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How not to run a government.

There’s a reason Tasmania’s hospitals and essential services are the nation’s worst. It’s because the state government underspends its own infrastructure budget by 27%.

The government says it can’t afford hospitals or houses but is planning an extra football stadium. These people thought it was a strange priority.

Tasmanian voters trudging to the polls on election day will be faced with an impossible choice. Only two parties can form government and most voters don’t want either of them.

A poll taken just after Christmas found only 26% of respondents thought the ruling Liberal government deserved to be re-elected. But the Libs are still ahead of Labor, whose support has tumbled to below the disastrous level they had when they lost last time.

There’s a reason for the community’s mood of resignation and resentment. The state is once again at the bottom of the national economic and unemployment pile and has long had the nation’s least capable services.

The three main issues worrying voters are, in order, healthcare, cost of living and housing. Neither major party has a coherent policy on any of them. The Liberals, having presided over a decade of hospital scandals and shortcomings, did not mention health during its campaign. Labor’s contribution was a meagre list of minor, uncoordinated thought-bubbles that failed to add up to anything like a coherent health policy.

Neither offered any serious offer of reform on housing.

There’s a history to all this, and it goes back quite a long way.

This is fiscal management, apparently

One day in 1989 Michael Clarke, secretary of the Tasmanian Department of Premier and Cabinet in the state’s new Labor government, got up from the lunch table at my house in Sydney.

“Right,” he said. “Now I’ve got to go back to Hobart and put Tasmania into receivership.”

The horror budget that followed was typical of the damaging stop-start nature of economic management by successive governments of both parties. The 1989-91 cuts forced the state into recession just as a global recession was taking shape: the state economy contracted by 0.11% between June of 1990 and 1991. Those cuts – and the damage they did – were the major cause of the government losing office after a single term.

But those cuts were relatively minor, compared with the slash-and-burn approach of Labor and Liberal governments between 2011 and 2018.

In 2011 the Labor premier and treasurer, Lara Giddings, was persuaded by Treasury officials that the state was facing a budget crisis and that savage cuts had to be made. There was no crisis, as it turned out, but that infamous budget tipped the state, once again, into an entirely avoidable recession. Between June of 2012 and of 2013, the economy shrank by 0.53% – just as other states were emerging from the Global Financial Crisis.

Gutwein ... cuts and spin
When the budget crisis failed to appear, Giddings tried to reverse the damage but it was too late. The election of 2014 was a landslide to the Liberals, who have been in office ever since.

But the new treasurer, Peter Gutwein, was a conservative budgetary hawk, a devotee of  fiscal austerity and the reduction in the size and scope of government. He magnified Giddings’s cuts and made them a great deal worse.

Slash-and-burn budgets demand sudden, quick cuts with the minimum political damage. The most politically difficult cuts are to ongoing programs that employ people. The easiest are to infrastructure programs that haven’t yet been built. But that means critical projects – hospitals, housing, schools, roads – aren’t built.

If that neglect was limited to one or two years every decade or so, it wouldn’t matter so much. But infrastructure is almost always the easiest sector to cut – or not to contemplate in the first place. That’s true everywhere, but Tasmania provides the clearest and craziest example.

This chart exposes the nonsense claim from successive governments that the state cannot afford to build the hospitals and public housing that are so badly needed. If other states can afford to spend a decade average of 12.6% of their revenue on infrastructure, why can Tasmania only afford to spend only half that – 6.7%?

Here’s a clue. In the Penguin Dictionary of Economics, you will find this entry:

Golden rule  The idea that government should borrow each year only to finance investment, not to finance current expenditure.

To put it more simply: taking out a mortgage to buy a house is different from maxing out your credit card to buy the weekly groceries. Both are borrowing, but if you borrow for a house, the house will still be there when you’ve paid it off – and, all the time, you’re getting the benefit of having somewhere to live.

But if you borrow to buy the groceries, you’ll end up with a huge bill and nothing left to show for it. Tasmanian governments appear to have little understanding of this basic principle: not all borrowing is the same.

According to the Australian Bureau of Statistics, servicing of Tasmanian government debt  in 2021-22 cost 2.86% of total revenue. And that includes the cost of outstanding public service superannuation.

The comparable figure for all states is 2.23%, including superannuation costs.

But this isn’t the complete picture: in Tasmania, 85% of borrowing costs are for super, leaving only 15% for everything else. The rest of the country puts 78% into everything else. That’s a prime reason why Tasmanian hospitals, public housing, public transport and roads are in such poor shape.

Magical realism and the government budget

Treasurers like voters to think they’re putting enough money into the necessary services that any community needs for a decent life – even when they have no intention of actually doing so. The trick they use in almost every budget is to promise to spend much more than they intend to.

The three charts which follow show the difference between the two – promised spending and actual spending – over the past 16 years. Let’s look first at the last Labor government’s record over the last seven years of its 16-year tenure.

Its last year in office, 2013-14, was the only one in which actual infrastructure spending outstripped what was promised in the previous budget. In another year, 2010-11, the two were about in line. But in the other five, there was a substantial difference between promise and delivery.

The trick went into overdrive after the Liberal government was elected in 2014. Understandably, they didn’t want anyone to know quite how savage their budget cuts were going to be.

Usually, budget papers have six columns covering each line-item. One shows the relevant amount from the previous years budget; then what was actually spent; then what’s expected to be spent over the next four years.

In the first three budgets handed down by the new Treasurer, Peter Gutwein, there were not six columns but only five. The one that was missing was the one showing the actual amount spent.

But it’s possible to recalculate that amount with a high degree of confidence. Also buried in the budget papers is a section all governments are required, under national agreements, to include. It’s called Uniform Government Reporting and it makes all governments conform to the same international accounting rules.

That section is full of numbers, very dull and usually ignored. But it includes both the amount promised and, unlike the rest of the budget, what was actually spent. On the basis of these data, we can see what actually happened in those first three years. And it’s no wonder they wanted to cover it up.

The bigger picture

This is what it looks like over the entire period, from 2007-08 to 2022-23. These figures have been adjusted to account for inflation, and they’re in constant 2023 dollars.

In today’s dollars, the present government has underspent its infrastructure budget by a total of $2.48 billion. That’s a gap between promise and reality of 27%.

The government’s usual excuse for the shortfall is timing: that projects have been delayed. That excuse would work for a single year but not for 16 years: if projects were late but continued, the money would show up in the spending figures eventually. In fact, if all promised projects actually happened, the usual cost blowouts would mean actual expenditure would normally be more than the budgeted amount, not less.

Another excuse is that other states have to spend more on infrastructure than Tasmania because their populations are increasing much faster. And so they do. But does that get Tasmania off the hook?

To find out, we need to look at the amount spent per head of population, rather than the total spend. And even on that basis, the gap between Tasmania and the rest of the country remains wide.

Mindless trickery and innocent victims

The cover-up tricks which have allowed successive governments to justify their failure providing urgently needed public infrastructure has consequences. This is the reason Tasmania’s public hospitals are the nation’s most overstretched and inefficient; it’s why scores of staff are burning out and leaving; and it’s why so little public housing is being built, sending homelessness rates soaring.

No state does this well, but they all do it better than Tasmania.

Poorer people die sooner, live with more chronic illnesses, suffer most from cost-of-living and housing stress, and have the highest rates of mental illness. Poorer people need public investment in all the services that can help with those things, including hospitals, doctors, nurses and public housing.

This chart shows how heavily the state’s population, compared with Australia as a whole, is skewed to the lower socio-economic levels.

Tasmania’s public-sector services, on which poorer people rely so heavily, should therefore be more plentiful in Tasmania than elsewhere. But the opposite is the case.

Implications: hospitals

Burden of disease is a measure of the total impact of illness on the community, measured in disability-adjusted life years lost. It’s a measure of healthy life lost, either through premature death or living with disability due to illness or injury.

Bed block is when patients needing admission to a specialist ward have to be kept in the emergency department because there’s no space on a specialist ward. The usual measure is the time waited at the 90th percentile – that is, the time when 90% of patients have been transferred to a ward and 10% remain.

There are 293 public hospitals in Australia with emergency departments. Tasmania’s performance is by far the nation’s worst.

It’s the main reason emergency departments are overcrowded, why mistakes are made by overworked staff, and why so many ambulances are ramped outside. It’s also a major cause of hospital-induced deaths.

Widely-cited research in Australia and overseas has shown that a patient affected by bed block has a 30% increased relative chance of dying within seven days. That means that if you come into the hospital with a 10% risk of death, bed block elevates that to 13%. And the long you’re held in emergency, the worse your chances become.

The researchers wrote: “The estimate of 120 deaths per annum associated with over-crowding in metropolitan Perth hospitals suggests that overcrowding should be regarded as a patient safety issue rather than simply an issue of hospital workflow.”

That was in Perth in 2006. The situation has greatly worsened everywhere and a realistic current estimate for Tasmania is much more than 120, and probably over 200.

Such dire overcrowding also means staff can no longer work efficiently. Chaos on the wards has resulted in staff working harder to treat fewer patients than they otherwise could. It’s reflected clearly in costs: the per-patient cost in 2016-17 was a bit better than the national average; four years later, it was 18% higher than the average.

It’s even worse in the emergency departments. The cost of each presentation, once lower than the rest of the nation, soared as overcrowding took hold.

For a high proportion of Tasmanians, the fees charged by specialists in private practice, and very low rebates from Medicare, force large numbers to rely on public hospital outpatient clinics – which can’t cope with the demand. Right now, 10.4% of the state’s population are on outpatient waiting lists and have not yet had their first consultation with a specialist. And until that first consultation, treatment cannot begin. It’s known as the hidden waiting list.

Implications: housing

Provision of public sector housing has not been a major priority for state governments since the 1970s. By the time the present government came to power in 2014, it had sunk almost to zero and, despite massive pressures and many promises, has hardly moved since.

Anyone spending more than 30% of income on housing is regarded as being affected by housing stress. Four years ago, households on a median income could afford to buy a median-level home; now they can’t.

Rents have soared even more, further and faster than in other states.

Despite all that, the number of people in social housing has barely moved and, in 2023, actually fell.

What now?

For the foreseeable future, nothing will change. Hospitals will continue to get worse, more staff will burn out and leave, more people will die, and more people will be homeless.

With few exceptions – and as their election campaigns clearly demonstrated – Tasmanian politicians are inept, out of touch and incapable of presenting any vision for reform. Too many promises have been broken for any new ones to be believed.

The government, in power for a decade, has run its course. It is divided, directionless and tired. But Labor’s leader, Rebecca White, is heading for her third electoral defeat because she and her close colleagues have failed to produce any coherent narrative of how the state should be reformed or even why they are in politics.

Because both major parties have failed to inspire any hope for the future, voters will turn to minor parties and independents, so the next parliament is likely to be even less stable and unlikely to run for its full four years.

This loss will, almost certainly, be White’s last. She has no future as Labor leader and probably none in politics. Whoever replaces her will have to unite a divided and dysfunctional party with few ideas and no sense of direction.

But who?

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