For a Premier and Treasurer who prides himself on fiscal management, pre-coronavirus Tasmania was looking pretty good.
Peter Gutwein has been holding the state’s purse strings since 2014 and there’s little doubt he was proud of his own performance, even telling Tasmanians “we are on the cusp of a golden age” in 2018.
CommSec’s most recent State of the States report ranked Tasmania as the equal-best-performing economy in the country, with its unemployment rate, in trend terms, the lowest it had been in 10 and a half years.
It was a marked shift from Mr Gutwein’s first couple of years as Treasurer, when Tasmania had the unwelcome title of worst-performing economy, between 2014 and 2016.
The year’s preceding that, under the former government, were certainly no better — economist Saul Eslake concluded Tasmania was in recession in 2012-13, with the unemployment rate around eight per cent in mid-to-late 2013.
Of course, a growing population and booming property market did not mean all Tasmanians were living comfortably pre-coronavirus.
But Mr Gutwein went into this crisis at least looking like he knew what he was doing with the state’s coffers. And public reaction to his handling of the coronavirus health crisis has been positive.
But how long that will last remains to be seen.
The health crisis is being replaced by a financial one, and the dreaded R-word — recession — is on the horizon.
Treasury predictions are for an unemployment rate of 12.23 per cent by the middle of year, a figure not seen since the early 1990s.
Opposition parties don’t get much of a look-in during a crisis: it’s unbecoming to throw stones during states of emergency. But with the public health emergency easing, Labor and the Greens have started to fire up again.
The Government’s daily coronavirus briefings, which were livestreamed to thousands of Tasmanians and offered Mr Gutwein a solid soapbox for the past two months, are no longer so pertinent and are being reduced.
So, how does a government whose strongest selling point has been the economy, weather an economic crisis?
Five years until budget recovery: expert
University of Tasmania budget policy analyst Richard Eccleston said there was a risk that once again, Tasmania might take longer than other states and territories.
“The sectors of the economy that have been very hard-hit are tourism and hospitality, and they are sectors that have been very important for Tasmania’s economic success in recent years,” he said.
Professor Eccleston said every recession was different, but it was likely to be a five-year process for the State Government of funding support, then stimulus, before the budget was getting back towards balance.
Mr Gutwein plans to quite literally build his way out of the crisis, by bringing forward infrastructure projects.
While the Premier hasn’t decided what those will be yet, he’s mentioned projects “like affordable houses, maintenance on schools and Government buildings, regional roads, bridges and dams”.
Professor Eccleston said stimulus spending on projects would be important over the next six to 12 months but it needed to be focused on labour-intensive areas and infrastructure that capitalised on emerging trends.
“So, rather than perhaps focusing on roads and traditional capital projects, perhaps the focus this time around might be in terms of something like renewables infrastructure,” he said.
Others have called for investment to be targeted towards health, for both social and economic reasons.
Former state Labor minister Julian Amos said the Premier’s plan to build the state out of the economic crisis was sensible, with the private sector needing confidence.
But he said questions needed to be asked about which projects were actually “shovel-ready”.
“And will he give a guarantee that the tenders for these projects will be given to local tenderers, and not to interstate and overseas companies,” he said.
Mr Amos said this government’s track record was one of not being able to spend what it had allocated to capital works.
“And one suspects that’s because they’re not able to get the projects out the door, in other words they’re not shovel-ready, they haven’t done all the work necessary to get them up and running.”
Tough political decisions ahead
Unlike other financial crises, it would be difficult to lay blame directly with governments for this one.
Professor Eccleston said that would likely determine whether the Tasmanian Government’s popularity suffered.
“I don’t think the Government can be accused of being a cause of the crisis, and opinion polls suggest the community is supportive of the response,” he said.
“But there will be, maybe 12 months down the track or in the lead-up to the next state election, tough decisions that need to be made around whether the tax system is going to be reformed, whether taxes and charges are going to be increased or where savings need to be made.”
Professor Eccleston said there was a risk that grim long-term unemployment rates could rub off on the Government, whether or not it was their fault.
“But it’s also about momentum, so the critical thing is perhaps not be so much the level of unemployment, but whether that unemployment is declining.”
This government’s term expires in March 2022, but an election could be called any time before then, with the Governor’s agreement.
Early elections and snap elections are sometimes used by leaders perceived not to have their own mandate — for example, Julia Gillard in 2010, who had won the prime ministership from Kevin Rudd without an election — or by governments who fear their popularity is going to run out.
Professor Eccleston said he expected the state government would run its full term, regardless of the state of the economy.
“Increasingly, I think voters are sceptical about governments that cut the parliamentary term short without a clear reason for doing that, in terms of losing the confidence of parliament or something.
That doesn’t mean times won’t get tough for the Premier.
“If we look back at the political fallout of recessions and these types of crises, it’s often that 12 months after the onset of the crisis when the politics becomes more challenging and governments need to make difficult choices and trade-offs about winding back emergency support measures and stimulus measures,” Professor Eccleston said.
“When do they have to think about increasing taxes or cutting other services so that they can have that medium-term goal of putting the budget onto a sustainable footing?”
Mr Amos said the impact of the crisis on the popularity of the government would also depend largely on how the easing of restrictions was managed.
“I think the Government, and the Premier in particular, has got a lot of public support for his actions and his approach up until now, so that even though there’s a lot of pain out there, people recognise the need for it.”
He said as long as the Government wasn’t too slow or inconsistent in its approach to rolling back constraints, Tasmanians were unlikely to lose patience.
In Tasmania at least, it’s a common refrain that bureaucrats will always urge caution.
Throughout the pandemic, and in regards to the rollback of restrictions, the Premier’s consistent messaging has been that decisions are made on public health advice.
Mr Amos said that was appropriate for public health, but when it came to the economy, Tasmania needed a less cautious attitude from its leaders: “And we need to take some risks to ensure it doesn’t fall over”.
He also expected the Government to lead until its term ran out.
“I think these are exceptional circumstances and everybody recognises that actions have needed to be taken that are beyond the bounds of any mandate sought and gained at the last election.
“However, the Government has to be careful that it manages itself in a democratic and open manner to ensure people’s trust remains with it.”