Tasmania will record a $1.1 billion deficit when Premier and Treasurer Peter Gutwein hands down the budget on November 12 with net debt set to rise to $1.8 billion.
Mr Gutwein announced the deficit while discussing the Treasurer's Annual Report released yesterday.
The report showed the COVID-19 pandemic had cost the state government about $400 million in six months.
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The state was on forecast to record a $66 million surplus at the end of the 2019-20 financial year but ended up with a $338 million deficit, $470 million if you removed Commonwealth funding.
However due to a strong cash balance before the pandemic Tasmania's balance sheet will remain in the positive.
Mr Gutwein said the strong pre-pandemic position left Tasmania in a better spot than any other jurisdiction throughout Australia.
"We ended the financial year still being net debt free and holding net cash and investments," he said.
"We will be the only jurisdiction in the country that will be net debt free at the end of the last financial year. Again demonstrating the strength of our balance sheet.
"This budget will be challenging and as I've said it will be an important budget coming up but we've rebuilt before and we will rebuild again."
Labor have accused the government of trying to avoid scrutiny because the report was released on a Friday afternoon.
Shadow Treasurer David O'Byrne saying the government's default position was to sneak things out on a Friday afternoon.
He said the report showed the government had not delivered on its infrastructure promise.
"Time and time again in financial documents, in budgets they promise a massive construction and infrastructure boom yet they fail to deliver," he said.
"Documents and reports time in and out have exposed their lack of delivery on infrastructure."
Mr O'Byrne said the 2020-21 budget needed to deliver for Tasmanians.
"We know that we've lost thousands of jobs over the last six months in Tasmania," he said.
"We know that our economy is heading into recession and the pressure is on the government to respond with a budget that will deliver for jobs."
The Tasmanian Chamber of Commerce and Industry also believes there needs to be a strong focus on jobs in the upcoming budget.
Chief executive officer Michael Bailey said the budget needed to set out a clear plan for job creation.
"A 'business as usual' approach simply won't cut it," he said.
"The budget will need to answer a few clear questions - how are we going to get cranes back in the sky, bring forward infrastructure investment, keep our skilled workers in the state and most importantly, create more jobs."
Mr Gutwein agreed that the only way out of the pandemic was to grow the economy and create jobs.
He ruled out increasing taxes in order to address the deficit.
"You can't tax your way to prosperity. As Liberals we believe that the lower the taxes that we can have the better in terms of our economy," Mr Gutwein said.
"What we've got is a transaction based taxation system which when the economy is growing, when the economy is strong will provide the revenues we require."
Mr Gutwein said the budget would outline a plan to get people back into work and make the economy more robust.
"What this next budget will do is to layout a plan that will rebuild Tasmania and build off the back of the $3.1 billion construction blitz that we've already outlined."