It gives me great pleasure to present Treasury’s 2010-11 Annual Report.
This year has seen significant change for Treasury as well as ongoing and new challenges.
After 17 years as Secretary, Don Challen retired in October 2010. Don made a major contribution in this role, serving successive governments. His leadership is largely responsible for shaping Treasury as the highly capable and professional organisation it is today.
The challenges Treasury faces, referred to in the past two annual reports, to a significant extent had their genesis in the global financial crisis. This, coupled with the impact of China’s growth on Australia’s terms of trade, has effectively created a new economic paradigm – high exchange rates and consumer conservatism - which has had a particularly challenging impact on Tasmania given the structure of our economy and the importance of GST revenues to the State’s finances.
These global and national developments have substantially influenced Treasury’s priorities over 2010-11, and are expected to continue to do so for some time to come.
The shortfall in GST and slower than anticipated growth in State taxation receipts contributed substantially to the structural budget gap identified in the 2010-11 Mid-Year Financial Report and the 2011-12 State Budget delivered on 16 June 2011.
Both the Mid-Year Financial Report and the State Budget identified a range of strategies to return the operating deficit to a sustainable position over three years. These included a labour productivity strategy, a 2 per cent per annum State wages policy, legislatively-backed measures to improve labour cost management within the public sector, major program reviews to identify more efficient and effective ways of conducting government business, a wide range of specific non-salary savings measures in government agencies, and improved efficiency and returns from the State tax base and from government businesses.
Treasury developed policy to support these strategies as well as supporting a series of major economic reviews and reforms over the past year.
Government businesses make a major contribution to the State’s economy. They also provide important revenue for the Budget and their activities, if not effectively managed, can represent significant risk to both the economy and the taxpayer. An important project undertaken during the year was the development and implementation of new governance and operating principles for government businesses. State-owned businesses compete or operate in many markets including electricity, telecommunications, rail and ports, financial investment management, forestry and wagering. The new principles provide much stronger shareholder oversight of governance, strategic decision making, operating efficiency, capital expenditure management, core and non-core business operations and executive remuneration. The principles also set clear business priorities, such as lowest sustainable pricing (particularly in the electricity sector).
During 2010-11, Treasury continued to progress important financial management and public accountability reforms through its Financial Management Framework Review.
Legislation to give effect to the outcomes of this review and to provide additional support for the new government business principles and an enhanced charter of budget responsibility will be introduced into State Parliament in 2011-12.
Developing business structures, pricing policies and regulated pricing frameworks for water and sewerage and electricity services was also a major focus during the year. We assisted the Treasurer by developing amendments to the Interim Price Order for the water and sewerage industry, which is to apply in 2011-12, as well as making amendments to the Water and Sewerage Industry Act 2008 and developing draft pricing regulations under the Act.
Regulations were developed to extend, from 1 July 2011, retail competition to business customers consuming between 50MWh and 150MWh of electricity.
Major regulatory activities during the year also included substantial completion of the mandatory code for gambling, improvements to liquor licensing arrangements and major improvements in the efficiency and effectiveness of tax collection and concession administration.
Treasury also developed the legislation to establish the Expert Panel Review of the Tasmanian electricity supply industry and has supported the Panel through the provision of a significant amount of information.
Treasury provided administrative, policy and modelling support for the State Tax Review. A discussion paper was released in December 2010 and a series of public forums and round table discussions with stakeholders was held in May.
We provided advice on the implications of the Australian Government’s Review of GST Distribution for Tasmania. Responding to this review will also be a major priority for Treasury throughout 2011-12.
Treasury’s Property Unit continued to progress the major construction projects – Princes Wharf No 1 Renewal and parliament square. The Princes Wharf project was completed in mid-2011. The impressiveness of this major development is testament to the property and project management skills in Treasury.
Other major areas of activity where Treasury officers provided substantial support and leadership were in the Forestry changes and in the development of national health reform policy.
The high level of output of Treasury officers during the year was only made possible through the professionalism and support of the Corporate Support Division which provides IT, information management, human resource management, finance and facilities services. Particular highlights during the year included the successful conclusion of Treasury’s Leadership Pipeline Program with presentations of the action learning group projects to the Corporate Management Group. Treasury also commenced an IT Infrastructure Project which culminated, through careful and detailed planning and implementation, in a complete changeover of Treasury’s ageing IT infrastructure over the Easter break without compromising the critical support for major activities such as the budget development process during this particularly busy time of the year.
As a result of the 2010-11 Mid-Year Financial Report and State Budget, Treasury had a significant reduction in its own budget. I am immensely proud of the way Treasury officers supported the identification and implementation of savings strategies and provided mutual support during a significant reduction in the number of positions in the Department.
Following the action taken in the State Budget in June 2011, credit rating agency Standard & Poor’s reaffirmed its AA+ credit rating for Tasmania.
I am confident that the work undertaken by Treasury which has led to the development of the budget management and labour productivity strategies, a new fiscal strategy recognising our current circumstances, and improved focus and efficiency in government business activities will contribute in a very positive way to Tasmania’s future economic growth and development and to sustainable future service delivery, consistent with Treasury’s mission.
Treasury’s wide-ranging achievements in this very challenging year will make a difference to the future well-being of Tasmanians – it would not have been possible without the hard work, dedication and commitment of our people working as a team across the policy, regulatory, operational and corporate support functions of the Department.