Premier Peter Gutwein has reacted with caution on whether the GST should be broadened and increased to help states cope with the debt burden from the coronavirus, saying he will avoid "trying to tax our way to prosperity".
On Tuesday, he outlined estimates of 27,000 job losses and a 12 per cent unemployment rate in the June quarter, along with a predicted $2 billion net debt for Tasmania by mid-2021.
It would be highest net debt figure in Tasmanian history, surpassing the $1.66 billion figure from 1996-7. But the 2021 level would be a significantly lower amount as a percentage of the overall gross state product, at about 6 per cent.
This percentage was expected to be far lower than the debt in other states and territories, some of which were at the 6 per cent level before the coronavirus crisis hit.
But the downturn in GST revenue may hit Tasmania harder, as the state's share was forecast to increase following a recent review.
When asked if he supported increasing the GST, Mr Gutwein said finding ways to increase economic growth in the post-COVID world would be his priority.
"One of the things I don't think we should be doing is trying to tax our way to prosperity," he said.
"It's important that we work sensibly, through the stages that we've laid out, to open up our economy because the most important way we can generate revenues is to actually get our economy up and running again."
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His foreshadowing of the state's economic position came on the same day that the Federal Budget was initially planned to be handed down. Tasmania is one of the first jurisdictions to outline the economic cost of the coronavirus, and will provide further details on Friday when it provides an economic and fiscal update.
Economist Saul Eslake cautioned the government against heading down the path of either increased taxes or drastic cuts to spending, instead favouring a cautious approach that made the most of low interest rate levels that would be in place for at least the next three years.
"We can afford to live with it because interest rates are so slow, and so the cost of servicing this debt is relatively small," he said.
"If the government is prepared to live with a higher level of debt than their previous fiscal strategy, then there is the option of a modest stimulus, although more of that responsibility probably rests with the federal government."
Suggestions included increased grants for first homeowners to fill the gap in the property market left by interstate and overseas investors, a social housing construction blitz to provide employment in the construction industry and ease the housing waiting list, and bringing forward infrastructure projects in the government's 40-year pipeline.
The low interest rates could also be an opportunity to address gaps in Tasmania's healthcare system, which have been further exposed during the coronavirus crisis, Mr Eslake said.
"But Tasmania will still be in a relatively better economic position than most other states and territories," he said.
Opposition finance spokesperson David O'Byrne disputed whether the state's finances were in good shape pre-coronavirus.
He said Labor wanted to see two key measures addressed: maintaining the levels of public services in Tasmania, and minimising the impact on the unemployment rate.