TASMANIA's lock out approach during lockdowns buffered the state’s bottom line but is reaching its expiry date, according to professional accounting body, CPA Australia.
“The Tasmanian Government has pursued a lock out approach during the mainland’s frequent lockdowns,” said CPA Australia general manager for external affairs, Jane Rennie.
“Economic orthodoxy suggests that isolation is financially disastrous for markets which go it alone," Dr Rennie said. "Without doubt, border closures pummeled some sectors and contributed to skills shortages, but on balance the budget figures suggest Tasmania’s lock outs provided short-term economic protection.
“However, this approach has an expiry date. Once Australia reaches its vaccination targets, it will be important to reintegrate into the national economy or risk being left behind as other states’ economies take-off.”
The budget forecasts a deficit of $690 million for 2021-22, which is $400 million more than expected in December. For the same period, the budget forecasts the state’s economy will grow four percent. GST receipts have made a significant contribution to the strength of the budget position. The government is forecasting a return to surplus in 2023-24.
“With the cost of borrowing so low at present, we consider the size of Tasmania’s debt manageable," Dr Rennie said. "We’re not concerned by the delay in returning to surplus. It’s much better to continue stimulating the economy than to cut back on spending too soon, which could damage Tasmania’s economy.”
There are no new taxes or revenue raising measures in the budget. The land tax threshold has been lowered, which represents a nearly $60 million reprieve for property investors over four years. There’s otherwise limited tax relief for first home buyers and nothing for owner occupiers.
Overall, the Tasmanian Government has delivered modest spending in the budget.
“We think this is appropriate given the economic circumstances. Tasmania is in a very different situation to its northern neighbours. However, we must remember that the positive economic indicators underlying the budget are the result of a highly unusual set of circumstances. This growth may not be sustainable when Australia transitions to a post-vaccination economy."
Most of the 2021-22 budget measures were announced in the 2020 budget or make good on election promises. There is a clear focus on health, infrastructure and education.
This budget allocates $900 million more to Tasmania’s health system than the 2020-21 budget.
“While additional funding for health will address critical short-term issues such as wait times, ongoing investment will be needed to consolidate any improvements,": Dr Rennie said.
About $4.6 billion has been allocated to infrastructure over four years, the majority of which will go to existing projects, but there’s an additional $600 million in new spending.
“Private sector construction has made a strong contribution to Tasmania’s infrastructure program," Dr Rennie said. "There are clear opportunities to encourage further private sector investment. It’s disappointing that the government has not capitalised on this.”
The budget includes more than $135 million for skills and training, with a focus on the TAFE sector.
“Skills shortages are an issue in Tasmania, as they are in the rest of Australia. This will remain the case until Australia’s borders re-open and international skilled labour, tourists and students return.
“The missing piece of the jobs puzzle is investment in employment opportunities for professionals. Tasmania’s accounting profession currently faces a shortage of mid-career and senior accountants. We think more needs to be done to encourage employment pathways for graduates."
Hospitality and tourism businesses have been hard hit by Tasmania’s lock out approach.
“The impact of lock outs on business has been softened by multiple rounds of business grants, travel vouchers and buy local campaigns," Dr Rennie said. “What is needed now is to wean businesses off their dependence on government support, by building capacity, developing strategic skills and encouraging innovation.
“Overall, there’s meagre support for Tasmania’s small businesses in the budget. More should have been done to assist them to access professional advice and support their digital transformation.”
Some $10 million has been allocated to establishing a new environmental agency.
“We’re pleased to see Tasmania incorporating environmental sustainability into its economy but the government will need to scale-up this spending to create a meaningful impact," Dr Rennie said.
cpaaustralia.com.au
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