By Tom O’Meara
Pressure is mounting for a solution to Tasmania’s unfunded superannuation liability to unlock about $430 million extra investment in the state annually.
The Tasmanian Chamber of Commerce and Industry and respected economist Saul Eslake are demanding action.
TCCI Chief Executive Officer Michael Bailey said it was time for the Government to tackle “the elephant in the room”.
“Premier Will Hodgman and Treasurer Peter Gutwein have done a great job in getting our state’s books back into balance, now is the time to take the next step,” Mr Bailey said.
“This year, about $300 million will be spent out of the budget paying superannuation to retired public servants.
“This is forecast to rise to about $430 million a year by 2030 as more public servants on the scheme (which closed to new entrants in 1999) retire. It won’t be totally extinguished until about 2070.
“In this day and age it is absurd that the Government is paying the equivalent of an extra 3000 nurses, teachers and police to retired public servants.”
In 2016, a Legislative Council inquiry examining the issue found that there were 9261 former public servants receiving an average annual gross pension payment of $31,302.
The inquiry made no substantive recommendations on how to deal with the issue.
Mr Bailey said that if a solution was agreed on, the forecast recurrent expenditure could be better invested in infrastructure and essential services like health.
As Treasurer in the Groom Government, former Premier Tony Rundle had the foresight to set up a fund in the 1990s to cover this cost.
“On Mr Rundle’s original plan, by 2017 this fund would have funded the superannuation costs from outside the budget,” Mr Bailey said.
“Unfortunately, those funds were spent by Premiers David Bartlett and Lara Giddings during the Global Financial Crisis, leaving us in the situation we are today.”
The cost could be partially offset by the sale of non-key assets, he said.
“In the past, it has been accepted wisdom that assets should only be sold if the money is going to be reinvested into new, productive infrastructure,” Mr Bailey said.
“However, given the recurrent cost to the budget, and the 50 year tail, there is a very good argument to be made that sale funds should be set aside to help offset the cost to the budget of the superannuation liability.
“For example, the sale of non-core assets like the Motor Accident Insurance Board wouldn’t cover all of the cost, but if the proceeds were invested in a similar way to the one-off Mersey Hospital sale funds, the funds could be drawn down over a period of, say, 10 years and offset against the annual super bill.
“This would reduce the annual drain on the budget for the next decade.”
Mr Bailey said all options needed researching, with one more radical option being legislation to retrospectively cap entitlements under the defined benefit scheme.
“The Government’s superannuation liability is the biggest threat to the future prosperity of the state, it’s time a solution was found and finally acted upon,” Mr Bailey said.
Mr Eslake raised similar concerns in his 2018 Tasmania Report in December, saying the issue was a significant blemish on Tasmania’s strong financial scorecard.
“For several decades the unfunded super liability will continue to represent a constraint on Tasmanian Governments flexibility and a source of risk to future budgets,” Mr Eslake said.
“In particular it means that present and future Tasmanian Governments have less scope than the governments of other states and territories for borrowing even at the present relatively low interest rates in order to fund worthwhile infrastructure investments.”
Tasmania’s liability is the biggest in Australia and is the reason why Tasmania doesn’t have a AAA rating, which forces the state to pay higher interest rates on borrowings.