Be bold, economists urge

Bank of America Merrill Lynch chief economist Saul Eslake
Bank of America Merrill Lynch chief economist Saul Eslake

TEN DAYS out from the state government's first budget, economists are urging the Liberal Party to be innovative and decisive with its economic blueprint.

Bank of America Merrill Lynch chief economist Saul Eslake said the government must clearly articulate how it will absorb a $400 million net operating deficit and future losses of Hydro Tasmania revenues.

Mr Eslake said it was time to address high costs of delivering core services and reform the state's tax system.

He said the proliferation of small providers meant Tasmania paid far more than others for poorer health and education outcomes.

He called on the government to rationalise some services.

"Tasmania's small scale and dispersed population come nowhere near explaining why the cost delivering these services far exceeds the national average," Mr Eslake said.

"I will continue to advocate for a Productivity Commission report into why it costs so much more and what changes should be made to our schools and hospitals."

Mr Eslake said while the government was unwise to rule out any new taxes, scope remained to reshape existing ones.

"Tasmania should look to broaden the base and lower the rates of payroll tax so that every business registered for GST is subject to pay," he said.

"Stamp duty is a horrible tax that imposes a large burden on a small number of people when they can least afford it," he said.

"Scrapping it and broadening the land tax would be a much fairer and simpler system, and make the state's revenue base vastly more predictable and stable."

Consulting economist Phil Bayley said the Liberals could make great gains by approaching the role of government differently.

"Rather than trying to provide all services in its own right perhaps the government should look at assuming the role of contract managers and overseeing outsourced service delivery," Mr Bayley said.

He said the shift would weed out ineffective and outdated government programs while fostering greater accountability in the progress of others.

Mr Bayley said public sector job cuts should be transparent.

"I'd like to see the reintroduction of publishing head count and full-time equivalent positions in government agencies," he said.

"Then the community can easily see if the size of the sector is coming down over time."

Economist Paul Blacklow said budget cuts should be aimed carefully.

"If they're going to make cuts they must do so in areas where the spending ends up in interstate or overseas coffers," Dr Blacklow said.

"Contracts, supplies and jobs shouldn't be slashed from areas where money spent ends up churning around the state's economy."

Dr Blacklow warned the governments against directly subsidising industries or firms.

"If they want to assist industries they should be focusing on providing education, information and co-ordination in areas of comparative advantage," he said.

"They shouldn't be picking winners or bankrolling individual companies when the borrowing could and should come from the private sector."

The economists agreed implementing a blanket ban on privatising public assets was a "foolish" manoeuvre, urging the government to side with sound policy.


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