Editorial Re: Tassie from The Australlian

Good times still on the roll in Tasmania

TASMANIANS deserve to bask in the glow of the turnaround in their state’s economic fortunes. They did the hard yards. Years of fiscal belt-tightening under former premier Jim Bacon and former treasurer David Crean helped drag Tasmania back from the brink of economic disaster. Underlying state debt, which peaked at $1.6 billion in 1998, is down to about $315 million, and should be wiped out by 2007. Five years ago Tasmania was shrinking, both in the size of its economy and the number of people – now it is growing again on both measures. But talk of a Tasmanian “economic miracle” needs a reality check. First, it is really a spin-off from the Australian economic miracle; and second, the Australian economic miracle is not a miracle, but the result of two decades of economic reform that have delivered a long period of sustained growth. One of the recent drivers of that growth, the property boom, came late to Tasmania, but the flow-on effect has been huge: the median house price there has risen to $187,000 from $123,000 just 12 months ago.

In an unanticipated setback, the government lost both Mr Bacon and Mr Crean to illness during three dreadful weeks in February. Paul Lennon now combines their roles, and in yesterday’s budget he went a long way towards sloughing off the “hard man” image he gained in his long struggle to rescue the jobs of Tasmanian workers from the designs of the Greens. Unfortunately, Mr Lennon’s radical makeover may not be in the interests of Tasmania’s economic renaissance. Unexpectedly strong growth and the property boom gave him nearly $154 million more to play with than anticipated, but only $8 million of this will find its way back into the pockets of Tasmanians, in the form of the now obligatory stamp duty relief for first-home buyers. Mr Lennon has decided to better his 4.7 per cent increase in revenues with a 5.8 per cent increase in spending focused on training schemes, hospitals, tourism and a $100 million “social package”. But look a little more closely into Mr Lennon’s budget papers, and the wisdom of a second successive exercise in tax-and-spend is suspect.

Growth is forecast to fall below the national rate, and unemployment to stay marginally higher. And Tasmania – which retains the lowest credit rating of any of the states – still draws two-thirds of its revenue from commonwealth grants, compared with 43 per cent for NSW. Putting Tasmania back in the black will be a step forward, but the welfarist approach of the 2003 and 2004 state budgets will be two steps back.