Questions & AnswersCommittee Work









Thursday 15 March 2012

Hansard of the Legislative Council

Premier’s Address (Including reference to Pulp Mill)

Mr FINCH (Rosevears) - Madam President, how do you read Tasmania's current position? We are not in a very good state. That is the state of the State, isn't it, we are in a bit of a mess. So we are throwing jobs out the window faster than we are creating them. Suddenly we have a budget problem that seemingly could not have been foreseen. Well, why not? I am not an economist, Madam President, and thank goodness for that. But surely a drop in GST and other revenues could have been foreseen some years ago.

Mr Hall - It was.

Mr FINCH - They were, in 2008 other signals were there.

Ms Forrest - Well, the GFC was already hitting then; the GFC was already well known then.

Mr FINCH - Yes, so why do Tasmanians -

Mr Parkinson - I didn't hear you talking about them in 2008.

Ms Forrest - I did, the Treasurer did.

Mr FINCH - When you are ready.

Madam PRESIDENT - Thank you, the member for Rosevears has the Floor.

Members interjecting.

Mr FINCH - So the question I have, why do Tasmanians, as taxpayers, pay for economists in Treasury and Government if they cannot plan for an obvious future downturn in revenue, and do it well?

Ms Forrest - Well, they did, but then they took the handbrake off when the election was on -

Mr FINCH - Yes, that is right. So you know, why has it suddenly become apparent to Treasury and the Government that Tasmania is in a financial mess, and that nurses and other qualified people have to be thrown on the scrap heap? Why could not this situation have been dealt with gradually, more gradually? Do our Treasury and government leaders go into denial until the last minute? Surely, Madam President, we pay economic advisers to look ahead, even if it is only for a financial year or two, and advise government accordingly. So I know it is hard to be an economist, and I indicated my aversion to the role earlier, but I cannot help thinking that those highly paid economists and recipients of their advice have let the Tasmanian people down.

Any household, Madam President, can just look ahead for a few months or even years. They can assess future income and expenditure, as we have to do, and you have to plan accordingly, do not live beyond your means. Then the normal household can reduce spending over a long period in a sustainable way which then causes, for the family, minimum harm. It seems our State Government cannot do that. If you can see your income is going to be lower over the next few years, well you immediately cut expenditure, not bury your head in the sand until the situation is so dire that you have to start selling off the family home. It seems the Tasmanian Government does not have that simple domestic skill. However, Madam President, be that as it may, we are in a situation where jobs in health and other areas are being cut. It is a simple economic fact that when someone loses their job, they also lose their ability to spend. This in turn further depresses our economy and does not impress the likes of Gerry Harvey.

Madam President, every job that is lost may save the wages bill but ultimately that will weaken our economy. Other types of efficiencies may be another matter.

Gross domestic product - GDP - figures released earlier this month made for depressing reading. Australia's economic growth in the December quarter slowed to just 0.4 per cent. State figures indicated that both Tasmania and South Australia were in recession and Victoria was on the brink of one. However, this, while academic, is debatable because State figures do not necessarily indicate the definition of a recession. Economist Saul Eslake explained this in an article in Tuesday morning's Examiner. I know that others have quoted Saul Eslake and how handy it is to have that overall assessment of how we are going in Tasmania and to have his keen interest in what we are doing in this State. This is a quote that I took from it; it is quite a long one but it does explain, in his words, the situation:

'Many commentators look, in order to determine whether an economy is in a recession, to see whether there have been two or more consecutive quarters of negative growth in the volume of goods and services produced - that is, in what (for a nation as a whole) is called real gross domestic product or GDP.

Unfortunately, the Australian Bureau of Statistics produces state-based estimates of real GDP (which it calls 'gross state product' or GSP) for financial years only.'

That is where it complicates things.

'Hence, we can't use this rule of thumb to ascertain whether Tasmania (or any other state) is in recession.

The bureau does publish, along with its quarterly estimates of GDP for Australia as a whole (such as were released last Wednesday for the December quarter of 2011), estimates of what it calls 'state final demand', which is the sum of spending by households, businesses and governments (including government-owned businesses) in each state.

Although those estimates, by definition, don't include interstate or international trade, some commentators say that a state economy is in recession if this measure of state final demand declines in real terms or two or more quarters in a row.'

We hear about that so often. Probably the member for Murchison goes through that from time to time. That is not in Saul Eslake's writings.

Members laughing.

Ms Forrest - I'm not surprised it's not in his writing.


'By this partial yardstick, Tasmania's economy isn't in recession, because although Tasmania did experience two declines in state final demand last year, they were in the June and December quarters, with a (quite large) increase in the September quarter in between.

That is, there haven't been consecutive quarters of negative growth in Tasmanian state final demand.'

That is the quote from Saul Eslake. It may not be a technical recession, Madam President, but it feels like one.

Ms Forrest - Through you, Madam President - I would like to quote the next bit that he said when he uses a measure that he has devised looking at the employment figures and participation rates. According to that measure that he is providing around that, he said that Tasmania is in recession. So, it depends - whether we are or not, it is certainly very challenging.

Mr FINCH - Yes. I would not want to be an economist.

News reports last week blamed the high interest rates and government spending cuts. Yes, obviously cutting government spending slows economic growth and, in Tasmania, it is contributing to a recession. However, if government revenue drops, so must spending, and the immediate future is looking grim. At the same time as the poor GDP figures were released last week, Treasury secretary, Martin Parkinson, revealed that Federal and State revenues are now in crisis with tax collections down by 4 per cent of GDP, almost $60 billion a year, and unlikely to return to former levels for many years to come, we heard from the Premier this morning.

Ms Rattray - Likely to be a decade.

Mr FINCH - Likely to be a decade, but Mr Parkinson warned of more pain ahead, saying:

'For both levels of government surpluses are likely to remain, at best, razor thin without deliberate efforts to significantly increase revenue or reduce expenditure'.

Madam President, the State Government has now been warned if it was not already. It may be a utopian concept and I might be economically naive but I cannot help thinking that we are failing to manage our economy properly.

The State Budget - let us hope things will look better on 17 May, but things are also dire in the private sector of course. Just looking across the Tamar from my electorate to the member for Windermere's area, we have Temco on the brink, Rio Tinto Alcan or Bell Bay Aluminium, as I think it has been rebadged, looking unviable in the future and even if the pulp mill was built it would only create a small proportion of those threatened jobs in the long term. Of course there are construction jobs and all that would go to boost the economy that that would bring, but in the long term there will not be that many jobs.

Ms Forrest - That's why we need a diverse economy, isn't it? We can't rely on one thing. Whether it's a pulp mill or whatever, you can't rely on one thing.

Mr FINCH - Absolutely. Of course threatened job losses also apply on my side of the river. The Beaconsfield Gold Mine is expected to lose 150 jobs by the end of June and that mine which has been going on and off for more than 100 years is unlikely to ever open again. That is the reading, whatever happens to the price of gold.

Ms Forrest - The gold price is pretty good at the moment and if the mine isn't profitable now it's unlikely to get better.

Mr FINCH - No, there is a sense that all the remaining viable ore has already been extracted, so you are fiddling around with the fiddly bits, if you know what I mean.

Mr Mulder - Otherwise known as small people's gold.

Mr FINCH - I am no economist or miner.

Mr Hall - Through you, Madam President - with regard to your comments on the pulp mill, even though I think you said it would only create a small amount of jobs, obviously it would create a large amount of jobs in construction, but not in the mill itself. The actual harvesting and all the ancillary jobs would be quite considerable.

Mr FINCH - Yes, point taken. I did not feel I had to say that, but thank you very much.

As far as Temco and Bell Bay Aluminium are concerned, Madam President, when did it make sense really to bring raw materials from thousands of kilometres away, process them with cheap electricity and then export them a further many thousands of kilometres away?

Mr Hall - You said cheap electricity?

Mr FINCH - Cheap electricity at the time. It does not make as much sense now, particularly with transport logistics and increasing costs of transportation. Do not mention the war.

Ms Forrest - There's only one other thing you're not allowed to mention.

Mr FINCH - It has always made better sense to use our electricity to value-add to our own raw materials or to sell our power, and of course that leaves the argument for another Bass Strait power cable. While on the subject of selling power across Bass Strait that idea of a water pipeline to Victoria has emerged again. I am pleased to see that the State Government is keeping an open mind about that. Evidently, the suggestion is that we would only be selling fresh water which would flow into Bass Strait after power generation. That is a suggestion at this time. It will be interesting to follow that.

Mr Mulder - We already have a pipeline that is supposed to be having gas and there's not much of that coming down.

Ms Rattray - Stop the gas and use the water.

Mr FINCH - There is another idea, Madam President. The ideas just flow. Throw one out there and see what comes back.

Ms Forrest - Through you, Madam President - I would suggest that before we put water over the other side of the water we are talking about we should get a second Basslink cable first.

Mr FINCH - Yes. I did not realise I was going to workshop this speech but it is good. I like it.

Mr Mulder - This is innovative thinking.

Mr FINCH - Yes, you can send a lot of water through a 6 metre diameter water pipe that goes across to the mainland. From my reading of it, I have not researched -

Ms Forrest - Six metre?

Mr FINCH - Or was it six millimetres?

Members laughing.

Mr FINCH - I know you have told me a million times not to exaggerate, but please. A big pipe can send a lot of water across to the mainland. I have not done extensive research -

Mr Mulder - That is obvious.

Mr FINCH - What we hear and what we see with scant viewing on television about water generally the issues are getting, I suppose, worse on the mainland.

Mrs Taylor - By crikey there is no shortage of water on the mainland at the moment.

Mr FINCH - Not at the moment, no, but the peaks and troughs, and as we move further into climate change and the effects of that we do not know what is going to happen. We have a fair idea that water is going to be - like we used to hear when we were young people - it is liquid gold and it is becoming more so.

Just looking further into our present economic situation, it worries me greatly and I am sure it worries all honourable members of the House, that about one-third of all Tasmanians are on some form of welfare. It is also worrying that other States resent the fact that Tasmania receives back considerably more GST revenue that we actually generate. I was really taken aback by the Western Australian Premier.

Ms Forrest - They have short memories.

Mr FINCH - Absolutely. I won't go down that path too far, but I just thought that that was unnecessary and it did not help our relations at all.

Mr Mulder - Another thing is that the subsidies that their manufacturing industries get in those States is a subsidy to those States that non-manufacturing States like us don't.

Mr FINCH - It would have been much better if he just sat on top of the totem pole and kept his mouth shut. I will look on the bright side of things now.

The Premier's Address last Tuesday was worthy, but for me not very inspiring. There was not a great deal about concrete job creation policies and as T.S. Eliot once said, 'If you have a big problem set up a committee,' but in this case there will be a white paper. I am not knocking that idea but most Tasmanians would prefer something a little more concrete than a white paper.

Mr Mulder - Chlorine-bleached white paper.

Mr FINCH - Thank you. There wasn't really anything new in the talk of the Asian century. That started in 2000 or even earlier.

Mr Hall - That was Paul Keating.

Mr FINCH - It has been around a long time.

Mrs Taylor - But the century started in 2000.

Mr FINCH - Mind you, I did make a point earlier by way of interjection when I said that in listening to the discussion with Simon Crean, Bill Kelty and Lindsay Fox we were hearing about the projections for the future, only scant details, but one of those that resonated with me was the growth in people who want to have middle-class values, or were going to develop middle-class values and there will be three billion extra by 2030.

Ms Forrest - In China.

Mr FINCH - It is actually China-India, that area. But three billion with middle-class values.

Ms Forrest - They will want more protein to eat, so we need more milk, more meat and everything else.

Mr FINCH - Let us keep an open mind on it. The markets are there for some of Tasmania's great products, but there are tremendous difficulties, the main one appears to be freight. If you can land a shipping container in Sydney from almost anywhere in the world for much less than one from Tasmania there is a problem that has to be addressed now. But the Premier's September trade mission is encouraging and is a good idea. Tasmania has a lot going for it, as the Premier said, in dairy, aquaculture, wine, mining and more, and of course forestry as well.

[5.00 p.m.]

A few weeks ago I had a meeting with a couple of stalwarts of the sawmilling and transport industries, Fred Ralph and Ed Vincent. They were optimistic about the new products from plantation timber like the laminated structural beams, but they were pessimistic about the resources for smaller sawmillers from State forests. They both agreed that the industry needed drastically restructuring although they both said not along the lines of the present IGA. That is economics.