- Forecast economic and employment growth is supported by major infrastructure investments.
- Net debt is expected to double to $2.99 billion in 2022-23, increasing to $5.18 billion by 2025-26.
- A deficit of $474.6 million is estimated in 2022-23, returning to $19.1 million in 2023-24.
Tasmania’s new Treasurer Michael Ferguson delivered his first state budget on 26 May 2022, following the resignation of former Premier and Treasurer Peter Gutwein in April.
The $8.3 billion budget aims to increase business and community confidence by strengthening Tasmania’s economy and delivering on the government’s commitments.
Investment priorities include health, education, infrastructure, affordable housing and building safe, inclusive communities.
Economic growth of 2.75% is forecast in 2022-23 driven by strong government expenditure and household consumption.
Employment is expected to grow by 1.25% in 2022-23, with the average unemployment rate set to remain at 4.5%.
Hobart Consumer Price Index (CPI) growth of 5.5% is expected to continue in 2022-23, dropping to 3.25% in 2023-24. This follows strong CPI growth in Hobart and nationally since 2020-21 due to supply chain disruptions after the pandemic and the more recent invasion of Ukraine.
The ongoing uncertainty in the domestic and global economic outlook, particularly in terms of national consumer spending, creates uncertainty regarding the forecasts of GST included in the 2022-23 Budget. Uncertainty also exists in relation to Tasmania’s relativity.
The Federal Government’s new GST distribution arrangements which came into effect from 1 July 2021 include a no-worse-off guarantee until 2026-27. There is a risk to Tasmania’s share of GST revenue and the budget bottom line when the guarantee ends. The Treasurer reinforced the Tasmanian Government’s position in his budget speech that the GST no worse-off guarantee should continue in perpetuity.
The budget records an estimated net operating deficit of $474.6 million in 2022-23. A modest net operating surplus of $19.1 million is projected for 2023-24, growing to $30.5 million by 2025-26.
Net debt is estimated to rise to $1.522 billion by 30 June 2022. This is $182.3 million less than projected in the previous budget. However, net debt is forecast to almost double during 2022-23, increasing to $2.99 billion in 2022-23 and $5.18 billion by 2025-26.
A major contributing factor to the expected growth in net debt has been the Tasmanian Government’s COVID-19 response and recovery measures which included significant expenditure, revenue forgone and infrastructure investment to drive economic growth.
The budget does not make it clear how the Government intends to stabilise and reduce the debt over time. However, the Treasurer declared that he is committed to sustainable and responsible economic and budget management. This includes action where required to rebuild fiscal buffers to provide flexibility to respond to future shocks in a way that doesn’t impact the delivery of essential services.
Key budget announcements
Outlined below are ten key budget announcements to help members guide their clients and businesses.
1. Cost of living concessions
Inflationary pressures have resulted in higher costs for households and businesses on many items including food, automotive fuel and dwelling construction.
The budget provides $305 million in concessions to help Tasmanians meet rising essential living costs. This includes $186 million to assist eligible concession card holders to pay their electricity bills, $79 million for council rate remissions costs over four years, and $39 million for water and sewerage bills which will be indexed annually to the Hobart CPI.
2. State taxation measures
The budget incorporates several previously announced and new state taxation measures.
In its 2022 State of the State Address, the Government announced changes to land tax rates and thresholds from 1 July 2022. The tax-free threshold has increased from $50,000 to $100, 000, the upper tax threshold has increased from $400,000 to $500,000, and the tax rate applying to land valued between $100,000 and $500,000 has been reduced from 0.55% to 0.45%.
In 2021-22, the Government announced measures to support sustainable housing and encourage businesses to employ young Tasmanians. The impacts of these measures are included in the 2022-23 Budget and forward estimates.
Housing measures include extending the eligible period for first home buyer and pensioner downsizing duty concessions for a further 12 months from 1 July 2022 and increasing the dutiable value cap from $500,000 to $600,000 to reflect increases in property prices, with the new cap to apply retrospectively from 1 January 2022.
Employment measures include extending the payroll tax rebate scheme for youth employees and for apprentices and trainees for two years to 30 June 2024.
The Government has announced a 2% foreign investor land tax surcharge that will apply to residential land that is not used as a principal place of residence and is acquired by a foreign investor in Tasmania on or after 1 July 2022.
The budget also includes forecast increases in casino tax and licence fees, commencing on 1 July 2023, which reflect reforms to the gaming market introduced in 2021.
Health continues to be the Government’s highest priority, with this budget increasing funding for health, mental health and wellbeing to $11.2 billion over four years.
A major initiative in the budget is the $150 million investment to upgrade digital health infrastructure over the next four years. This is part of a Digital Health Strategy to enable seamless communication and information sharing across hospitals, GPs, community health, allied health, and other specialist providers.
The budget also provides $6.5 million to continue the Mental Health Reform Program, $45 million for child and adolescent mental health reforms, $20 million to further improve patient care through Older Persons Mental Health Services, and $1.5 million to continue the implementation of Tasmania’s overarching mental health plan, Rethink 2020, with a focus on suicide prevention.
4. Education, training and skills
The Government continues to invest record amounts into education, skills and training, with expenditure allocating over $8.5 billion in this budget.
Highlights include $250 million in infrastructure investment for new and upgraded schools around the State, $12 million to replace and modernise digital business systems, a further $8 million to extend the JobTrainer Fund which provides free or low-cost training courses, and $4 million for more laptops and tablets for students to support remote learning.
The budget will invest $5.6 billion over four years in infrastructure for hospitals, schools and communities. Record funding of $2.7 billion is allocated for roads and bridges. This includes $731 million for the $786 million new Bridgewater Bridge, which is the State’s largest ever transport infrastructure project, co-funded by the Tasmanian Government and the Federal Government.
Other co-funded major projects are the $565 million Midland Highway Action Plan, the $350 million South-East Traffic solution between Sorell and Hobart, $280 million for the Bass Highway between Launceston and Marrawah, and $120 million to improve the Sideling section of the Tasman Highway between Scottsdale and Launceston.
The Budget also invests $633 million over four years for roads, while also providing a $81.5 million boost for road and bridge maintenance works.
The budget provides $538 million over four years for social and affordable housing, and homelessness initiatives, including $204 million allocated for 2022-23. This funding forms part of a $1.5 billion housing package which is expected to build 1,500 homes by June 2023 and 10,000 homes by 2032.
The budget seeks to extend measures that make it easier for Tasmanians to enter the housing market. The Residential Land Rebate has been doubled in 2022-23, from $15 million up to $30 million, while the $30,000 First Home Owners Grant has been extended to 30 June 2023.
The Budget provides an additional $2.5 million for a further 250 new ancillary dwellings to add to rental stock. The Private Rental Incentives Program receives a further $9 million over three years to encourage property owners to make their properties available for rent to low-income households.
Tasmania’s tourism sector receives $10 million in the budget over the next four years to support recovery from the pandemic and growth of the visitor economy.
Tasmania currently attracts around 20,000 visitors from New Zealand annually. The budget provides funding of $2 million for Inbound Tourism Support to enable Air New Zealand to deliver a direct service between Hobart and Auckland.
8. Climate change and renewables
The budget includes $9.8 million to support Tasmania’s goal of achieving net zero emissions from 2030 and identify practical solutions to reduce emissions as part of the State’s next Climate Change Action Plan. Tasmania has achieved its target of net zero emissions or lower in six of the last seven years.
The Tasmanian Government’s renewables target is 200% renewable by 2040. In November 2020, Tasmania achieved 100% self-sufficiency in electricity from renewable sources.
The budget invests a further $2.3 million towards transitioning the Government fleet to electric vehicles by 2030 and $800,000 to implement the Renewable Energy Coordination Framework to support the future growth of renewable energy sector.
9. Industry support
Major investments in developing sustainable and competitive Tasmanian industries and business include $2 million for Infrastructure Tasmania to deliver government infrastructure projects, $1.8 million for the 2024 Trade and Investment Mission to showcase the products of Tasmanian exporters and continue export market growth, and a $1 million power network upgrade to support re-opening the Dolphin Mine on King Island.
Other key investments include $800,000 to support the growing minerals and construction sectors, $535,000 to encourage environmentally conscious, sustainable water use, $500,000 for Brand Tasmania to establish the Tasmanian Mark Certification Scheme to promote the State’s unique products, goods and services, and $500,000 for the Tasmanian Space Technology Seed Fund to support the development of the State’s emerging space industry.
10. Inclusive communities
The budget includes Tasmania’s first Gender Budget Statement to highlight actions the Government is taking to create a more inclusive Tasmania. This is supported by $800,000 for the Tasmanian Women’s Strategy on gender equality, $740,000 to develop a Women and Girls in Sport Strategy to increase female participation in sport, $450,000 to increase gender and cultural diversity in the resources sector, and $450,000 to promote women’s leadership in hospitality.
Delivering better outcomes for Tasmanian Aboriginal people is also a budget priority evidenced by a further $2 million for Tasmania’s Closing the Gap Implementation Plan and $1.5 million to improve health outcomes for Tasmanian Aboriginal people. The budget also provides $500,000 to support truth-telling and treaty processes co-designed with, and led by, Tasmanian Aboriginal people.