Wednesday 23 May 2012

Hansard of the Legislative Council

BUDGET REPLY

Mr FINCH (Rosevears) - Madam President, I take this opportunity to congratulate the member for Derwent on his elevation - I will not go down the steep gravelly track - but I will point out that in my 10 years in the House, I think when I first came in there were five Labor members on that side and an independent Labor member, all of whom have departed.

Mr Hall - And yourself.

Members laughing.

Mr FINCH - That was one Labor extreme left, five Labor and an independent Labor but the point is how things change. Many people highlight the fact that we seem to be sedentary and we do not change much, that we are the same old, same old, when in fact there is that turnover, there is that renewal all the time. It is interesting to see now the member for Derwent is here and in this exalted position of Leader. I imagine it is a coveted position and you have this wonderful opportunity to develop experience. For how long, I am not quite sure, but I certainly wish you well. The good nature with which you approach the job is going to be helpful to the House in working through our legislation and trying to make the proper decisions here. Congratulations and I wish you well.

Madam President, just talking about my 10 years here, I do not think I have really felt excited at all about any of the budgets that have come before us since I have been here. I have not really felt good about a budget and I certainly do not feel good about this one.

Ms Rattray - What about the 'heart of gold' one?

Mr FINCH - That appealed to some, and for some it will live on in their memory but not for me. It does not stand out. We are in the same bind now as we have been for years. We are an island state with not many more than 500 000 people. We have a big reliance on what is really a subsidised GST payment. We have a brain drain which occurs and has always occurred and, of course, an ageing population.

This year particularly, Tasmania is the victim of the so-called two-speed economy as economist Professor Ian Harper argues. Professor Harper says that Tasmania's economic woes are the fault of Australia's two-speed economy and not the state government. Professor Harper was speaking at the Tasmanian Chamber of Commerce and Industry's budget lunch last Friday and he said that Tasmanians were part of the 80 per cent of Australians missing out on the mining boom. He has reported in the Examiner newspaper that Tasmania's trade-exposed industries such as tourism, retail, agriculture and manufacturing were further harmed by the high Australian dollar. This is the former chairman of the Australian Fair Pay Commission. He said that it was not all doom and gloom however, Madam President. I will quote from that Examiner report. He said:

What's happening is not a result of government incompetence this is a result of a transition of historic proportion in this country and we have to make this work for us!

There is a silver lining to this cloud but you have to look for it ...

You need to be a smart economy.

That is a glimmer of hope from Professor Ian Harper. There are some small hopeful initiatives I saw on my recent electoral tour. As the TFGA's chief executive, Jan Davis, wrote in Tasmanian Country last week, the new Midlands irrigation scheme will be a tremendous boost for agriculture. Speaking with the member for Apsley, I think you have at least two initiatives in your electorate and as many as four. That is another glimmer of hope, a little bit of a silver lining. Tasmania's wine industry has the potential to double with Tasmania seen as one of the best opportunities for investment in wine production in the world, not just Australia.

I also know that many Tasmanians are having a very hard time, particularly in those areas which depend on forestry. I have only to speak to the members for Apsley, Murchison, Huon, Western Tiers and Derwent - they are dramatic times. Many businesses in my electorate are facing continuing uncertainty about the proposed pulp mill. I remember talking through the valley at the time the debate was at its hottest. Those businesses in my electorate that were going to be beneficiaries of contracts if the pulp mill went ahead were very positive and eager and looking forward to the development of the pulp mill -

Mr Dean - They still are.

Mr FINCH - Yes. Well, after nine years I can tell you that the relationship is wearing a bit thin, and the enthusiasm has died off to a certain extent. Others have been holding back investment in clean and green projects but they are holding back because of the continuing uncertainty about the situation. As I have highlighted in the House over my nine years that the pulp mill has been on the agenda, it has been a state of uncertainty and what concerns me for my businesses is the lack of being able to draw up a proper business plan of how they can progress what they are doing.

I suppose it cannot really be a proper Tasmanian budget without the careful analysis of a former Smithton boy, Saul Eslake. I always find him worthy of quoting. He opens his analysis with this: 'Lara Giddings's second budget marks a retreat from austerity that was the defining characteristic of her first'. This was in the Tasmanian Times on 18 May. Yes, this budget is a retreat from austerity, just as is happening in Europe. Governments are realising that too much austerity too quickly causes recession and negative growth, and Tasmania's growth predictions also show fragility.

Our economy is only expected to grow at 1.25 per cent in this financial year - less than half the national rate. Unemployment is expected to rise to 7.5 per cent in the next year, well over the national rate of 4.9 per cent. I remember clearly many years ago before I came into parliament when our rate was up around 11 per cent for many years - 10 and 11 per cent. That is the reason for the retreat from austerity. Saul Eslake says the state government has found room to ease off for two reasons:

The first is a decision to abandon the past practice of taking as given the federal budget's forecasts for Tasmania's share of GST revenues.

Instead a model devised by the state Treasury is used, which takes into account future changes in states' relative fiscal capacities and in the mix of Commonwealth specific purpose payments to the states.

Ms Forrest - Through you, Madam President, this is the question I have. It is quite staggering that the commonwealth does not include that in their models.

Mr FINCH - Yes. That is right because this allows the government to assume $757 million more in revenue from the GST over the forward estimates than if it had simply used the federal budget formula.

Ms Forrest - My point is why doesn't the federal government use the same issues like the washout of the Wilkie money, for example, in their models?

Mr FINCH - That's right.

Ms Forrest - And do we know whether they do or they don't. You haven't read the budget paper to see, have you?

Mr FINCH - No.

Mr FINCH - As I say, I take my guidance from Saul Eslake. He goes on to say -

Ms Forrest - Keep going then -

Mr FINCH - They are his observations, so you might care to argue that with Saul Eslake.

Ms Forrest - I will take it up with Saul. He would probably agree with me.

Mr FINCH - No - as Saul Eslake explains in the Tasmanian Times on 18 May, the other factor is 'the vastly improved financial position of Hydro Tasmania'.

Ms Forrest - Projected.

Mr FINCH - Yes.

Hydro Tasmania will directly contribute almost $1 billion to government revenue over the five years to 2015-16 including $288 million more in 2013-14 and 2014-15 than anticipated in last year's budget. These two factors have allowed the government to go soft on some of last year's saving measures, and fund a range of other hand-outs. And they have allowed the government to give the state's economy a bit of a breather at a time when it is, arguably, in recession.

Saul Eslake has a talent for helping even me to understand what is happening in the economy. His analysis is backed up by the Australian Financial Review. They had a view of the state budget on 18 May with a headline 'Giddings keeps foot on the accelerator'. That tops the story which explains the retreat from austerity to which Saul Eslake had referred. The retreat is mainly to do with health services. I do not think anyone could argue against that, given the dire situation we have witnessed since the last budget. As the Australian Financial Review puts it:

The Budget pledges new cuts of $68 million over four years at the same time it abandons cuts of $120 million that it said it would take from health spending in the 2011-2012 Budget. The government decided the cuts were too stringent and reversed the decision.

Hear, hear, Madam President. In all fairness, it is hard to see what else the government could have done. But then, as Saul Eslake points out, Tasmania has a fundamental problem which must eventually be faced. I will quote him for the last part:

The fundamental problem that will continue to confront this, and any future, Tasmanian government: that the cost of running government services will absorb around 5 percentage points of gross state product, or $650 (7 per cent) more per head, in 2012-13 than it does, on average, on the mainland. And Tasmania's ability to keep spending above-average amounts on below-average services is under increasing threat from the four bigger states' push for a larger share of the revenue from the GST.

In other words, we cannot go on the way we are.

Ms Forrest - Through you, Madam President - Saul Eslake has been saying that for a number of years and we still have not had an explanation or even an investigation that I can see from the government, as to why it costs us so much more per capita to provide the same services.

Mr FINCH - A lot of it comes back to numbers.

Ms Forrest - That is not what Saul says.

Mr FINCH - Yes, my assessment would be that the reality of the situation is that we have 500 000 people and the services we provide - if you give us a million people, you do not need to double the number of services to service that million people.

Ms Forrest - Through you, Madam President - the point he makes is that the difference cannot be attributed purely on numbers of people alone. He said there must be more to it than that and we should investigate that, and look at it because he believes it is a significant difference. From commentary in the past, particularly, that he has made on this very point, in his view, it is not just about the size of our population.

Mr FINCH - I get a sense here of an investigation coming on by Committee A.

Ms Forrest - Maybe the governments needs to do this one.

Madam PRESIDENT - Let us not have it at the moment. Just continue your contribution.

Mr FINCH - Budget time is also the time for, I suppose, the wish list for infrastructure spending. I have used that opportunity in the past but I think it will be without much hope, this budget. A continuing problem for me in my electorate is the West Tamar Highway, which I have spoken about often enough. It is dangerous in some parts -

Ms Forrest - Especially when you are on it.

Mr FINCH - You have been listening to too many people. I was hoping that the member for Western Tiers would be here. There is a stretch of the West Tamar Highway called Muddy Creek which is downhill. The car travelling under the speed limit will bounce about to such an extent that you are always fearful that you will topple over the side of the road into his daughter's house. They have built alongside the highway.

Ms Forrest - Doesn't he have a bit of Armco railing to put up there to stop it?

Mr FINCH - It is that situation. It was so dramatic that, luckily, DIER has seen fit to come in and improve that road that they had worked on before. It was such a patch-up job that they have had to come in and spend another $350 000 to $400 000 to improve that road. That work is underway at the moment. I am thankful for that. You could say that it should have been done properly in the first place.

I can report that Bradys Lookout is a disgrace. The deputy mayor of West Tamar, Christina Holmdahl, who is a great campaigner for the highways, was able to secure good dollars over the years for spending on the West Tamar Highway when Bryan Green was the Minster for Infrastructure. She arranged a meeting with Lara Giddings as the infrastructure minister and I remember that she was so pleased that the minister would have to come to the meeting using Bradys Lookout. She would witness, even in the government car, what the community has to put up with - a dangerous, damaged road that you could not travel at the speed limit because you would be bouncing all over the road. At least that money has been allocated, that promise has been continued - it is north of $6 million.

Mr Harriss - Approved by a very well meaning committee, might I say.

Mr FINCH - Am I right, just over $6 million?

Mr Hall - Yes.

Mr FINCH - It is obvious that we cannot expect major spending from the state government with its $283 million deficit. As the Premier put it in her budget speech, returning the budget to a sustainable position is not something we can do overnight or in just one budget. It will be hard enough to achieve the hoped-for operating surplus of $53 million in 2012-14. So, what to do? We have Dr Ernesto Sirolli working away. That was positivity and enthusiasm for the most part.

Ms Rattray - Through you, Madam President - and you dare not challenge that enthusiasm or that direction.

Mr FINCH - No. I must say it was interesting to hear his thoughts on community development and it is interesting how sometimes the leaders emerge that can draw that community development along with them. Hopefully, this is a time when people will put their hands up and come out as the leaders of the community, or people with the inspiration take people with them and think about those new ideas that may garner opportunities for us in Tasmania.

Do we lower our expectations for services that are costing us more per head than on the mainland? I hope that GST revenues will not be cut further but realise that we cannot morally expect more from the other states. But we can hope for, and indeed ask the federal government for, more spending on infrastructure, and the type of infrastructure that can bring Tasmania economic returns. The federal budget is in relatively good shape and there are many avenues for applying for federal funding - not for welfare, but for development, and particularly the development of smart new initiatives that I have just spoken about. How Tasmania, for instance, can reap the benefit from the National Broadband Network for a start, and maybe niche markets in Asia for Tasmanian food - those opportunities that might now start to emerge or be noticed now that we are in the circumstance that we are in. The opportunities are there and I believe it is a matter of looking to find them.

Mr Hall - Through you, Madam President - before the honourable member sits down - with regard to the statement you made about the pulp mill and the fact it has been dragging on for nine or so years, you then commented that some of your businesses could not move on because of the uncertainty created by that. I am just trying to draw a nexus between that as to why.

Mr FINCH - Look at someone like Beams Bros which had the limestone that is critical to the firing up of the process that develops the process for the pulp mill. They have a successful business anyway but that will be the icing on the cake for them. They have been waiting and waiting for that to happen. How do they gear up their business, change their business model and set up their business plan to include that when they are virtually on hold?

Have a look at someone like Tyco Tamar at Exeter, which I have spoken about in the House before. When I came into the electorate it was a small engineering firm employing 26 and now it has 75 employees - and that is without the pulp mill. Imagine if the pulp mill was to go ahead. Some of the contracts that would flow to Tyco Tamar for their construction work would give a huge boost to their business. They are waiting and waiting, and encouraged to wait and wait, and in the meantime they are getting on with business, but still with uncertainty.

Mr Dean - Blenkhorn Plumbing is another one.

Mr FINCH - We have them up and down the valley. Thanks, Madam President.