Labor’s Financial Policy
Tasmanian Labor’s Fiscal Strategy reflects its commitment to:
- Deliver improved services to the Tasmania community;
- Maintain the State’s infrastructure investment;
- Improve public sector efficiency, and
- Constrain government expenditure to within long-term average growth in revenue and maintaining tax competitiveness.
The Strategy is designed to provide a stable financial environment that is fiscally sustainable and provides certainty for delivery and planning of Government services, while at the same time providing appropriate discipline on a government’s future spending and revenue policies.
Labor believes that all revenue and expenditure decisions should not create a structural problem in the State’s finances that would require major short-term or extreme actions at some stage in the future.
Because of the rapidly compounding effect of growing budget deficits and the limited nature of State revenue raising powers, Labor accepts that Tasmania’s financial position can escalate out of control without the discipline of a sound medium term fiscal strategy.
Labor believes key state services such as health and community services, education, law and order and public safety need a high level of budget certainty in order to properly plan and deliver efficient and effective services into the future.
Equally, the State’s public infrastructure needs a consistent level of investment in order to properly maintain and improve public assets, such as roads.
Setting and monitoring a multi-year fiscal strategy taking a medium to longer term view of the State’s financial position is essential if the State is to provide stable, efficient and effective services in the future as well as a conducive environment for private business investment and economic growth.
Multi-year fiscal targets should seek to ensure funding certainty for government services and reduce the likelihood of future structural problems in the Budget.
Labor’s Fiscal Strategy also takes into consideration current financial circumstances to set a sensible path from the current situation to a sustainable future. It is important to measure the progress against the most important elements of the budget but also to recognise that key measures of budget health (such as the net operating surplus) can often be masked by large fluctuations in the valuation of non-cash changes such as depreciation and superannuation.
Labor believes there is a need for the Fiscal Strategy to provide some flexibility for repairing funding allocations to key services such as health.
The three essential elements of Labor’s Fiscal Strategy are:
- A commitment to invest in the State’s public infrastructure at not less than 8 per cent of State revenue on a five-year rolling average annual basis.
- A commitment to ensure that the General Government cash position is at least maintained in balance, on a five year rolling average basis. This means Labor will not incur significant cash deficits on an ongoing or structural basis.
- A commitment to an adequate and certain level of funding for key services, within the overall constraint of long-term revenue growth.
Recurrent spending on services
Labor will ensure adequate and certain levels of funding for key government services will be increased at a rate greater than inflation but not greater than the State’s average annual growth in revenue, on a five year rolling average basis.
Labor will not increase the overall burden of taxation above the national average as measured by the Commonwealth Grants Commission’s tax raising effort (ie tax severity) ratio.
Labor will take a responsible approach to managing net debt, by ensuring a sensible balance between the need to invest in and maintain the State’s public infrastructure and the need to maintain an adequate financial buffer.
The appropriate levels of future net financial assets (ie negative net debt) will be reviewed on an annual basis to ensure that neither the State’s infrastructure investment needs nor the State’s financial stability objectives are unreasonably compromised.
Labor will continue to manage future public sector superannuation costs by ensuring adequate provisions for superannuation in its annual and future budget planning. Current projections show that budget allocations for future outlays on public servant pensions are manageable and sustainable.