After enjoying $1.5 billion in cumulative revenue above forecast over the past four years, the Treasurer now faces a serious problem.  Forty per cent f his budget’s revenue base is now uncertain, stemming from the Productivity Commission’s GST review.   The review has been delivered to the Federal Government, but not released publicly.  All we know from the draft report is that every scenario being considered would hurt Tasmania.  The only variable is by how much.

We know Federal Treasurer Scott Morrison is offering briefings to the states, but on Sunday Mr Gutwein said he had not been briefed and had not seen the report.  Given these briefings are on offer, it is pure wilful ignorance that takes Tasmania into an unprecedented level of budget uncertainty tomorrow.   Mr Gutwein claimed the Prime Minister’s statement that “Tasmania will not be one dollar worse off” was enough for him to press forward with revenue estimates based on the current GST distribution. This is the Treasurer at his dishonest best.  First, the Australian Treasury did not even attempt to model GST distribution after next year, such is the uncertainty from the Productivity Review, so how can Mr Gutwein?

Second, leading Australian economist Saul Eslake rightly pointed out in The Examiner that the Prime Minister is likely being disingenuous with this language, potentially leading to a $367 million loss in Tasmania’s GST revenue by 2021-22 as our distribution is frozen in dollar terms and drops from 3.7 to 3.2 per cent of the total GST pool.

So we have Tasmania’s Treasurer ignoring the Australian Treasury and a leading economist to deliberately go into a budget with a only a vague idea about how much revenue our state will receive.  Mr Gutwein knows his false claims of a budget surplus will be hit, so he is choosing not to deal with this issue.

There has never been such a disconnect between the rhetoric of a government and the reality of a fiscal situation than what we see today. The Treasurer makes the farcical claim that he has delivered a budget surplus four years ahead of schedule.  The fact is he has never produced a real surplus. In 2015-16, the Treasurer produced a small net operating surplus of $62 million on the back of $126 million in unexpected revenue. But that surplus included one-off federal infrastructure funding of $81 million.  This is money that technically comes into the budget as revenue, but does not need to be shown as operating expenditure.  It artificially enhances the budget outcome.  

This is why our own State Treasury and Mr Eslake have cautioned against the value of the net operating result, with Treasury describing the ‘distorting impact’ of one off infrastructure payments to this measure, instead pointing to the underlying result which removes the distortion.

On this undistorted measure, Mr Gutwein almost made it to a surplus in 2015-16, with a $19 million deficit.  However, in 2016-17, he went backwards, overspending his budget by $178 million and producing a $67 million deficit.  This year’s revised estimates showed a $136 million underlying deficit, but I expect this to blow out further with the Treasurer’s pork barrel spending already having started.

With more than $1.5 billion in additional revenue flowing into the state over the past four years, Mr Gutwein has no excuse for not having produced an underlying surplus.  One of his key challenges this year will be to forecast and deliver his first surplus.