1The 2017-18 Budget

Key Issues
  • The 2017-18 Budget focuses on the implementation of the Government's key priorities of jobs and economic growth; health and education; and supporting Tasmanians in need. It provides significant additional funding to implement new initiatives to support these priorities while continuing to successfully implement the Government's established Fiscal Strategy.This Budget lays the foundations for building Tasmania’s future; investing $2 billion into important infrastructure and including record spending on health and education as well as measures to grow the economy and create jobs, whilst keeping downward pressure on cost of living increases.
  • It is only through the significant improvement in the Budget position that has been achieved by the Government,together with the positive change in the Tasmanian economy that hasalso occurred, that a strong foundation has been able to be provided to enable a sustainable improvement in the vital services provided to the Tasmanian community.
  • Over the 2017-18 Budget and Forward Estimates period the Government again meets all of its established Fiscal Strategy actions. Net Operating Balance surpluses are expected in each year for the first time in almost a decade; Fiscal Balance surpluses are achieved in the third and fourth years of the Forward Estimates; and General Government Net Debt improves compared to last year's Budget expectations.
  • The fundamentals of the Tasmanian economy are positive. Business confidence in the economy is strong; labour market conditions and forward indicators are positive with the State's unemployment rate currently estimated to be below the national average in trend terms; the tourism industry continues to be a strong contributor to the economy and is directly stimulating spending and investment; and the Tasmanian economy is expected to expand by 2.5 per cent in 2017-18,which is stronger than the longterm average rate of growth.
  • Investment in infrastructure by the Government continues to be at historically high levels.In the 201718 Budget, the Government has committed $245million in new infrastructure funding over the Budget and Forward Estimates period with total infrastructure expenditure now totallingover $2.0billion. This includes significant investment in schools and education ($117million);hospitals, health facilities and technology (over $500million);human services and housing ($120million);roads and rail (over $800million);tourism, recreation and culture ($39million) and information and communication technology ($50million).
  • To maintain the improvement in the Budget position that has been achieved, it is essential thatstrong regard continues to be paid to the prudent management of Budget risks, including highly variable revenue levels and to the constraining of future expenditure growth within the levels represented by the Budget and Forward Estimates.

The 2017-18 Budget

The 2017-18 Budget represents another important step in the improvement in Tasmania's Budget position. Not only has the Net Operating Balance returned to a surplus position well before the Government's original 2019-20 estimate but, for the first time in almost a decade, Net Operating Balance surpluses are being forecast for each year of the Budget and Forward Estimates period. Importantly, in addition to this improvement in the Net Operating Balance, it is now also expected that a Fiscal Balance surplus will be achieved in 2019-20 and 2020-21 and there will be a substantialimprovement in the General Government Net Debt position at the end of the Forward Estimates period compared to the end of the Forward Estimates period at the time of last year's Budget.

This improvement in Tasmania's Budget position has been achieved at the same time as the Government has taken action over consecutive Budgets since the 2014 Election to significantly improve the services being provided to the Tasmanian community. With the establishment of a strong Budget position and a positive economic environment,the Government can deliver new and improved services in a sustainable manner.

In recent years Tasmania's economic fundamentals have continued to improve. Business confidence in the economy is strong and labour market conditions and forward indicators are positive with the State's unemployment rate currently estimated to be below the national average in trend terms. The tourism industry continues to be a strong contributor to the economy and is directly stimulating spending and investment. Overall, the Tasmanian economy is expected to expand by 2.5 per cent in 2017-18,which is stronger than the longterm average rate of growth.

In the 2017-18 Budget the Government has a strong focus on the implementation of its major priorities of jobs and economic growth; health and education; and supporting Tasmanians in need. This is achieved through:

  • increasing the level and quality of services available to the Tasmanian community;
  • the implementation of important Government reforms across portfolio areas;
  • responding to the needs of the Tasmanian community;
  • developing infrastructure to support servicedelivery and vital economic growth;
  • supporting business to support Tasmanian jobs;
  • assisting key industry sectors to reach their full potential; and
  • providing leadership and confidence in Tasmania as a place to live, work and invest.

2017-18Budget Priorities

The 2017-18 State Budget is strongly focused on the delivery of the Government's priorities outlined in its Plan for a Brighter Future: Deliverables 2017document. These priorities are: health and education; jobs and economic growth; and supporting Tasmanians in need. Together with the effective implementation of the Government's Fiscal Strategy, the 2017-18 Budget delivers a comprehensive package of initiatives that will deliver better services to the Tasmanian community and continue to drive jobs and economic growth.

Key priorities being implemented as part of the 2017-18 Budget are detailed below. Further information on key deliverables for all Government agencies is provided in individual agency chapters of Government Services Budget Paper No 2.

Health and Education

The Government is committed to continuing its substantial investment in health and education. The 201718 Budget forecasts record health spending over four years of over $7 billion, an increase of more than $650million compared with estimates in the 2016-17 Budget. Education spending is also at record levels over four years and will increase by more than $250million to total $6.4 billion over the Budget and Forward Estimates period, compared with estimates in the 2016-17 Budget. The 201718 Budget includes significant additional funding that will improve the delivery of services to the Tasmanian community and support the development of service infrastructure that builds on the far-reaching investment that has already been made by the Government in these critical areas. This investment supports major Government reforms such as One State, One Health System, Better Outcomes and changes to the Education Act. Additional funding in the 2017-18 Budget includesthe following new major initiatives:

Health

  • $100 million for key hospital initiatives;
  • $67.3 million to support Patients First - Stage 2 - New Hospital Beds and Staff;
  • $16 million for mental health service delivery priorities;
  • $14.4 million to supplementfrontline staffing costs;
  • $9 million to secure a second medical and police search and rescue helicopter;
  • $9.5 million to support the cost of Ambulance Officers and $3 million for a new Campbell Town Ambulance Station; and
  • $62.7million for hospital and rural health facility infrastructure including $35million for Mersey Community Hospital capital upgrades.

Education

  • $28.8 million for schools infrastructure and $6 million to support Non-Government schools infrastructure development;
  • $18.6 million to support the implementation of Education Act reforms; and
  • $17.8 million to support student learning through investing in district school nurses, school support workers, student engagement and flexible learning and child and student wellbeing.
Jobs and Economic Growth

Investing to support jobs and economic growth is a high priority for the Government. Notwithstanding the Government's achievements to date and the increasing strength of the Tasmanian economy, the Government is committed todriving further economic growth and job creation. Major initiatives in the 2017-18 Budget include:

  • $21.8 million to support the Cradle Mountain Visitor Experience;
  • $20 million to support business by reducing electricity costs;
  • $17.1 million for a payroll tax rebate to supportthe employment of new apprentices, trainees and youth;
  • $12.5 million to support the Government's Agri-Food Plan;
  • $11million in additional support for Tourism marketing;
  • $10.4 million to support a continuation of First Home Builder Assistance;
  • $9.5 million to support Copper Mines of Tasmania and the West Coast community;
  • $8 million for tourism infrastructure in parks;
  • $7.3 million for an extension of the successful Accelerated Local Government Capital Program;
  • $6.9 million to support the City Deal Launceston;
  • $4.1 million for the Employment Partnership: Jobs Action Plan;
  • $3 million to implement the Global Education Growth Strategy;
  • $3.2 million to support the Drysdale Centre of Excellence;
  • $2 million to support the implementation of the Government's Strategic Growth Plan for Tasmania's Forest Industries; and
  • $2 million in grants to small business to support the employment of new apprentices and trainees.
Supporting Tasmanians in Need

Not only is the Government supporting Tasmanians in need by driving jobs and economic growth and providing improved education and health services, but also through implementing a wide range of other initiatives and reforms. These include the provision of significant additional funding for vital government services;the implementation of reforms such as the Government's Corrective Services package;the allocation of targeted funding that will make a real difference to disadvantaged Tasmanians, including disadvantaged youth, and the provision of support to non-government organisations that play an important role in directly supporting our communities. Major new initiatives funded in the 2017-18 Budget include:

  • $27.5 million to meet the costs associated with additional Out of Home Care services and the Commissioner for Children and Young People;
  • $12.5 million to implement the Government's Corrective Services package including sentencing reforms and a prisoner through-care and reintegration initiative;
  • $6 million to implement a health and wellbeing program for ambulance, police, fire and emergency services officers;
  • $5.6 million for programs supporting youth at risk;
  • $3.8 million for a Medical Cannabis Controlled Access Scheme to assist with paediatric epilepsy;
  • $2.5 million to support legal assistance services;
  • $2.5 million for the final allocation required to meet the full cost of the Equal Remuneration Order transition;
  • $2 million for the Housing Tasmania Property Modification Program;
  • $1 million to support a state service-wide approach to the employment of aboriginal and young people; and
  • $420000 to support an Eligible Persons Register.
Other Major 2017-18 Budget Initiatives

In addition to the 2017-18 Budget initiatives detailed above, the 2017-18 Budget also includes a number of other important new initiatives that reflect key government policy priorities. These initiatives include:

  • $60 million to meet payments to Local Government under the Government's water and sewerage reforms;
  • $50 million to meet costs associated with major digital transformation projects that will improve service delivery;
  • $29.9 million for Tranche 2 rail revitalisation infrastructure funding;
  • $27 million for the Fuel Reduction Program and $2 million for Bushfire Planning, Mitigation and Response in our parks;
  • $20 million for the additional costs of Tranche 2 irrigation projects;
  • $19.1 million for Freight Access Bridge Upgrades to help boost transport productivity;
  • $16 million to meet cost and demand pressures in the Tasmanian Prison Service;
  • $13.1 million to undertake the Department of Police, Fire and Emergency Management's much needed Project Unify to improve its information systems;
  • $12.5 million for community infrastructure including $3.5 million for the Circular Head Health and Wellbeing Centre, $3.5 million for the Dial Regional Sports Centre Upgrade, $2 million for the Oatlands Swimming Pool and $3.5 million for the Devonport Golf Club;
  • $7.8 million to support the new Emergency Services Computer Aided Dispatch System; and
  • $7 million for the Mowbray Connector.
Implementing our Fiscal Strategy

The Government is committed to the ongoing successful implementation of its Fiscal Strategy. It is only through the achievement of an improvement in the Government's Budget position that the Government has been able to responsibly provide the funding required to improve services to the Tasmanian community. As noted in chapter 3 of this Budget Paper, the Government continues to meet all of the actions established in its Fiscal Strategy. Furthermore, it is now expected that the Net Operating Balance will be in surplus over the Budget and Forward Estimates period. It is, however, important that attention continues to be paid to the potential for significant variations to occur in revenue levels, particularly relating to GST receipts. Continued discipline in respect of expenditure levels will also be important to ensure that the Budget is managed on a long-term sustainable basis.

2017-18 Budget Estimates Summary

The following sections provide a summary of the key Budget estimates included in the 2017-18 Budget. Further detailed information on these estimates is provided in thisBudget Paper and, on an agency by agency basis, within Government Services Budget Paper No 2.

Table 1.1:Key Budget and Forward Estimate Aggregates

2016-17) / 2017-18) / 2018-19) / 2019-20) / 2020-21)
Forward) / Forward) / Forward)
Budget) / Budget) / Estimate) / Estimate) / Estimate)
$m) / $m) / $m) / $m) / $m)
GENERAL GOVERNMENT
Revenue / 5 573.7) / 5 874.0 / 5 863.0 / 5 984.8 / 6 048.7
Expenses / 5 496.3) / 5 819.8 / 5 812.3 / 5 933.6 / 6 003.4
Net Operating Surplus/(Deficit) / 77.3) / 54.3 / 50.7 / 51.3 / 45.3
Fiscal Surplus/(Deficit) / (160.6) / (253.9) / (229.2) / 2.8 / 71.1
Net Debt at 30 June / (301.3) / (451.8) / (200.0) / (212.9) / (339.6)
Infrastructure Investment / 534.9) / 657.0 / 604.8 / 420.6 / 359.5

Net Operating Balance

The Net Operating Balance is estimated to be a surplus of $54.3 million in 2017-18. Net Operating Balance surpluses are also expected to be achieved across the Forward Estimates period.

Chart1.1highlights the change in the Net Operating Balance that has occurred since 2006-07 and the current projections for the 2017-18Budget and Forward Estimates period.

Chart 1.1:Net Operating Balance, 2006-07 to 2020-21

It should be noted that the receipt of Australian Government funding for capital programs, particularly oneoff major projects, has the effect of improving the Net Operating Balance outcome. Given the nature of the Net Operating Balance measure,it reflects the receipt of revenue from the Australian Government but does not factor in the expenditure of these funds on infrastructure projects. Given this situation, the Underlying Net Operating Balance has been used for a number of years as a measure that removes the distorting impact of one-off Australian Government funding for specific capital projects. The Underlying Net Operating Balance is therefore generally derived by excluding non-operational capital related funding received from the Australian Government from the Net Operating Balance.

In 2016-17, the Estimated Outcome will also be significantly affected by the financial impact of the expected transfer of the Mersey Community Hospital from the Australian Government to the State. This includes the significant one-off Australian Government payment of $730.4 million and additional Other Revenue of $10million that reflects the accounting treatment of the transfer of ownership of the Mersey Community Hospital asset value. Given the material and one-off nature of these transactions, their impact has also been reflected in the presentation of the Underlying Net Operating Balance.

Table 1.2 below provides information on the Underlying Net Operating Balance for the 2016-17 Estimated Outcome and 2017-18 Budget and Forward Estimates period.

Table 1.2:Underlying Net Operating Balance, 2016-17 to 2020-21

2016-17 / 2017-18 / 2018-19 / 2019-20 / 2020-21
Estimated Outcome / Budget / Forward Estimate / Forward Estimate / Forward Estimate
$m / $m / $m / $m / $m
Net Operating Balance / 812.0 / 54.3 / 50.7 / 51.3 / 45.3
Less
One-off Australian Government Capital Funding
Roads and Rail Funding1 / 119.8 / 116.1 / 49.2 / 60.0 / 60.0
Royal Hobart Hospital Redevelopment / 25.0 / 15.0 / 10.0 / .... / ....
Sustainable Rural Water Use and Infrastructure Program2 / 22.0 / 19.0 / 14.0 / .... / ....
Mersey Community Hospital Transfer
Australian Government Payment / 730.4 / .... / .... / .... / ....
Asset Value Transfer / 10.0 / .... / .... / .... / ....
907.2 / 150.1 / 73.1 / 60.0 / 60.0
Underlying Net Operating Balance / (95.2) / (95.8) / (22.4) / (8.7) / (14.7)

Notes:

  1. The existing fiveyear roads funding agreement with the Australian Government expires at the end of 201819. Based on Australian Government roads funding over recent years, an estimated Future Australian Government Roads Funding allocation of $60million has been included in 201920 and 202021 to provide a more accurate estimate of the likely level of infrastructure expenditure that will occur over the Forward Estimates period.
  2. This has previously been referred to as Water for the Future Funding in previous Budget Papers.

Fiscal Balance

A Fiscal Balance deficit of $253.9million is estimated for 2017-18 with the outcome improving over the Forward Estimates period to a surplus of $71.1 million in 2020-21. The improvement in the Fiscal Balance reflects both the expected Net Operating Balance outcome and the impact of capital expenditure over the Budget and Forward Estimates period.

Chart1.2 illustrates the Fiscal Balance since 2006-07.

Chart 1.2:Fiscal Balance, 2006-07 to 2020-21

Net Debt

Net Debt represents Borrowings less the sum of Cash and Deposits and Investments. The reference to 'negative' Net Debt means that Cash and Deposits and Investments exceeds Borrowings. This can also be referred to as Net Cash and Investments.

It is estimated that General Government Net Cash and Investments will be$451.8 million as at 30 June 2018. This Net Cash and Investments position represents an improvement of $277.7million on the estimated 30June2018figure of $174.1million detailed in the 2016-17 Budget Papers.

General Government Net Cash and Investments is estimated to remain positive over the Forward Estimates period and be $339.6 million as at 30 June 2021. This reflects the impact of estimated Net Operating Balance outcomes and infrastructure investment levels.

Chart1.3 illustrates Net Debt since 2007.

Chart 1.3:Net Debt, 2007 to 2021

Sources of Revenue

In 2017-18, General Government Sector total revenue is estimated to be $5874million. This represents an increase of $300.3million on the 2016-17 Budget Estimateof $5 573.7million.

Chart1.4 provides information on the major sources of General Government Sector Revenue in 2017-18. Chapter 5of this Budget Paper provides a detailed explanation of the major revenue items included in the 2017-18 Budget and over the Forward Estimates period.