1     The 2020-21 Budget

Key Issues

·       The 2020-21 Budget is focussed on supporting employment, returning confidence in our economy to pre-COVID-19 pandemic levels, supporting the Tasmanian community and rebuilding an even stronger Tasmania.

·       Prior to the COVID-19 pandemic, the Tasmanian economy was growing at its strongest rate in over a decade. High levels of tourism had led to a pipeline of tourism-related construction projects. Population growth was over double the long-term average rate and growth in employment was robust, with low unemployment levels.

·       The COVID-19 pandemic has had a profound impact on the Tasmanian community, the Tasmanian economy and previous Budget estimates.

·       Like other jurisdictions, Tasmania experienced record falls in most key economic indicators. The Tasmanian economy is estimated to have contracted by ½ per cent in 2019-20. This would be the first decline in Tasmanian gross state product since 2012-13 and the largest decline in almost 20 years.

·       Even with the containment of the pandemic at a State and national level, and some positive early signs of recovery at a State level, full recovery from the pandemic is expected to be gradual and uneven, and subject to continuing uncertainty.

·       Governments around the world have responded to the economic and social challenges created by COVID‑19 by providing unprecedented levels of economic support to households and businesses. The action taken by the Tasmanian Government has played a key role in mitigating the social and economic impacts of the pandemic at a State level.

·       The social and economic support packages implemented by the Government are unrivalled in the history of the State both in terms of the quantum of funding and the breadth of measures. The value of the response, to date, has exceeded $1 billion, supporting businesses, households and the community.

·       Notwithstanding the impact of the COVID-19 pandemic, the 2020-21 Budget shows a return to a Net Operating Balance surplus in 2022-23.

·       The provision of record total infrastructure funding of nearly $5 billion in the 2020-21 Budget demonstrates the Government’s continuing commitment to driving the State’s economic prosperity through investment in next generation infrastructure. While General Government Sector Net Debt levels increase as a result of this record investment, they remain manageable and reasonable when compared to other jurisdictions, especially in a low interest rate environment.

·       The 2020-21 Budget maintains a focus on strong and effective support to the Tasmanian community to assist its continued recovery from the COVID-19 pandemic.

2020-21 Budget Development

The environment in which the 2020-21 Budget has been finalised is very different to that which was envisaged at the commencement of the 2020-21 Budget development process. The emergence of the COVID-19 pandemic has dramatically impacted the health and wellbeing of our community, our economy and the Government’s Budget position. Governments across Australia and around the world have been required to address these issues and take action to minimise the impact of the pandemic.

The full consequences of the COVID-19 pandemic remain very uncertain. There is uncertainty in relation to the evolution of the pandemic, the associated public health response and the nature and extent of future support measures that will be required to be implemented by the State and Australian Governments. It is important that the information presented in the 2020-21 Budget Papers is considered in the context of this ongoing uncertainty.

Prior to the COVID-19 pandemic the Tasmanian economy had performed strongly in 2018-19, growing by 3.6 per cent, the strongest result since 2003-04. This performance was supported by above trend growth in household consumption and dwelling investment, as well as robust business investment driven by strong growth in tourism over recent years. Population growth was over double the long-term average rate and growth in employment was robust, with unemployment at low levels.

From a Budget perspective, the Net Operating Balance had been returned to a surplus position in 2015‑16 and was expected to remain in surplus over the term of the 2019-20 Budget and Forward Estimates. In recent years, the Government had allocated significant additional funding to a range of initiatives that supported the provision of services to the Tasmanian community and had significantly increased the level of funding provided for infrastructure development.

With the advent of the COVID-19 pandemic in Tasmania, in March 2020, the economic consequences of the COVID-19 pandemic were swift, severe and on a scale not seen since the Great Depression. The public health crisis, and the measures implemented to slow the spread of infection, led to sharp declines in economic activity and employment within Tasmania, nationally and globally.

The Government was required to postpone the development of the 2020-21 Budget and focus efforts on addressing the immediate impacts of the pandemic on the Tasmanian community and supporting the community’s future recovery.

Over the course of the following six months, the Government made a number of announcements in relation to major support and stimulus packages, while also announcing other individual initiatives on an ongoing basis. To ensure that the Tasmanian community was kept informed of not only the critical health and wellbeing aspects of the pandemic, the Government (as the first state to do so) released Economic and Fiscal Update Reports in May and August 2020 to provide estimates of the financial and economic impacts of the pandemic. These reports were prepared in a highly uncertain environment with the impact of the pandemic evolving on a continuing basis.

The estimated financial impact of the Government’s COVID-19 pandemic response and recovery measures announced prior to the tabling of the 2020-21 Budget have been captured in the estimates presented in the 2020‑21 Budget Papers and in the 2019-20 Treasurer’s Annual Financial Report, and agency 2019-20 annual reports. These measures have a total estimated value to the Tasmanian community of over $1 billion.


In the 2020-21 Budget, the Government has funded further COVID-19 pandemic response and recovery measures that it considers essential to protecting the health and wellbeing of Tasmanians and to providing continuing support to the recovery of the Tasmanian community, businesses and the economy. While recognising the priority of these measures, the Government has also provided additional funding to continue the implementation of Government policy priorities. The Government strongly believes that the implementation of these policy priorities will continue the important progress that had been made prior to the pandemic while also now providing support to the community as it recovers from its impact.

The Key Fiscal Measures presented in this Budget Paper reflect the impact of the COVID-19 pandemic and the estimated impact of actions that the Government is committed to taking to support Tasmania’s recovery. While there is an immediate and material short-term negative impact on the General Government Net Operating Balance, which is currently estimated to result in deficits for the next two years, the Net Operating Balance is expected to return to a modest surplus position over the final two years of the current Forward Estimates. In relation to General Government Sector Net Debt, this is expected to increase to $4.4 billion by 30 June 2024. These estimates reflect the impact of the net operating position and the Government’s record investment in next-generation infrastructure. When considered on a comparative basis with the net debt position of other jurisdictions and in the context of the current low interest rate environment, which is expected to remain for the medium‑term, this level of net debt is considered to be manageable.

From an economic perspective, the Tasmanian economy is forecast to continue to follow a gradual recovery path from the end of 2021‑22. The assumed continuation of positive outcomes in relation to the control of virus infection rates, both in Tasmania and on mainland Australia, will support the continued strengthening of consumer and business confidence, leading to improving levels of economic activity.

As noted at the commencement of this section, both the fiscal and economic estimates presented in this document have been prepared in a highly uncertain environment. There is a greater than normal potential for these estimates to vary materially from those currently determined as a consequence of changes in the trajectory of the pandemic and the resulting impacts on the Tasmanian community and economy. Revised fiscal and economic estimates will be presented in the 2020-21 Revised Estimates Report that is required to be released by 15 February 2021 and in the 2021-22 Budget Papers.



2020-21 Budget Funding Priorities

The 2020-21 Budget is focussed on supporting employment, returning confidence in our economy to pre‑COVID-19 pandemic levels, supporting the Tasmanian community and rebuilding an even stronger Tasmania. Detailed information on the initiatives that the Government is funding over the 2020-21 Budget and Forward Estimates to achieve these outcomes is provided in the Key Deliverables section of each entity’s chapter within Government Services Budget Paper No 2.

COVID-19 Response and Recovery Commitments

Since the commencement of the COVID-19 pandemic, the Government has provided support to the Tasmanian community and economy valued at over $1 billion. This support has included increased funding to government agencies to provide services to the community, the waiver of tax payments and government fees and charges, grants to the business and broader community, interest free loans, support for the operation of government entities, support for community organisations and additional infrastructure investment. Major expenditure commitments (excluding infrastructure which is detailed below) include:

·       $60 million for the Public Building Maintenance Program (the total value of the Program is $70 million);

·       $51.7 million to support Tasmania’s health system during the COVID‑19 response and recovery period;

·       $45.5 million to address elective surgery demand in response to the COVID‑19 pandemic;

·       $23 million for emergency accommodation assistance;

·       $20 million for the Small Business Sustainability and Recovery Assistance Package;

·       $20 million for the HomeBuilder grant;

·       $20 million to support the Port Arthur Historic Site Management Authority;

·       $16.8 million for Statewide Safe Spaces;

·       $14 million reflecting the waiver of school fees and levies;

·       $12.5 million for Make Yourself at Home Travel Vouchers;

·       $12 million for the Waratah-Wynyard Coastal Pathway;

·       $10.8 million to expand the Apprentices and Trainees Small Business grant;

·       $10.5 million in funding for key VET courses;

·       $10 million for the Regional Health and Ambulance Facilities Fund;

·       $10 million for Improving the Playing Field grants;

·       $9.4 million to support local government interest free loans;

·       $8.9 million for COVID-19 Response and State security;

·       $7 million to support parks;

·       $6.6 million for Engaging and empowering our learners to succeed;

·       $5.8 million to support a range of initiatives to respond to domestic and family violence;

·       $2.2 million to improve Crown Lands transaction turnaround time;

·       $2.1 million to support a range of child safety initiatives; and

·       $1.3 million for the Rent Relief Fund.

In addition to the above specific commitments, the 2020-21 Budget provides funding to establish a central provision (within Finance-General) for currently unknown or uncertain COVID‑19 related expenditure. Funding of $145 million has been allocated to this provision. The funding within this provision will also be available to meet any additional costs associated with the implementation of recommendations of the Premier’s Economic and Social Recovery Advisory Council. See chapters 4 and 12 of Government Services Budget Paper No 2 for more information on this provision.

Premier’s Economic and Social Recovery Advisory Council

In response to the COVID-19 pandemic, the Premier established the Premier’s Economic and Social Recovery Advisory Council to provide advice and recommendations on how best to mitigate the economic and social impacts of the pandemic. On 20 July 2020, PESRAC released its interim report which detailed 64 recommendations for consideration. The Government has previously announced that it endorsed all 64 recommendations.

Six of PESRAC’s Interim Report recommendations had already been implemented prior to the release of the report. These were:

·       the Government should require agencies to purchase from Tasmanian business on an “if not why not” basis for at least the next two years;

·       government businesses should be subject to as strong buying local requirements as government agencies;

·       simple templates and tools should be made widely available and small organisations given proactive assistance to meet minimum requirements;

·       common approaches for common situations should be encouraged, not bespoke arrangements for each situation;

·       Workplace Standards should make special efforts, including by providing simple templates, to assist volunteer-based organisations develop COVID-19 Safety Plans; and

·       the State Government should accelerate the Tasmanian State Service Review.

The Government has addressed a further 28 recommendations through the allocation of funding for COVID‑19 Response and Recovery Measures in the 2020‑21 Budget or through existing initiatives. This funding is reflected in agency allocations detailed in this Budget Paper and includes:

·       extending the Payroll Tax Rebate (and associated grant program for small business) to apply to all Apprentices, Trainees and Youth across all industry areas until 30 June 2022, at a cost of approximately $22 million;

·       joint State-Australian Government funding of $21 million to provide low or no fee training places for job seekers, school leavers and young people looking to upskill and retrain, regardless of prior qualification attainment;

·       supporting more efficient processing of Crown Land transactions, as well as improved development assessment and approvals, ensuring the opportunities from the State’s significant infrastructure program are fully realised, at a cost of $4.6 million;

·       funding of $1.1 million in 2020‑21 and further funding of $2.1 million allocated across the Forward Estimates that has been provided to the Department of Education to implement the core infrastructure and initial phases of a Case Management Platform to deliver a cross‑agency view of learners facing vulnerability; and

·       funding of $676 000 over two years to support the development of a regionally‑based model for coordinating the recovery from the COVID‑19 pandemic. This funding will ensure that the longer-term recovery efforts are flexible and scalable, regionally coordinated, and take into account the whole‑of‑government and national approach to the COVID‑19 pandemic recovery.

PESRAC is currently undertaking a broad-based community consultation program to develop the recommendations for its final report, which is due to be provided to the Government in February 2021. The timing of this final report will enable its recommendations to be fully considered by the Government in the development of the 2021-22 Budget. Funding within the central COVID-19 Provision is available to provide support for any recommendations requiring implementation in 2020-21.

Government Policy Priorities and 2018 Election Commitments

In addition to the funding that has been provided in this Budget to meet COVID-19 pandemic response and recovery measures, the Government continues to provide support for the implementation of its existing policy agenda, including the ongoing implementation of its 2018 election commitments. Major commitments over the 2020-21 Budget and Forward Estimates include:

·       $590 million to support the Tasmanian Health Service;

·       $166.6 million for Taking Education to the Next Level;

·       $121 million to support the Tasmanian Government Radio Network Project;

·       $55.2 million for Out of Home Care demand growth;

·       $53 million for Educational adjustments - Disability funding meeting learner needs;

·       $50 million to support demand and beds in major hospitals;

·       $40 million as a provision to meet the cost of responding to bushfires;

·       $19.4 million for the First Home Owners Grant extension;

·       $17.3 million to support the State Fire Commission and for fuel reduction teams;

·       $16 million for the Tasmanian Renewable Hydrogen Development Fund;

·       $14 million to meet Tasmanian Prison Service demand and cost pressures;

·       $13 million for Statewide and Mental Health Services;

·       $12.3 million for Taking Agriculture to the Next Level;

·       $11.6 million to support a new NBL team;

·       $9.5 million for implementation of the Waste Action Plan; and

·       $4 million for Ticket to Play.

New Infrastructure for Tasmania

The 2020-21 Budget provides record support for infrastructure totalling almost $5 billion. This level of investment is fundamental to the Government’s focus on supporting employment, returning confidence in our economy to pre-COVID-19 pandemic levels, supporting the Tasmanian community and rebuilding an even stronger Tasmania. The program also reflects the Government’s strong and ongoing commitment to investing in infrastructure that will support efficient and modern government services into the future. It represents a strategic pipeline of investment that enables Tasmanian businesses and industry to plan for the long-term.

This total investment includes a $3.9 billion program of important community infrastructure projects to be delivered through Government agencies. This includes investment in:

·       roads and bridges ($2.4 billion);

·       hospitals and health ($369.6 million);

·       human services and housing ($296.8 million);

·       law and order ($275.4 million);

·       schools and education ($218.1 million);

·       tourism, recreation and culture ($198.1 million); and

·       ICT to support service delivery ($135.4 million).

The level of infrastructure funding provided in the 2020-21 Budget is well above long-term historical infrastructure investment levels (see Chart 6.1 in chapter 6 of this Budget Paper).

Chart 1.1 provides details of agency infrastructure investment expenditure for 2020-21, by classification. Chapter 6 of this Budget Paper provides a detailed explanation of the Government’s investment in agency infrastructure over the 2020-21 Budget and Forward Estimates.

Chart 1.1:         Infrastructure Investment by Classification, 2020-21

Title: Infrastructure Investment by Classification, 2020-21 - Description: The chart shows that the largest area of infrastructure investment in 2020-21 is Roads and Bridges (45.2%), followed by Hospitals and Health (17.6%) and Tourism, Recreation and Culture (11.4%).

In addition to investing in infrastructure through agencies, the Government also provides significant funding to government businesses, together with TasWater, to undertake important infrastructure projects. This funding can be provided through equity contributions or through grants. Over the 2020-21 Budget and Forward Estimate period, the Government will provide $776.9 million to government businesses and TasWater to support major long-term infrastructure projects including Tasmanian Irrigation schemes, the Tasmanian Rail Revitalisation Project, the replacement of TT-Line vessels, the decommissioning and re‑location of the Macquarie Point wastewater treatment plant, as well as other significant water and sewerage projects.

This investment in infrastructure is supported by other major infrastructure related expenditure such as the $70 million Public Building Maintenance Program and funding of $120.9 million provided over the 2020‑21 Budget and Forward Estimates for the Tasmanian Government Radio Network Project.

2020-21 Budget Presentational Issues

Given the environment in which the 2020-21 Budget has been prepared and the resulting timing of the tabling of the Budget, the following presentational changes have been made and related issues are highlighted below.

Replacement of Estimated Outcome with Actual Outcome

When the Budget is tabled in Parliament before the end of the preceding Budget year, it is established practice for an appendix to be included in this Budget Paper providing information on the Estimated Outcome for the current Budget year and also including the March Quarterly Report. Given the timing of the 2020‑21 Budget and the recent publication of the Treasurer’s Annual Financial Report 2019-20, actual outcomes information is available for 2019-20 and has been included in relevant financial tables in this Budget Paper. The March Quarterly Report 2019-20 has previously been published and the September Quarterly Report 2020-21 will be published, in accordance with legislative requirements, as a separate document to these Budget Papers.

As a result, no Estimated Outcome appendix has been included in this Budget Paper.

Economic Estimates and Forecasts

The COVID-19 pandemic has created challenges for economic forecasting and has led to an increase in the level of uncertainty present in the forecasts. The economic estimates and forecasts included in this Budget Paper incorporate assumptions and judgments based on information available at the time of preparation. Due to this uncertainty, forecasts have only been prepared for 2020-21 and 2021-22.

Presentation of COVID-19 Information

The collection of information on, and the presentation of, the Government’s COVID-19 pandemic response and recovery measures, has necessarily developed over time since the emergence of the pandemic and during the course of the finalisation of the 2020-21 Budget. This has reflected the breadth of the measures being implemented by the Government, the availability of information, and the differing accounting treatments for some measures. It should be noted, that the presentation of COVID-19 related expenditure in the 2020‑21 Budget Papers has required the exercise of judgement in relation to the most appropriate approach to be adopted for each measure.

Information and Estimates Subject to Change

The information presented in this Budget Paper is based on data available at the time of the finalisation of estimates and other information. The status of the COVID-19 pandemic across Australia and the response of governments can change very quickly, with these changes having the potential to have major implications for the State’s economy and action taken to protect the health and wellbeing of the Tasmanian community and support the State economy. As a result, since the finalisation of the information presented in this Budget Paper, there may have been material changes to the information presented that has been unable to be taken into account. Further information on Budget risks and sensitivities is provided later in this chapter.



2020-21 Budget Estimates Summary

The following sections provide summary information on the key 2020-21 Budget estimates. Further detailed information on these estimates is provided in this Budget Paper and, on an entity basis, within Government Services Budget Paper No 2.

Table 1.1:         Key Budget and Forward Estimate Aggregates, 2019-20 to 2023-24




































General Government Sector








6 406.7

6 413.9

6 428.1

6 812.4

7 094.6

7 335.2


6 349.3

6 751.6

7 546.1

7 093.9

7 080.7

7 318.0

Net Operating Surplus/(Deficit)



(1 118.0)











Fiscal Surplus/(Deficit)



(1 779.7)











Net Debt at 30 June1



1 854.8

2 854.4

3 729.1

4 380.5








GFS Net Debt at 30 June2              



1 432.8

2 466.2

3 370.0

4 048.8








Infrastructure Investment



1 073.4












1.    Net Debt represents Borrowings plus Lease liabilities, less the sum of Cash and deposits and Investments. This measure incorporates the impact of recognising Lease liabilities on the Balance Sheet.

2.    GFS Net Debt represents Borrowings less the sum of Cash and deposits and Investments. This is equivalent to Net Debt based on the Australian Bureau of Statistics Government Finance Statistics reporting framework, and excludes the impact of Lease liabilities.


Net Operating Balance

The Net Operating Balance is estimated to be in deficit by $1 118 million in 2020-21, improving to a surplus of $17.2 million by 2023-24.

Chart 1.2 highlights the change in the Net Operating Balance that has occurred since 2014-15 and the current projections for the 2020-21 Budget and Forward Estimates period.

Chart 1.2:         Net Operating Balance, 2014-15 to 2023-241

Title: Net Operating Balance, 2014-15 to 2023-24 - Description: The chart shows that the Net Operating Balance was in surplus from 2015-16 to 2018-19 before a deficit in 2019-20. It will be in deficit in 2020-21 and 2021-22 before returning to a small surplus in 2022-23 and 2023-24. Note:

1.    The Net Operating Balance Actual for 2016-17 is presented net of the one-off Australian Government payment of $730 million related to the Mersey Community Hospital. The Net Operating Balance including this payment was $804 million.


It should be noted that the receipt of Australian Government funding for capital programs, particularly one‑off major projects, has the effect of improving the Net Operating Balance outcome. Given the nature of the Net Operating Balance measure, it reflects the receipt of revenue from the Australian Government for infrastructure purposes but does not factor in the expenditure of these funds on infrastructure projects. The Underlying Net Operating Balance has, therefore, been used for a number of years as a measure that removes the distorting impact of one-off Australian Government funding for specific capital projects. The Underlying Net Operating Balance is generally derived by excluding from the Net Operating Balance, significant one-off capital related funding received from the Australian Government.


Table 1.2 below provides information on the Underlying Net Operating Balance.

Table 1.2:         Underlying Net Operating Balance, 2019-20 to 2023-24



























Net Operating Balance


(1 118.0)










Less One-off Australian Government Funding






Bridgewater Bridge






Cascades Female Factory






Cradle Mountain Experience






COVID-19 Infrastructure Stimulus Funding







COVID-19 National and World Heritage Projects






National Water Infrastructure Development Fund






Redevelopment of the Royal Hobart Hospital







Revitalising TAFE Campuses across Australia







Roads and Rail Funding (Nation Building)







Roads of Strategic Importance







Sustainable Rural Water Use and Infrastructure Program







Tasman Bridge Upgrade







Urban Congestion Fund


















Underlying Net Operating Balance


(1 412.0)













Fiscal Balance

A Fiscal Balance deficit of $1 779.7 million is estimated for 2020-21 with the outcome improving over the Forward Estimates period to an estimated deficit of $437.9 million in 2023-24.

Chart 1.3 illustrates the Fiscal Balance since 2014-15.

Chart 1.3:         Fiscal Balance, 2014-15 to 2023-241

Title: Fiscal Balance, 2014 15 to 2023-24 - Description: The chart shows the Fiscal Balance has been in deficit since 2016-17. It is estimated to be a deficit of $1.8 billion in 2020-21 and is in deficit over the Budget and Forward Estimates.


1.    The Fiscal Balance for 2016-17 is presented net of the one-off Australian Government payment of $730 million for the Mersey Community Hospital for presentation purposes. The Fiscal Balance including this payment was $677 million.


Net Debt

Net Debt represents Borrowings less the sum of Cash and deposits and Investments. A reference to ‘negative’ Net Debt means that Cash and deposits and Investments exceeds Borrowings. This can also be referred to as Net Cash and Investments.

It is estimated that General Government Net Debt will be $1 854.8 million as at 30 June 2021. General Government Net Debt is estimated to be $4 380.5 million as at 30 June 2024. A major contributing factor in the increase in General Government Net Debt is the COVID-19 pandemic, which has required a significant response by the Government in order to support the community and the economy in responding to and recovering from, the effects of the pandemic. The response includes significant expenditure measures, revenue forgone (both from the decline in economic activity and Government policy decisions) and the Government’s record commitment to infrastructure development through both agencies and government businesses. The record investment in the State’s infrastructure also represents a strategic long‑term commitment to develop Tasmania’s future.

When considered on a comparative basis with the Net Debt position of other jurisdictions and in the context of the current low interest rate environment, which is expected to remain for the medium-term, this level of Net Debt is considered to be manageable.

Chart 1.4:         GFS Net Debt, 2014 to 20241

Title: GFS Net Debt, 2014 to 2024 - Description: The chart shows that GFS Net Debt is estimated to be $1.4 billion in 2021, increasing to $4 billion by 2023-24. GFS Net Debt is similar to the Net Debt measure but excludes Lease liabilities.Note:

1.    This chart presents information on a GFS Net Debt basis. GFS Net Debt reflects the methodology that is applied by the Australian Bureau of Statistics under its Government Finance Statistics reporting framework. The presentation of this chart on a GFS Net Debt basis enables a consistent and comparable time series to be presented to facilitate an understanding of changes in Net Debt over an extended period of time. Information on GFS Net Debt and the AASB 16 Leases based Net Debt calculation (applicable from 1 July 2019) is provided throughout this Budget Paper.



Sources of Revenue

In 2020-21, General Government Sector total revenue is estimated to be $6 428.1 million.

Chart 1.5 provides information on the major sources of General Government Sector Revenue in 2020-21. Chapter 5 of this Budget Paper provides a detailed explanation of the major revenue items included in the 2020-21 Budget and over the Forward Estimates.

Chart 1.5:         Sources of General Government Revenue, 2020-21

Title: Sources of General Government Revenue, 2020-21 - Description: The chart shows the major sources of General Government Sector Revenue in 2020-21, showing that the major revenue item is Grants (63.3%), followed by Taxation (19%) and Sales of Goods and Services (6.7%).

Purposes of Expenditure

In 2020-21, General Government Sector total expenditure is estimated to be $7 546.1 million.

Chart 1.6 provides information on the major purposes of General Government Sector Expenditure in 2020‑21. This Chart reflects the detailed information provided in Table A1.16 in appendix 1 of this Budget Paper.

Chapter 4 of this Budget Paper provides information on expenditure variations included in the 2020‑21 Budget and over the Forward Estimates.

Chart 1.6:         General Government Expenses by Purpose, 2020-21

Title: General Government Expenses by Purpose, 2020-21 - Description: The chart shows the major purposes of General Government Expenses, with the largest items being Health (32.6%) followed by Education (23.7%) and Public order and safety (10.6%).

Current Budget Risks and Sensitivities

Impact of COVID-19 Pandemic

The ongoing COVID-19 pandemic and the associated responses from the Australian and Tasmanian governments and elsewhere, creates greater uncertainty than is usually the case in relation to the fiscal and economic information presented in the 2020-21 Budget Papers. This uncertainty exists in terms of both potential negative and positive impacts on the information presented.

The impact of the COVID-19 pandemic on the information presented in the 2020-21 Budget Papers will continue to be closely monitored by the Government. Revised estimates will be provided in the 2020‑21 Revised Estimates Report that is required to be published by 15 February 2021. The 2021-22 Budget will subsequently provide a detailed update of all Budget Paper information.

Goods and Services Tax Revenue

There remains a high degree of uncertainty in relation to the continuing impact of the COVID-19 pandemic on GST receipts.

GST revenue collections are sensitive to changes in national consumer spending patterns. The recent significant reductions to GST pool forecasts in the Australian Government’s 2020-21 Budget reflected record falls in consumption as a result of the ongoing impacts of COVID-19. The Australian Government has forecast strong growth in the GST pool in 2021-22 and beyond.  It is noted in the Australian Government 2020-21 Budget that there remains a high level of uncertainty around the domestic outlook and economic recovery with large upside and downside risks associated with the forecasts.

There is a one-to-one relationship between variations in the size of the national pool of GST available for distribution to the states and variations in GST revenue to Tasmania. For example, a one per cent variation in the GST pool would result in a $24 million variation in Tasmania’s GST revenue in 2020-21, assuming that the State’s population share and assessed relativity remained constant.

Relativity factors calculated by the Commonwealth Grants Commission reflect states’ relative fiscal strengths. Responses to the pandemic have affected many states’ own‑source revenues in the 2019-20 financial year, and there are likely to be ongoing revenue and expenditure impacts across the 2020-21 Budget and Forward Estimates period. These impacts and the Australian Government’s response to the pandemic may also affect relativity factors.

From 2021-22, the GST distribution methodology will begin to transition from the current principle of equalising states’ fiscal capacities to the level of the state with the highest fiscal capacity, to equalising to the fiscal capacity of the higher of New South Wales or Victoria. The transitional arrangements include a no‑worse-off guarantee until 2026‑27. However, due to the finite nature of this guarantee, there is a risk to Tasmania’s share of GST revenue from 2027-28.


Australian Government Funding and Agreements

Australian Government funding is also provided through time-limited National Partnership Agreements and Project Agreements. The level of risk associated with these agreements is generally related to the nature of the payments provided and the difficulties agencies face adjusting expenditure levels when they cease. The increased amount of Australian Government funding in 2020-21 may increase these risks.

Future funding arrangements in relation to expiring funding agreements are an ongoing risk exposure for all states, particularly where these agreements are funding core service delivery.

Australian Government funding uncertainty imposes a budgetary risk on Tasmania and reduces the State’s flexibility to fund its own expenditure priorities or respond to changing fiscal circumstances as they arise.

Where the CGC assesses Tasmania as receiving a level of Australian Government funding above the national average, or where it is the only recipient, the result is an almost equal reduction in the State’s GST revenue share over time. Effectively, this substitutes untied GST revenue for tied Australian Government funding, further limiting the State’s ability to direct funding according to its priorities and emerging fiscal challenges.

State Taxation

State taxation revenue estimates are sensitive to changes in a range of economic parameters, such as employment, wages growth and inflation, as well as prevailing economic conditions in Tasmania more generally. Conveyance Duty in particular is subject to a range of factors, including population growth, housing supply and interest rates which can result in significant volatility from year to year.

These parameters have all been impacted by the COVID‑19 pandemic.

Given the ongoing economic impact of Government measures to limit the spread of COVID‑19, including border closures and taxation relief measures to support the Tasmanian community, the State Taxation revenue outlook across the Budget and Forward Estimates remains uncertain.

Other Risks

Government Businesses

Government business are subject to a wide range of influences that can significantly impact the level of returns to the Government, both positively and negatively. These include market conditions, infrastructure investment requirements and the implementation of major reform programs. Such influences may impact the Budget through increased costs or reduced returns from government businesses, and may also necessitate changes to businesses’ capital structure requirements.

Energy Projects

The State is continuing to progress a number of significant energy projects including Battery of the Nation and Marinus Link. Work is currently focused on taking the projects to a Final Investment Decision and is being progressed by the State-owned electricity businesses. Both of these projects will require significant investment if they proceed and, depending on the project finance model(s) chosen, may result in billions of dollars in new assets and liabilities being recognised on the Total State Sector balance sheet, although the majority of the investment will fall outside the Forward Estimates period.

In addition to these projects, the State is also targeting to double its renewable energy output by 2040. To achieve this target, the State may need to provide some level of support to encourage new renewable generation projects.

Funding requirements beyond the Forward Estimates

Expenditure estimates presented in this Budget Paper are based on the standard Budget and Forward Estimates period of four years. As such, expenditure levels beyond this period are not identified. As is established practice, such impacts are taken into account in the ongoing development and management of this Budget.

General Agency Cost Pressures

While all agencies are expected to deliver services within their allocated Budget and Forward Estimates, there continues to be a range of pressures which agencies need to manage, including staffing levels, general increases in the cost of inputs and increasing demand for services. These issues will require ongoing management and review.

Health Expenditure

Improving health services in Tasmania is a high priority for the Government and this is reflected in the significant level of additional funding that the Government continues to provide for health services throughout Tasmania (including in this Budget). Notwithstanding the provision of this additional funding, the delivery of health services to the Tasmanian community continues to present a significant budget challenge (as it is across all Australian jurisdictions), and this has been exacerbated by the uncertainty associated with the COVID-19 pandemic. The Government is continuing to monitor health demand and service requirements.

Tasmanian Prison Service

The Government has provided significant additional funding to address increased operating costs associated with the prison service (including in this Budget). It is possible, however, that demand issues and requirements for changing program delivery will continue to place pressure on future operating costs.

Northern Prison Costs

Investigative works are currently being undertaken at the proposed site for the new Northern Prison. While a significant allocation has been made towards the cost of the construction of this facility, the final cost and associated funding, remains uncertain.

Out of Home Care

The Government has provided significant additional funding to support vulnerable children with complex needs in Out of Home Care, including that provided in this Budget. Future funding requirements will continue to be reviewed taking into account a range of factors including the number of children in care, the level of care required and the ongoing implementation of reforms.

Support for Business and the Economy

The Government works closely with the private sector and local government to support investment and employment across Tasmania. This may result in the allocation of additional funding, the provision of financial guarantees or the forgoing of revenue over the Budget and Forward Estimates. In some instances, there have been offers of support made by the Government to business that may be taken up, if certain conditions are satisfied at a later date.

In response to the COVID-19 pandemic, the Government has supported Tasmanian businesses through the provision of loan programs to support businesses to invest to diversify and to remain viable. The increased size of the Government’s loan portfolio results in an associated increase in credit risk.

Natural Disaster Costs and Recovery Arrangements

The 2020‑21 Budget includes additional funding to support an increased central provision for bushfire emergency costs. As has been the case in the past, additional funding to meet bushfire‑related costs will be considered on a year‑by‑year basis, depending upon funding requirements.

Under Natural Disaster Relief and Recovery Arrangements and the new Disaster Recovery Funding Arrangements that replaced the NDRRA from 1 November 2018, the State is able to seek reimbursement from the Australian Government for a portion of the costs incurred by the State and local government in the event of natural disasters. Assumptions have been required to be made in relation to the level of future funds to be received from the Australian Government relating to previous disasters and the timing of the receipt of those funds. Any variation from these assumptions will result in an impact on the current Budget estimates.

TT-Line New Vessels

The Vessel Replacement Taskforce will provide advice to Government on options for greater involvement by Australian businesses in the replacement of the vessels. Depending on the outcome of this process, and a subsequent decision by Government, as to how to proceed, there may be implications for the assumed timing of the purchase of replacement vessels. This could influence the timing of contributions into and out of the Vessel Replacement Fund, the level and timing of debt incurred by TT-Line, as well as TT-Line returns and overall financial performance.

RHH Redevelopment

The Royal Hobart Hospital redevelopment project is Tasmania’s largest ever health infrastructure project. The Government took possession of the 10-storey inpatient facility (K-Block) on 18 March 2020. During the construction and commissioning phase of the project, a number of issues were identified which continue to be worked through with the Managing Contractor.

Infrastructure Expenditure

The Government is continuing its strong focus on the development of next generation infrastructure in the 2020-21 Budget. Actual infrastructure expenditure varies considerably year-on-year due to a range of factors, with the resulting variance potentially creating a material impact on the key fiscal indicators in the Budget. These factors can include:

·       the availability of appropriate industries to complete design and construction works consistent with planned project timelines;

·       changes to the timing of project expenditure;

·       unforeseen project delays arising from matters requiring resolution during initial planning stages;

·       the timing and amount of Australian Government funding for infrastructure, including projects which are still progressing through investment planning stages; and

·       finalisation of State funding requirements (including timing) to match Australian Government commitments.

In 2020-21 and over the Forward Estimates, there is also a risk that the impact of the COVID-19 pandemic may create delays with project delivery.

Claims against the State by survivors of institutional child sexual abuse

The Government has committed $70 million over ten years to meet compensation and administration costs under the National Redress Scheme for Institutional Child Sexual Abuse. There is a risk that additional costs may be incurred, including for matters that are not covered under the scheme.

Royal Commission into Violence, Abuse and Neglect and Exploitation of People with Disability

There will be costs for jurisdictions from participation in the Royal Commission info Violence, Abuse, Neglect and Exploitation of People with Disability. Expected costs are associated with hearings that relate to Tasmania and the legal and administrative support including the cost of providing information and evidence to the Royal Commission by government agencies. In addition to these indirect costs, it is likely there will be costs associated with any Tasmanian Government response to the Royal Commission’s findings and recommendations.



Appendix 1.1   State and Territory Credit Ratings

The current credit ratings and outlook for long‑term domestic debt of the states and the territories by the rating agencies, Moody’s Investors Service (Moody’s) and Standard & Poor’s (S&P), are detailed in Table 1.3.

Table 1.3:         Government Ratings




New South Wales

Aaa (Stable)

AAA (Negative)


Aaa (Stable)

AAA (Credit Watch Negative)


Aa1 (Stable)

AA+ (Stable)

South Australia

Aa1 (Stable)

AA+ (Stable)

Western Australia

Aa1 (Stable)

AA+ (Stable)


Aa2 (Stable)

AA+ (Stable)

Northern Territory

Aa3 (Stable)


Australian Capital Territory


AAA (Negative)