The Federal Budget 2023

Tasmanian government revenues will take a big hit in 2023/23 as GST payments come in $277m lower than the best estimates. These GST changes contained in the budget will pose a problem for the state budget, to be handed down in two weeks’ time.

State government revenue projections aside, it was a budget largely without surprises for Tasmanians. Most of the major commitments had been rolled out over recent weeks.

Treasurer Jim Chalmers pitched his second budget under the catchline “Stronger Foundations For A Better Future”, highlighting cost-of-living relief, measures to strengthen Medicare and to create a stronger and more secure economy.

He said Australia is not immune to an expected global downturn.

“The global economy is slowing due to persistent inflation, higher interest rates and financial sector strains,” Mr Chalmers said.

“Outside of the pandemic and the Global Financial Crisis, the next two years are expected to be the weakest for global growth in over two decades.

The GST projections will cause headaches for Treasurer Michael Ferguson, who is due to hand down his state budget in two weeks and will reduce the chances of a surplus and see an increase in state debt.

Tasmania received $3426m in 2022/23 and Tuesday’s federal budget revealed its share of the consumption tax is estimated to be $3489m in 2023-24.

It is an increase of just $63m – or 1.8 per cent at a time inflation is running at six per cent.

State Treasury forecasts had put GST revenue potentially as high as $3766m – $277m above what is now expected.

Projections for the following two years show improved GST receipts exceeding state predictions by $200m in 2024/25 and $301m in 2025/26, but estimates beyond the budget year have proven unreliable in the past.

Arrangements to ensure no state is worse off under a Coalition-era GST restructure end in 2027/28 and Tuesday’s budget made no projection of the impact on state revenue if they are not retained. The top up is worth around $112m in this financial year.

Mr Ferguson’s woes aside, Tasmanians will benefit from household energy bill relief, cheaper medicines, a boost to bulk billing and increases to parenting payments.

Federal payments make up 65 per cent of state spending and projections of overall revenue are kinder to the state’s coffers.

Figures reflecting the total of both GST and specific purpose payments show Tasmania to be $1.2bn – or almost six per cent – better off between 2022/23 and 2024/25 than predicted in the Coalition’s last budget 14 months ago – a reflection of Labor’s big spending election promises.

But $197m of spending committed to Tasmania over the next three financial years seems to have disappeared or delayed since Labor handed down its first budget last October – more if the new commitments at Macquarie Point and UTAS stadium are taken into account.

Liberal Senator Jonno Duniam was not impressed by Labor’s second budget.

“Labor have spent heavily in this Budget, yet Tasmanians have missed out. Far from being responsible economic managers, they’ve ignored our State and its needs,” he said.

The Budget confirms the Federal Government has splurged $240m on a waterfront AFL stadium in Hobart, whilst it is ripping hundreds of millions of dollars away from key programs and services – including at least $248m from Tasmanian road projects.”

Funding to flow for Tasmania’s AFL bid

Federal government funding to support Tasmania’s AFL bid will start flowing almost immediately, Tuesday’s budget papers reveal.

Earmarked under the heading “Hobart and Launceston – place based co-investments” reveals $20m has been allocated in 2023/24.

It is followed by $45m in 2024/25, $80m in 2025/26 and $100m in 2026/27 for a total of $245m in federal funding across the four years of the forward estimates.

“The Government is providing $305m from 2023–24 to 2027–28 to deliver urban renewal projects in Hobart and Launceston, with $240m to help unlock the potential of the Macquarie Point precinct in Hobart and $65m for a stadium redevelopment in Launceston,” the budget papers reveal.

The state government has committed $375m towards the projected $715m cost of a 23,000-seat stadium at Macquarie Point and $65m for the Launceston stadium redevelopment as part of the successful AFL team bid.

But anyone hoping to gain an insight into exactly what the federal government is paying for at Macquarie Point will be disappointed by the lack of detail in the budget. Only broad details of the plan had been publicly announced, including housing and improvements to the wharf precinct and public open space.

The project is mentioned seven times in the budget and supporting documents.

The expenditure of $240m in federal money is variously explained as “unlocking the potential of the Macquarie Point precinct in Hobart”; “funding for the Macquarie Point Precinct”; “to deliver urban renewal projects in Hobart” and to “support development at Macquarie Point in Hobart”.

Only the final reference, in a media release from Minister for Infrastructure, Transport, Regional Development and Local Government Catherine King, mentions that some of the money will be spent on the stadium.

“This investment is a broader urban renewal precinct, including construction of affordable housing and Macquarie Point Stadium,” the media release notes.

Elsewhere in the budget, around $100m in specific purpose payments to the state appear to have been shifted from the current financial year to later years’ budgets. In some cases projects funded over four years have been spread over five.

Most likely a cost-saving measure, it could also signal a potential problem with delivering projects, possibly through shortages in skilled labour or supply chain issues.

For example, National Partnership Payments to support infrastructure spending nationwide were expected to come in at $12.2bn in 2022/23 in last October’s budget but are now projected to be $10.5bn, representing an underspend of around 14 per cent.

Federal budgeted spending on roads in Tasmania has been reduced from $1095m to $1045m between the two budgets to be $50m less between 2022/23 and 2025/26, a fall of around five per cent before inflation.

In addition, the state’s allocation under the Roads of Strategic Importance funding has been cut from $571m to $437m over the four years from 2022/23, a reduction of $134m, or 23 per cent.

Labor made an election promise of $540m to go towards upgrades of Bass Highway, Tasman Highway and the East and West Tamar Highways. A total of $513m is allocated over five years.

But the budget also contained a big boost in federal funding for Tasmania’s World Heritage sites: $25m over five years, up from $5.1m over four.

What’s in it for Tasmania?

When the Federal Labor Party made its bid to Tasmanian voters last year, it made just shy of 70 funding promises for the state, many of which were sweeteners in its October budget.

For the coming financial year, there was a lack of surprises for Tasmania, in fact, mentions of the state in the Federal budget papers were scarce.

The most notable allocations were funding for University of Tasmania Stadium and the revitalisation of Macquarie Point, promises which made headlines just weeks ago.

One new drop of funding in the budget is $2bn nationwide for investment in the Hydrogen Headstart program, which is designed to boost the country’s hydrogen power capabilities and exports.

Budget papers name mainland hydrogen hubs Wollongong, Gladstone and Whyalla as funding recipients, but it’s not clear if Tasmania will share in the funding.

Federal climate change and energy Minister Chris Bowen said it would build on investment in Hydrogen producing regions, including at Bell Bay.

“This critical new investment is all about making Australia a global leader in green hydrogen, as competition for clean energy investment accelerates around the world,” Mr Bowen said.

“Australia already has the largest pipeline of renewable hydrogen projects in the world. Our regions have the resources, technical skills and key trade partnerships to drive growth in hydrogen and other clean industries, as well as the jobs that come with it.”

Existing spending on other projects was highlighted, with funds continuing to flow for the Hydro Tasmania’s Tarraleah Power Station redevelopment, with $19.2m allocated for the 2023-24 period and $23m the next financial year.

“The Australian Government is providing funding to support upgrade works on the Tarraleah hydro power scheme redevelopment in Tasmania’s Central Highlands – a cornerstone project of the Battery of the Nation initiative,” the budget papers said.

Funding will continue to flow too for MarinusLink, as announced in the previous budget, with $25m to come over the next financial year and $15m the following.

By the end of the 2024-25 financial year, the federal government will have spent $75m on just the design and approvals phase of the project.

Funding for the Hobart Airport runway, which was announced last year, will land in Tasmania’s pockets in the coming year, with $60m over two years to upgrade the runway and airfield facilities.

“This investment will allow to increase wide body aircraft operations in our state and open the potential for increased Antarctic support, direct international passenger and freight opportunities,” Hobart Airport CEO Norris Carter said.

“The majority of the works are planned to take place at night-time, so we can continue to operate our airport without interruption to flights.”

Construction is expected to start in early 2024.

The data for this article has been drawn from several different sources, which is relied upon by the author excluding omissions and/or errors. The views expressed or implied in this article are those of the author and should not be relied upon to make financial and/or business decisions. We recommend each business seek independant professional advice taking into account their own specific business needs.