1     The 2022‑23 Budget

Key Issues

·       The 2022‑23 Budget is focussed on strengthening Tasmania’s future by delivering for all Tasmanians and supporting the Tasmanian community.

·       The Budget continues to invest in essential services including health, education and housing, and assists vulnerable Tasmanians with the cost of living.

·       Reflecting the Government’s priorities, health and education account for almost 60 per cent of Budget expenditure over the next four years, while the Government is also committed to investing $1.5 billion into housing over the next 10 years.

·       The Budget is supported by a positive economic outlook and over the short‑term the Government will meet its Fiscal Strategy measures. From 2023‑24 the Budget is forecast to return to a Net Operating Balance surplus.

·       The Tasmanian economy is forecast to grow by 2¾ per cent in 2022‑23 and three per cent in 2023‑24, supported by increases in domestic and international tourism and overseas migration. This follows expected growth of 3¾ per cent in 2021‑22, supported by strong growth in household consumption and government expenditure.

·       The strength of the economy is also evident in the State’s labour market. In March 2022, employment was above its pre‑pandemic level and the strong recovery in the broader economy means that employment is expected to grow by 2¼ per cent in 2021‑22, more than double the long‑term average.

·       There have been material increases in General Government Sector revenue compared to the 2021‑22 Budget, reflecting forecast growth in GST revenue and the continued strength in State Taxation revenue, particularly conveyance duty, payroll tax and land tax.

·       Additional funding of just over $1.2 billion is allocated over the 2022‑23 Budget and Forward Estimates for initiatives in priority areas, including: COVID‑19 transitional funding; delivery of Government commitments; priority infrastructure projects; and to progress recommendations of major reviews.

·       The 2022‑23 Budget provides for $5.6 billion in infrastructure investment, of which in excess of $4.8 billion will be delivered through Government agencies.

·       The Budget also includes $730.5 million for the New Bridgewater Bridge, the biggest transport infrastructure project in Tasmania’s history which will improve safety, reduce travel times and support jobs.

·       The Government is committed to the sustainable and responsible management of the State’s economy and State Budget.

·       The Government will act as required to rebuild the fiscal buffers crucial to provide the budget flexibility to respond to future shocks in a measured way over time, which does not impact on the provision of essential Government services.


 

2022‑23 Budget Context

The 2022‑23 Budget strengthens Tasmania’s future by building upon the current strong economic environment, with record infrastructure investment and significant additional funding to deliver essential community services for all Tasmanians in priority areas of health, education, housing and community infrastructure.

The successful management of COVID‑19 in Tasmania allowed for the easing of most restrictions, with closures of the State’s borders with other states and territories occurring only in response to specific outbreaks in other jurisdictions.

The Tasmanian economy is expected to grow by 3¾ per cent in 2021‑22, with growth of 2¾ per cent in 2022‑23, driven by strong government expenditure and household consumption. Through 2022‑23 and 2023‑24 the lifting of domestic and international border restrictions is expected to drive the recovery in international tourism, overseas migration and population growth.

Employment is forecast to continue to grow in 2022‑23 by 1¼ per cent, which follows strong expected growth of 2¼ per cent in 2021‑22. The strength of the economy is expected to be reflected in the unemployment rate, which is forecast to remain at 4½ per cent for 2021‑22 and over the following two years.

There have been material increases in General Government Sector revenue compared to the 2021‑22 Budget reflecting forecast growth in GST revenue and continued strength in State Taxation revenue, particularly conveyance duty, payroll tax and land tax.

The 2022‑23 Budget supports all the Government’s 2021 election commitments, new initiatives, and increased infrastructure investment, while also providing additional funding to meet growing demand for essential community services.

The Budget is supported by a positive economic outlook and over the short‑term the Government will meet its Fiscal Strategy Strategic Actions. From 2023‑24 the Budget is forecast to return to a Net Operating Balance surplus.  However, in the final year of the Forward Estimates the Strategic Action relating to the combined annual debt servicing cost and defined benefit superannuation costs being less than six per cent of General Government Sector cash receipts is forecast to be exceeded.

The Government is committed to meeting all of its Strategic Actions and will take action to rebuild the fiscal buffers crucial to build the budget flexibility to respond to future shocks in a measured way over time, which does not impact on the provision of essential Government services.

COVID‑19 continues to be a significant source of uncertainty. A risk remains regarding the emergence and management of new variants that are resistant to current vaccines. The impacts of the Russian invasion of Ukraine, global supply chain issues and persistent price pressures highlight how circumstances can quickly change. The Government continues to carefully manage the needs of the Tasmanian community and the State’s Budget position, balancing short‑term needs with longer term fiscal sustainability.

 


 

2022‑23 Budget Priorities

The 2022‑23 Budget provides over $1.2 billion in new investment and initiatives over four years. Additional funding has been directed towards the following areas:

·       strengthening essential services to support living with COVID‑19;

·       introducing new targeted services and as a result of recommendations made through major reviews; and

·       continuing to invest in community infrastructure.

Key initiatives and projects funded over the 2022‑23 Budget include:

·       $166 million for Health services across the State, including $50 million for continuing demand for major Hospitals;

·       $150 million for Digital Health Transformation projects, including $40 million reallocated from the Department of Health’s existing Budget allocation;

·       $81.5 million for increased Roads maintenance;

·       $40 million for new Youth Justice Facilities to replace the Ashley Youth Detention Centre;

·       $44 million as an additional State contribution to the New Bridgewater Bridge;

·       $35 million as an initial allocation to deliver Housing initiatives as part of the $1.1 billion in new investment over 10 years through Housing Tasmania;

·       $32 million for contributions to major irrigation projects throughout the State;

·       $25 million for upgrades at the Dial Regional Sports Complex;

·       $18.9 million to continue the Derwent Ferry Service;

·       $15.1 million for a trial of Multidisciplinary Centres to support victim survivors of sexual assault;

·       $13.8 million in additional funding to operate the Southern Remand Centre;

·       $12.5 million in 2022‑23 for Tasmania’s Third Family and Sexual Violence Action Plan to be finalised in 2022;

·       $11.3 million to continue fixed‑term COVID‑19 housing support into 2022‑23 and 2023‑24;

·       $10 million for Tourism Tasmania to continue initiatives to secure recovery from the COVID‑19 pandemic and maximise Tasmania’s visitor economy future; and

·       $2 million for the implementation of recommendations made as part of the State Service Review.

Detailed information on these initiatives over the 2022‑23 Budget and Forward Estimates is provided in the Key Deliverables section of each entity’s chapter within Government Services Budget Paper No 2.


 

Infrastructure Investment

The Government continues its ambitious infrastructure investment program, with a record investment in infrastructure of $5.6 billion. This will secure a better future for all Tasmanians and maintains the Government’s strong commitment to a substantial pipeline of infrastructure investment which will provide confidence to Tasmanian businesses to invest, employ and grow over the short and medium‑term.

Infrastructure investment in the General Government Sector exceeds $4.8 billion over the Budget and Forward Estimates to deliver community infrastructure project funding for:

·       roads and bridges ($2.7 billion);

·       human services and housing ($578.4 million);

·       hospitals and health ($490.4 million);

·       schools, education and skills ($313.7 million);

·       ICT support to service delivery ($297.2 million);

·       law and order ($222.9 million); and

·       tourism, recreation and culture ($205 million).

In addition to the significant investment in Government agencies, the 2022‑23 Budget includes $736.9 million in equity contributions to government businesses and other entities including:

·       $229 million to Tasmanian Railway Pty Ltd for rail infrastructure projects;

·       $202 million to Tasmanian Irrigation Pty Ltd for Tranche 3 of the Irrigation Projects and Energy on Farms Initiatives;

·       $100 million to Tasmanian Water and Sewerage Corporation Pty Ltd; and

·       $52 million for Hydro Tasmania to support the redevelopment of the Tarraleah Power Plant.

2021 Election Commitments and Other Initiatives

The 2021‑22 Budget provided funding to implement all of the Government’s 2021 election commitments and a range of other existing initiatives. This included significant commitments in key priority areas, including health, skills and training, job creation, tourism and meeting future infrastructure requirements. This funding is continued in the 2022‑23 Budget to deliver these commitments.

The 2022‑23 Budget also includes a Provision for the Continuation of Time Limited Programs to support the extension of fixed‑term initiatives. Funding of $180 million is allocated in Finance‑General for the Provision across the Forward Estimates. As part of future Budget Development processes, the Government will assess the continuation of fixed‑term initiatives following advice on the outcomes, efficiency and evaluations of these initiatives.

 


 

2022‑23 Budget Estimates Summary

The following sections provide summary information on the key 2022‑23 Budget estimates. Further information on these estimates is provided throughout this Budget Paper. Information on an entity basis is provided within Government Services Budget Paper No 2.

Table 1.1:         Key Budget and Forward Estimate Aggregates, 2021‑22 to 2025‑26

 

202122 

202122 

202223 

202324 

202425 

202526 

 

 

Estimated 

 

Forward 

Forward 

Forward 

 

Budget 

Outcome 

Budget 

Estimate 

Estimate 

Estimate 

 

$m 

$m 

$m 

$m 

$m 

$m 

 

 

 

 

 

 

 

General Government Sector

 

 

 

 

 

 

Revenue

7 257.5 

7 875.2 

7 848.2 

8 225.5 

8 398.9 

8 481.7 

Expenses

7 947.2 

8 331.5 

8 322.8 

8 206.4 

8 366.7 

8 451.2 

Net Operating Surplus/(Deficit)

(689.8)

(456.3)

(474.6)

19.1 

32.2 

30.5 

 

 

 

 

 

 

 

Fiscal Surplus/(Deficit)

(1 041.2)

(791.4)

(1 135.9)

(691.6)

(553.2)

(283.6)

 

 

 

 

 

 

 

Net Debt at 30 June1

1 704.4 

1 522.1 

2 994.0 

3 958.9 

4 791.1 

5 179.0 

 

 

 

 

 

 

 

GFS Net Debt at 30 June2

1 419.0 

1 126.9 

2 633.8 

3 617.5 

4 488.3 

4 911.5 

 

 

 

 

 

 

 

Infrastructure Investment

828.5 

851.4 

1 324.2 

1 366.0 

1 232.2 

931.7 

 

 

 

 

 

 

 

Notes:

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 a deficit of $474.6 million in 2022‑23, returning to a surplus of $19.1 million in 2023‑24.

Chart 1.1 highlights the change in the Net Operating Balance that has occurred since 2016‑17 and the current projections for the 2022‑23 Budget and Forward Estimates.

Chart 1.1:         Net Operating Balance, 2016‑17 to 2025‑261

Title: Net Operating Balance, 2016-17 to 2025-26 - Description: The chart shows that the Net Operating Balance was in surplus from 2016-17 to 2018-19 before presenting deficits in 2019-20 and 2020-21. It will be in deficit in 2021-22 and 2022-23 before returning to a small surplus from 2023-24 to 2025-26.

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.

 

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.

Notwithstanding that Australian Government funding for infrastructure generally continues, the Underlying Net Operating Balance has been used for a number of years as a measure that removes the impact of one‑off Australian Government funding for specific capital projects. It should be noted that the Underlying Net Operating Balance is not a standard fiscal or accounting measure and is not reported by other state governments.


 

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

Table 1.2:         Underlying Net Operating Balance, 2021‑22 to 2025‑261

2021‑22 

2022‑23 

2023‑24 

2024‑25 

2025‑26

Estimated 

Forward 

Forward 

Forward

Outcome 

Budget 

Estimate 

Estimate 

Estimate

$m 

$m 

$m 

$m 

$m

Net Operating Balance

(456.3)

(474.6)

19.1 

32.2 

30.5

Less One‑off Australian Government funding

Battery of the Nation ‑ Tarraleah

.... 

(9.8)

(19.2)

(23.0)

.... 

Bell Bay Line

.... 

.... 

.... 

(6.4)

(8.0)

COVID‑19 Infrastructure Stimulus Funding

(11.1)

(1.8)

.... 

.... 

.... 

COVID‑19 National and World Heritage Projects

(3.1)

(1.5)

.... 

.... 

.... 

Cradle Mountain Experience

.... 

.... 

(5.7)

(5.3)

(19.0)

Melba Line Bulk Minerals Rail Hub

.... 

.... 

(3.2)

(6.4)

(4.8)

National Water Infrastructure Development Fund

(3.4)

(30.3)

(20.0)

(20.0)

(20.0)

New Bridgewater Bridge

(30.8)

(208.4)

(224.4)

(91.6)

(67.6)

Redevelopment of the Royal Hobart Hospital

(22.0)

.... 

.... 

.... 

.... 

Roads and Rail Funding (Nation Building)

(67.0)

(134.3)

(82.4)

(189.4)

(172.5)

Roads of Strategic Importance

(70.7)

(61.7)

(114.2)

(143.0)

(85.4)

Tasman Bridge Upgrade

.... 

(4.7)

(25.0)

(19.0)

(16.0)

Urban Congestion Fund

(1.3)

(13.3)

(12.0)

(17.2)

(17.0)

(209.3)

(465.7)

(506.1)

(521.3)

(410.3)

Underlying Net Operating Balance

(665.6)

(940.3)

(487.0)

(489.1)

(379.8)

 

 

 

 

 

 

Note:

1.    Underlying Net Operating Balance is not a standard fiscal measure applied by other state governments, and its utility is subject to interpretation.

 

 


 

Fiscal Balance

A Fiscal Balance deficit of $1 135.9 million is estimated in 2022‑23 with the outcome improving over the Forward Estimates to an estimated deficit of $283.6 million in 2025‑26.

Chart 1.2 illustrates the Fiscal Balance since 2016‑17.

Chart 1.2:         Fiscal Balance, 2016‑17 to 2025‑261,2

Title: Fiscal Balance, 2016 17 to 2025-26 - Description: The chart shows the Fiscal Balance has been in deficit since 2016-17. It is estimated to be a deficit of $1.1 billion in 2022-23 and is in a gradually decreasing deficit over the Forward Estimates periods from 2023-24 to 2025-26.

Notes:

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

2.    Due to the scale of the chart, the Fiscal Balance in 2017‑18 appears as nil. The actual figure for this period is ($4 000).


3.     

Net Debt

Net Debt represents Borrowings and Lease liabilities 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 $2 994 million as at 30 June 2023. General Government Net Debt is estimated to be $5 179 million as at 30 June 2026.

A major contributing factor to the growth in General Government Net Debt over the 2022‑23 Budget and Forward Estimates has been the Government’s response and recovery measures to support the community and the economy from the impacts of the COVID‑19 pandemic. The response includes significant expenditure measures, revenue forgone and the Government’s commitment to a strong pipeline of infrastructure investment to drive economic growth.

Chart 1.3 illustrates GFS Net Debt since 2017.

Chart 1.3:         GFS Net Debt, 2017 to 20261

Title: GFS Net Debt, 2017 to 2026 - Description: GFS Net Debt is similar to the Net Debt measure but excludes Lease liabilities and enables a consistent and comparable time series. The chart shows that GFS Net Debt was negative from 2017 to 2020. This has moved to a small positive GFS Net Debt outcome in 2021. GFS Net Debt is estimated to be $3.0 billion in 2023, increasing to $5.2 billion by 2026.

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 2022‑23, General Government Sector total revenue is estimated to be $7 848.2 million.

Chart 1.4 provides information on the major sources of General Government Sector Revenue in 2022‑23.

Chapter 5 of this Budget Paper provides a detailed explanation of the major revenue items included in the 2022‑23 Budget and over the Forward Estimates.

Chart 1.4:         Sources of General Government Revenue, 2022‑231

Title: Sources of General Government Revenue, 2022-23 - Description: The chart shows the major sources of General Government Sector Revenue in 2022-23, showing that the major revenue item is Grants ($5.1 billion or 65%), followed by Taxation ($1.6 billion or 21%) and Sales of Goods and Services ($451 million or 6%).

Note:

1.    Interest income is 0.4 per cent of General Government Sector total revenue.


 

Purposes of Expenditure

In 2022‑23, General Government Sector total expenditure is estimated to be $8 322.8 million.

Chart 1.5 provides information on the major purposes of General Government Sector Expenditure in 2022‑23. 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 2022‑23 Budget and over the Forward Estimates.

Chart 1.5:         General Government Expenses by Purpose, 2022‑23

Title: General Government Expenses by Purpose, 2022-23 - Description: The chart shows the major purposes of General Government Expenses, with the largest items being Health ($2.6 billion or 32%) followed by Education ($2 billion or 25%) and Public order and safety ($800 million or 10%).


 

Agency Infrastructure Investment

In 2022‑23, Infrastructure investment delivered through the General Government Sector is in excess of $1.3 billion.

This investment includes additional funding of $51.4 million for the delivery of new infrastructure. Key projects include: $30 million for Digital Health Transformation; $10 million for Outdoor Learning Areas; $3.3 million for Multidisciplinary Centres; and $2.5 million for Youth Justice Facilities.

The 2022‑23 Budget provides $123.5 million for Roads of Strategic Importance, $97.9 million for Infrastructure Maintenance and $90.6 million for the Extended Social Housing Build.  The Extended Social Housing build expands the building program for new social housing, and is on track to meet the target of 1 500 new homes by June 2023.

The 2022‑23 Budget also provides funding of $251 million for the New Bridgewater Bridge. This project is co‑funded by the Tasmanian and Australian Governments, with Australian Government funding of $208.4 million and $42.6 million in state funding being provided.

Chart 1.6 provides a breakdown of the 2022‑23 agency infrastructure expenditure by ABS classification. Chapter 6 of this Budget Paper provides information on the Government’s investment in agency infrastructure over the 2022‑23 Budget and Forward Estimates.

Chart 1.6:         2022‑23 Infrastructure Investment by ABS Classification

Title: 2022-23 Infrastructure Investment by ABS Classification - Description: The chart shows that the largest area of infrastructure investment in 2022-23 is Roads and Bridges ($712.5 million or 54%), followed by Human Services and Housing ($207 million or 15%) and Hospitals and Health ($120 million or 9%).

 
 

 

2022‑23 Budget Presentational Issues

2021‑22 Estimated Outcome

Given the timing of the 2022‑23 Budget, full year actuals are not available for 2021‑22. The most recent full year information is the 2021‑22 Estimated Outcome which is included in relevant financial tables throughout this Budget Paper. Appendix 2 of this Budget paper provides actual information to 31 March 2022.

The 2021‑22 Estimated Outcome information presented reflects financial estimates available at the time of the finalisation of the Budget Papers and includes agency assessments of funding requirements, current estimates of State taxation and information available from the Australian Government and government businesses. Material changes to revenue and expenditure estimates can occur between the preparation of these estimates and those reported in future reports on the 2021‑22 actual outcome.

Detailed information on the final Outcome for 2021‑22 will be published in:

·       the Preliminary Outcomes Report, required to be published by 15 August 2022 in the event that the preliminary outcomes result differs materially from the Estimated Outcome published in appendix 2 of this Budget Paper; and

·       the Treasurer’s Annual Financial Report, which will be tabled in Parliament by 31 October 2022.

Economic Estimates and Forecasts

This Budget Paper includes Treasury’s estimates for key Tasmanian economic indicators for the 2021‑22 financial year, forecasts for 2022‑23 and 2023‑24 and projections for 2024‑25 and 2025‑26.

The estimates and forecasts included in this chapter use a number of assumptions and judgements that are based on information available at the time of preparation and are inherently uncertain and subject to change, particularly in the current environment.


 

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 listed in Table 1.3.

Table 1.3:         Government Ratings

 

Moody’s

S&P

 

 

 

Tasmania

Aa2 (Stable)

AA+ (Stable)

New South Wales

Aaa (Stable)

AA+ (Stable)

Victoria

Aa1 (Negative)

AA (Stable)

Queensland

Aa1 (Stable)

AA+ (Stable)

South Australia

Aa1 (Stable)

AA+ (Negative)

Western Australia

Aa1 (Stable)

AA+ (Positive)

Northern Territory

Aa3 (Stable)

na

Australian Capital Territory

na

AAA (Negative)