ANZ chief economist and proud Tasmanian Saul Eslake writes:

Michael Aird’s first Budget fully delivers on the Lennon
Government’s election promises, but over the next four years operating
expenses (wages and salaries of public sector employees, grants and
subsidies) will be at least $500 million higher and capital
expenditures at least $230m higher than envisaged before this year’s state election.

The Budget provides for more than $500m of additional “operating
expenses” which will fund, among other things, an additional 450 staff
at the Royal Hobart Hospital, a new emergency department at the
Launceston General Hospital, two new ambulance crews, and a $20m
package of improvements in dental care. Health also gets an extra
$114m of capital funding over the next four years for, among
other things, new medical equipment for the RHH, LGH and
NWRH and 100 new ambulances.

The Budget also provides $50m in additional recurrent and $45m of
additional capital funding for education (including 60 new primary
school teachers, 29 Year 7 teachers over the next five years and
$30m for the new Kingston High School); $40m in additional recurrent
and $43m capital funding for public safety (including 12 extra police
officers); and $23m for programs to assist the agricultural sector.

total, operating expenses will rise by 7% in 2006-07 – the third
consecutive year in which operating expenses have risen by at least
this amount – but are then projected to slow to an average of just 1.7%
per annum over the following three years.

As a result, the Tasmanian general government sector will incur
operating deficits (operating expenses in excess of revenues) in each
of the next four years (2006-07 through 2009-10) and fiscal deficits
(that is, after accounting for capital expenditures) in each of the
next three years – in breach of the new five-year fiscal strategy
announced in the Budget.

Apart from the ACT, Tasmania is the only State currently planning to
run operating deficits in each of the next four years (NSW is expecting
an operating deficit in 2006-07 but on the projections in its most
recent Budget will return to operating surpluses in 2007-08; South
Australia is yet to bring down its 2006-07 Budget).

On the other hand, most States and Territories envisage running fiscal
deficits (that is, after providing for capital expenditures) over the
next four years. And Tasmania’s average fiscal deficit over the next
four years is equivalent to about 0.25% of gross State product, smaller
than those of any other State or Territory except Western Australia.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey