Achievements towards Outcome 2

Budget Output 2.1 – Economic policy advice
Budget Output 2.2 – Fiscal policy and regulatory advice
Budget Output 2.3 – Market structures facilitation

That the Government receives sound and timely economic and fiscal policy advice

Budget Output 2.1 – Economic policy advice

Demographic change

In 2006–07 we provided secretariat and research support to the Demographic Change Advisory Council (DCAC). Research included preparing the Council’s discussion paper, titled Demographic Change in Tasmania: Challenges and Opportunities, which sought feedback from the Tasmanian community on the range of issues that Tasmania might expect to face as a result of demographic changes in the decades ahead. A large number of submissions were received, from which we have drawn to prepare further reports for the council. We have also prepared a research paper on non-participation in the Tasmanian labour market. All council reports can be found at www.dcac.tas.gov.au.

We have undertaken research on long-term cost and demand pressures that Tasmanian Government agencies face involving collaboration with Tasmanian Government agencies and organisations, such as the Australian Bureau of Statistics (ABS) and the University of Tasmania.

This issue is being recognised nationally as one of the most potentially pressing long-term influences on the Australian economy and it relates to a variety of policy considerations that will have the attention of all Australian governments over the coming years. At risk are Australia’s relative standard of living status (in a global context) and the ability of future communities to support an ageing population. The work in Tasmania will draw on and contribute to research and policy analysis occurring nationally.

Invermay Flood Risk Analysis

During 2006–07 we played a major part in developing policy measures to address the flood risks at Invermay in Launceston, using cost-benefit assessments of both engineering and planning based solutions. This work was undertaken in close consultation with officers in the Department of Primary Industries and Water and the Launceston City Council. It achieved the development of robust and cost-effective policies to provide a long-term and sustainable solution based on an improved levee system, major changes to land use planning and building controls, and improved emergency planning arrangements.

Government Prices Oversight Commission improvements

We implemented legislative changes to enable the Government Prices Oversight Commission to operate more effectively and to improve the way competitive neutrality complaints can be investigated. The legislation, which was passed in May 2007, also removed unnecessary burdens on government bodies, including local government councils, when price investigations are undertaken.

Economic monitoring

We are responsible for reporting to the Treasurer on trends in the Tasmanian, Australian and global economy, as well as preparing forecasts of key economic indicators important to Tasmania.

As part of this task, we prepare a chapter on the Tasmanian economy for the State Budget. This chapter reviews Tasmania’s recent economic performance and outlines Treasury’s outlook for the forthcoming financial year and over the Forward Estimates period.

Another major task that we undertake each year is to provide information on Tasmania’s economic outlook to the ratings agencies, Standard and Poor’s, and Moody’s. This involves identifying important underlying trends and structural changes to Tasmania’s economy and the reasons for these changes. This has become particularly significant in recent years with the much stronger economic performance in Tasmania and the closer integration with the mainland economy through Basslink, access to mainland natural gas and substantially improved air and ferry services.

Our economic forecasting performance continues to be strong. We were more accurate than industry forecasts for four of the six forecasts we made for 2005–06 (employment growth, the participation rate, population growth and the consumer price index) but less accurate on two (the unemployment rate and the ten-year Commonwealth bond rate). It is not possible to assess our performance for our 2006–07 forecasts yet because some data is not available until late 2007.

Water & Sewerage

We have also prepared and released a discussion paper on high-level issues for reform. This was used for initial consultation with the community, and the feedback received has been incorporated into the preliminary comments to Government on possible reform options.

We have undertaken a high-level due diligence of the status of water and sewerage assets, with the cooperation of local government, and have begun an analysis of the financial and other implications for local government of the reform options.

We have also initiated discussions with the Australian Government on our reform objectives and the means by which it could assist the State to achieve sustainable outcomes.

Competition Index

Early in 2006–07 the Government released the 2005 edition of the Competition Index which we prepare each year. The Competition Index is an objective assessment of how competitive Tasmania is as a location for investment and employment, compared with other Australian jurisdictions and, in some cases, New Zealand. For the first time, the 2005 Competition Index included comparisons with the Northern Territory and the ACT.

Next year’s aims

We will:

• Provide advice to the Water and Sewerage Ministerial Taskforce on the structural options and key regulatory changes that will best build a sustainable and robust water and sewerage sector for all Tasmanians.
• Prepare a submission for consideration by the Australian Government for financial assistance to implement water and sewerage reforms in Tasmania.
• Work together with local government managers and employees, businesses, environmental, community groups and others to better understand the impacts of water and sewerage reform options, and the least disruptive means by which the reform could be implemented.
• Continue to undertake research on demographic change, and a new project to develop population projections for Tasmania.

Many of the research studies will be used to help the council develop a major report on strategies that could be adopted in Tasmania to address the long-term economic, social and workforce problems arising from demographic change. We will have a principal role in preparing this report.

• In early 2007–08, we will prepare the Demographic Change Advisory Council’s Issues Paper. We will also begin work for the council on developing a set of state and local government population projections which will be publicly released.
• Release the 2006 edition of the Competition Index in 2007–08.

Budget Output 2.2 – Fiscal policy and regulatory advice

Payroll tax

We have undertaken a review of payroll tax assistance (in the form of grants), which has led the Government to decide to cease providing indirect support through the payroll tax assistance programs and instead aim assistance through direct industry related funding.

We reviewed the effectiveness of fuel (petrol and off-road diesel) subsidies. This led to a decision by the Government to cease providing subsidies and to continue supporting motorists through a reduction in motor taxation rates for light vehicles and duty on the transfer of heavy vehicle registrations (a revenue-neutral Budget measure that was announced as part of the 2007–08 Budget).

We prepared the Taxation Legislation (Miscellaneous Amendments) Bill 2007, which amended a number of taxation Acts in order to simplify and clarify the original policy intent of certain provisions and to maintain the operational integrity of the legislation. This is part of an on-going initiative to keep Tasmania’s tax legislation current and as effective as possible.

Superannuation

We amended various public sector superannuation scheme Trust Deeds and legislation to enable the Retirement Benefits Fund to implement the Australian Government’s “Better Super” changes that came into effect on 1 July 2007.

We advised on amendments to the Retirement Benefits Regulations 2005 to

enable a member’s superannuation contributions to be split and paid into a superannuation account for a spouse.

We also made a number of other amendments to improve the clarity and the administrative efficiency of the regulations.

Impacts of Gambling

On behalf of the Treasurer we commissioned a study into the social and economic impacts of gambling in Tasmania.

We also advised on amendments to the Gaming Control Act 1993 to improve clarity, administrative efficiency and probity measures within that Act.

Commonwealth Grants Commission

We provided input into the Commonwealth Grants Commission’s (CGC) 2010 Review, which will determine the methods used for distributing GST revenue among the states for the five-year period beginning in 2010. Tasmania’s contribution to the review will ensure that the State’s financial needs are recognised under these new methods.

We also contributed, with other states and territories, to providing a case to Australian Government officials for better arrangements for Specific Purpose Payments (SPPs). This aims to create opportunities for more efficient and improved service delivery. In particular, we contributed to joint state and territory reports on the Commonwealth–State Housing Agreement and the Natural Heritage Trust.

We provided the State Grants Commission with an improved asset preservation model for distributing Commonwealth Identified Local Roads Funding to local government in Tasmania.

Next year’s aims

We will:

• Support the development of the necessary policy, legislative and administrative framework to enable the introduction and application of an ambulance service user fee from 1 July 2008.
• Facilitate the adoption of payroll tax administration arrangements that are consistent with those in place in Victoria and New South Wales. Payroll tax harmonisation will significantly reduce the payroll tax compliance costs for businesses.
• Develop legislation to amend a number of taxation and related Acts to close off potential loopholes, delete redundant provisions and ensure consistency with comparable Acts of other jurisdictions.
• Prepare amendments to the Liquor Licensing Act 1990 to strengthen the existing regulation of the supply and consumption of alcohol and to improve the administrative efficiency and operation of the Act.
• Coordinate the completion of the study into the social and economic impacts of gambling in Tasmania and coordinate a whole-of-government response to the findings of the study.

• As well as managing grants allocated by the TCF board, we will assist the board in developing a more strategic approach to grant-making.
• Coordinate workplace discussions for the CGC’s 2010 Review, scheduled for April 2008, during which commissioners from the CGC will visit Tasmania to discuss the State’s specific needs and disadvantages with those who are at the forefront of service delivery.
• Assist the CGC in implementing a new process for providing and quality assuring the data that it uses in its annual updates of state GST shares.
• Continue to provide input into the renegotiation of SPPs, including those for the Australian Health Care Agreements, Vocational Education and Training, and for Schools Education.

Budget Output 2.3 – Market structures facilitation

Electricity markets – retail competition

As part of the roll-out of electricity retail competition, we conducted an information session for “tranche 2” electricity customers (those customers with an annual electricity bill in the order of $250 000 or above). The aim of the information session was to advise customers and stakeholder groups on the impact of retail competition in Tasmania.

Retail price determination

As part of establishing retail electricity tariffs from 1 January 2008, we appointed a consultant to review Hydro Tasmania’s submission on the energy price to be used for the period from 1 January 2008 to 30 June 2010.

We provided advice to the Treasurer on the energy price which was included as part of the Tasmanian Energy Regulator’s 2008 Retail Price Determination.

Strategic partner for the Tasmanian optic fibre network

We have been providing strategic policy, regulatory and financial advice to help achieve the Government’s objective of maximising future broadband telecommunications opportunities and creating greater competition in the telecommunications sector.

We conducted a Request for Proposals (RFP) process which sought proposals for a Strategic Alliance with a telecommunications carrier.

Next year’s aims

We will:

• Following the evaluation of the responses received under the Request for Proposals for the provision of telecommunications services and facilities, negotiate with several respondents to finalise the selection of a commercial partner for the commercialisation of the Government’s Connect Tasmania network.
• Continue to monitor the regulatory arrangements for retail competition and ensure that they are consistent with developments at the national level.