Wednesday, 27 April 2016

Basslink highlights State's budget woes

(Published in The Mercury 27th April 2016)
The big danger in the aftermath of the Basslink debacle is the search for someone to blame will divert attention from finding the best solution.

At last week’s Senate hearings in Hobart, Michael Negnevitsky, UTas engineering professor nailed it when he said “...the failure of the Basslink has to be viewed not just as a disaster......but.... as a wake-up call..... in 10 years time we may not recognise our power systems.... (which) in the last five years have changed much more than in the previous 50 years.”

It’s not just a wake-up call from an energy security viewpoint but also from the perspective of the government’s fragile budgetary position as it begins to grapple with the costs of the outage and the after-effects.

The roles of participants will give a glimpse of how the State sector works.

The cash costs of at least $200 million will be borne by Hydro Tasmania. It will have to find the money from somewhere. It won’t come from the Consolidated Fund which would directly impact the general government’s budget. But it will come via the back door, either from TasNetworks or from Tascorp.  The impact on the State’s overall position will be the same. This position will also be affected by the expected massive write-down in the value of Hydro’s generating assets, reflecting reduced future income as dam levels are restored. In 2005 Hydro wrote down the value of its generating assets by $1 billion. A similar write-down would not surprise

Thursday, 7 April 2016

Budget myths

(Published in The Mercury 6th April 2016)

Treasurer Gutwein is no exception. All State Treasurers no matter what party affiliation will perpetuate four myths whenever a budget or a budget update is released.

Myth number one is if the State economy grows so too will State government revenue.

The second myth is the budget forward estimates for the years beyond the current year can be reliably estimated.

Myth number three is the misplaced focus on the general government rather than the total state sector which includes government businesses.

The fourth myth is that budget sustainability is best measured using a flawed profit figure.