Tasmanian Times

Saul Eslake

Commentary on Mid-Year Review of 2007-08 Tasmanian Budget

Saul Eslake ANZ Chief Economist

But provided the global and national economy ‘hold up’ as implicitly assumed (something over which the Tasmanian Government of course has no influence) then the state is in a much better position to meet those challenges than it appeared as recently as eight months ago.

Download analysis: 2007-08_Mid-Year_Report.pdf

Saul Eslake

Author Credits: [show_post_categories parent="no" parentcategory="writers" show = "category" hyperlink="yes"]
1 Comment

1 Comment

  1. Alex Wadsley

    February 17, 2008 at 5:51 pm

    Fair and objective analysis. A very nice position to be in, with a windfall coming in time for the next election cycle.

    One issue of note:

    “diverting the previously projected cash surpluses away from the Superannuation Provision Account (to which most of the Government’s surpluses had been directed since it became ‘net debt free’ in 2004-05)”

    The SPA and the concept of ‘net debt free’ are part of the smoke and mirrors of the state governments financial management. The Superannuation Provision Account is a component of the Consolidated Fund accounting which is a separate accounting method from the Fiscal Balance and net operating balance presented in the report.

    Attempting to inter-relate the two was the source of the ‘mistake’ in the Liberals budget promises during the previous state election. By contrast the Labor party promised only to maintain a surplus on the consolidated fund, reduced the payment to the SPA and then ran deficits on the Fiscal balance at the next budget to fund its election promises. Sounds complex? yes it is.

    The state government has not paid ‘surpluses’ from the fiscal balance into the SPA, if anything surpluses have been paid into the special capital funds such as ESIF and now the Hospital Capital Fund which are then a source of slush funds for election promises.

    The SPA is a provision account that accumulates a balance based on notional payments from the consolidated fund, these offset the substantial superannuation liability of public servants on defined benefit schemes (as opposed to defined contribution which is held by the RBF). Most of these funds are then on lent to other departments or offset the underlying debt of the government (of $1.17 billion at last report). The total superannauation liability is some $3.67 billion with $1.145 billion notionally accumulated in the SPA and $3.68 billion identified as unfunded in the Treasurer’s Report, but a figure of $2.4 billion is identified as a ‘net’ unfunded super in the Budget. The figure of $3.67 billion is actually a net figure of $5.1 billion less $1.4 billion in real assets managed by the RBF.

    The total on account balances is some $1.89 billion, but the goverment (as of FY 2006-07) only had $720 million in net assets, so the SPA is largely fictional. The government could have lent the $720 million to itself to build the hospital while still paying into the SPA.

    These numbers can be found in the Treasurer’s Financial Report.

    Confused? You ought to be. The state government is co-mingling superannuation funds with its other accounts while claiming to be net debt free, but not being honest as to whether the unfunded super is actually $3.67 billion (with $720 million of assets) or whether ‘net’ unfunded super is $2.4 billion, with net assets of $720 million and $1.2 billion lent to itself out of sight.

    Separating the SPA into a Future Fund would enable transparency in the governments financial arrangements, as well as potentially improved return on simply lending the money back to the government.

    It might also lead to budget bonuses being appropriately directed to addressing the governments long-term liabilities rather than being hidden away in special funds and then used to beat the Opposition in an election spendathon … which is what happened last time.

You must be logged in to post a comment Login

Receive Our Weekly Tas Roundup

Copyright © Tasmanian Times. Site by Pixel Key

To Top