2023-24 Tasmanian Budget reveals massive slump into debt, increased borrowing

The 2023-24 state budget, released on Thursday shows the state's net debt will balloon by 46 per cent and borrowing by 68 per cent over the next four years.

The budget revealed the estimated net debt outcome for this financial year was likely to be $712 million less than forecast.

However, debt is expected to rise to $3.29 billion next financial year, $4.59 billion in 2024-25 and $5.59 billion in 2026-27.

Debt servicing costs are expected to rise by 65 per cent over the forward estimates, from $144.9 million in 2023-24 to $285.5 million in 2026-27.

Treasurer Michael Ferguson on Thursday said the state's net debt position was sustainable.

He said Tasmania had the second lowest net debt per capita out of all Australian jurisdictions.

"It's been recognised by ratings agencies in the past that Tasmania can manage through this," Mr Ferguson said.

He said the budget's fiscal balance significantly improved over the forward estimates.

"The fiscal balance is by far and away the best measure of the government's ability to contain the growth of debt.

"It significantly improves over the forward estimates to about $180 million in the final year."

Borrowings will increase in 2024 by 32 per cent to $4.5 billion, $5.5 billion in 2025 and $6.6 billion in 2027.

The budget predicts a modest surplus of $12.7 million in 2025-26.

A $300 million cut to government agencies is signalled in the budget papers for 2024-25.

Treasury has stated the government will work with individual agencies over 2023-24 to look for efficiencies with minimal impact to services.

The government will spend $8.7 billion next financial year, of which 33 per cent will be on health ($2.9 billion), 25 per cent on education ($2.1 billion) and 1 per cent on housing and community amenities ($112 million).

It will take in $8.4 billion in revenue, of which 67 per cent will come in the form of federal government grants ($5.6 billion) and 20 per cent in taxation ($1.6 billion).

The redevelopment of Macquarie Point, including the construction of a stadium has been highlighted as an expenditure risk for the state's budget as the scope of the project had not been fully defined and due to cost escalations associated with major projects in Tasmania.

The budget papers contain $230 million of the state's $375 commitment to the redevelopment, $60 million for a Tasmanian AFL high performance centre, and $34.5 million for the Tasmanian AFL team.

Treasury said a 6.5 per cent cap on Commonwealth funding for health was a problem for the budget as demand for services might grow at a higher rate.

Treasury has estimated the Marinus Link, Battery of the Nation and North West Transmission Development projects have a cost of $6.4 billion.

It said substantial costs would be incurred by the government and government businesses in 2023-24 to progress these projects.

It said there was a risk that prior to the Final Investment Decision in December 2024, there would be a requirement to underwrite of pre-commit significant funding to early works.

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