only in the Government but in the whole of Tasmanian politics.

So far, Labor supporters can take little comfort from the Opposition’s approach. They are attacking the Government not for failing to borrow but for finally doing so, apparently blind to the reality that a future Labor government will have to do just that.

“The Liberals claim to be responsible financial managers and yet they are spending like drunken sailors and have plunged Tasmania into $1.1 billion in net debt,” Opposition Leader Rebecca White said.

The main thing with debt is not how much you borrow but how much that money costs. Right now, the State Government can borrow at historically low rates of about 2 per cent.

Both parties are following the same disastrous fiscal script.

Until that changes, the slide into chaos will continue.