Eric Abetz, Minister for Finance in the State of Tasmania, last week issued a very liberating statement. He recently forecasted the state’s debt will reach $10.4 billion by the 2028-29 financial year. This figure is significantly less than the earlier estimate of $13 billion from Treasury. The announcement comes as part of a supplemental budget passed by the legislature to address mounting fiscal problems in the state. This year, the state has an operating deficit of more than $1 billion, most likely closer to $1.5 billion.
In an op-ed, Abetz touted the need for fiscal discipline. He suggested that the government will introduce “action of a huge scale” in the budget due in May 2026. His statements are a clear indication that he is committed to tackling Tasmania’s dire financial position whilst still accommodating competing needs within the budget.
Cost-Cutting Measures on the Horizon
We are going to reduce expenditures on department marketing and communications. We’re making our central office and short-term leasing footprint more efficient, as well as our procurement processes. Among them, these initiatives are projected to create about $12 million a year in savings at their maximum.
Abetz stated, “To reach peak debt — the point at which annual borrowings stop increasing — by the end of the forward estimates, and to begin paying debt down thereafter.” The administration has shown a strong interest in responsibly tackling existing debt. Beyond that, they’re committed to paying down those debts moving forward.
Departments are required to identify money to pay for any salary raises above 2.5 percent. This requirement has long been a part of our short-sighted, cost-cutting strategies. The budget includes this pay raise, which has emerged as a major flashpoint between the government and unions. In response, unions have made an absolute no-go to the government’s proposal of a 3 percent raise. This raise is projected to save the state an additional $125 million.
Balancing Wage Demands and Fiscal Responsibility
Abetz has claimed hysterically that unions are making “inflated wage demands.” He cautions these demands have the potential to do immeasurable harm to Tasmanian taxpayers and their fellow workers. He highlighted the point that departments need to find the money to pay for any wage increases above the budget’s 2.5 percent cap. That’s why it’s so important for them to think ahead.
“If we did it overnight, it would lead to shock-waves in our economy, in our agencies, in our service delivery,” Abetz cautioned. He called for a sensible approach in limiting wage increases rather than a knee jerk reaction to the demand. “And that’s why you’ve got to do the right-sizing in a considered manner, and not in a brash and rushed manner,” he added.
We know how important it is for the federal government to continue to focus on fiscal stability even as they tackle wages and other pressing concerns. GST comes to a powerful prominence in Tasmania’s revenue structure, making up 40 percent of the state’s revenues. Commonwealth grants will make up two-thirds of the revenue for the 2025-26 financial year.
Future Tax Considerations
While Abetz has not ruled out the possibility of new or increased taxes as part of May’s budget, he has expressed a preference for cutting spending as the primary means of balancing the state’s financial books. This change would be consistent with his repeated pledge to practice fiscal discipline in the face of continued economic temptation.
The budget papers describe the three new measures as “modest in dollar terms,” but they represent a “symbolic and strategic component of the broader budget sustainability agenda.” Abetz highlighted the importance of getting the planning right in budgetary measures to ensure we are in a responsible fiscal position in the future.
