TCCI

TASMANIA
REPORT

 
CONTENTS

EVENT PARTNERS

From the Chair

3

About the Author

4

A Social vision for Tasmania
TasCOSS Introduction

5

Tamania’s Economy

7

Tamania’s Labour Market

25

Tamania’s Residential
Property Market

37

Tamania’s Population
and Society

47

Tamania’s Education System

59

Tamania’s Public Sector

73

Tasmania’s Longer-term
Economic Challenge

85

Tamania’s Regions

101

Looking Forward:
the 2018 Election and Beyond

111

 From the Chair
SUSAN PARR

As engaged Tasmanian leaders, you all know the signiﬁcance
of accurate data in measuring and managing key objectives
and the beneﬁts of positive relationships with stakeholders
who join with us in striving to achieve a better Tasmania for
all and who recognise that prosperity and wellbeing
are intrinsically linked at an individual and community level.
It is gratifying to note that many organisations like Tasplan
Super, are now using the Tasmania Report in their planning.
The signiﬁcance of economic indicators alone can cloud
vision and judgement. The juxtaposition of social and
economic indicators informs a fuller appreciation and
prompts debate about the priorities that Tasmania must
set. Of course, State Government plays a huge part in the
achievement of community priorities, but Local Government,
health and education institutions, industry, businesses,
community groups, households and individuals have
a responsibility to look beyond self-interest and
professional empires, and understand and act for
the needs of Tasmania as a whole.
Tasmanians are the unhealthiest, oldest, worst educated,
most under-employed and most dependent on Government
beneﬁts in Australia. This is not sustainable and if it continues
will condemn a large number of Tasmanians to unproductive
lives with compromised opportunities for employment,
personal fulﬁlment and community engagement. The ﬂow on
eﬀects mean increasing health costs, more people who feel
alienated from society, and who in turn, have no stake
in developing communities.
Traditionally, business has not examined the qualitative
indicators of Tasmania’s success such as housing,
education and health.

The TCCI believes that the true measure of a successful
Tasmania must include improved achievements in these
areas as well as the quantitative indicators of employment,
infrastructure development, levels of taxation and the costs
of doing business in an island state with a static population
and limited transport options.
The recent Productivity Commission Report Shifting the Dial:
5 year productivity review (October 2017) highlights the need
for “a new agenda focused on individuals. Getting better
outcomes involves new agendas involving the non-market
economy (mainly education and healthcare), the innovation
system, using data, creating well-functioning cities and
re-building conﬁdence in institutions.”
As we approach the next State election, it is essential
the each of the parties seeking government commit to
a clear strategic plan designed to achieve measurable
outcomes in education and training, health and
infrastructure underpinned by a commitment to rebuild
conﬁdence in our institutions.
This will require leaders with courage, vision and valour
to see beyond political horizons to deliver policies that avoid
the future as described by the Productivity Commission.
Mediocrity is not the future Tasmanians deserve.
The TCCI envisages Tasmania as the most successful state
in the Commonwealth. The measures of that success include
prosperity but depend on education standards and good
health and conﬁdence in our institutions.
With the publication of the third Tasmania Report, the
TCCI will continue to track Tasmania’s progress towards
the attainment of improved results in jobs, construction,
exports, new businesses, housing, health status and
educational achievement.
I commend the report to you all.
Susan Parr
Chair
Tasmanian Chamber of Commerce and Industry

TCCI TASMANIA REPORT 2017

It is with great pleasure and pride that I introduce this third
Tasmania Report to you. It is remarkable both in the quality
of the data, the analysis and the themes identiﬁed by Saul
Eslake, as well as the unique partnership that makes the
funding of the report possible. The idea that the Tasmanian
Chamber of Commerce and Industry and TasCOSS together
with partners Bank of us, Chartered Accountants Australia
and New Zealand, the Federal Group, Southern Cross
Television and the Mercury Newspaper could combine
in a partnership that provides all of us with key data
continues to disrupt conventional attitudes around likely
partnerships formed for the beneﬁt of all Tasmanians.

3

 About the author
SAUL ESLAKE
Saul Eslake worked as an economist in the Australian
ﬁnancial markets for more than 25 years, including
as Chief Economist at McIntosh Securities (a stockbroking
ﬁrm) in the late 1980s, Chief Economist (International)
at National Mutual Funds Management in the early 1990s,
as Chief Economist at the Australia & New Zealand Banking
Group (ANZ) from 1995 to 2009, and as Chief Economist
(Australia & New Zealand) for Bank of America Merrill Lynch
from 2011 until June 2015.
He has now established his own independent economics
consultancy business, based in Tasmania, and also has
a part-time appointment as a Vice-Chancellor’s Fellow
at the University of Tasmania.
Saul has been a non-executive director of Hydro Tasmania,
the energy business owned by the Tasmanian State
Government since March 2008. He is also on the Board
of Housing Choices Australia Ltd, a not-for-proﬁt provider
of aﬀordable rental housing in three states, including
Tasmania; and is Chair of the Board of Ten Days on the
Island, Tasmania’s biennial multi-arts festival.

TCCI TASMANIA REPORT 2017

Saul has a ﬁrst class honours degree in Economics from
the University of Tasmania, and a Graduate Diploma
in Applied Finance and Investment from the Securities
Institute of Australia. In December 2012 he was awarded
an Honorary Doctor of Laws degree by the University
of Tasmania. He has also completed the Senior Executive
Program at Columbia University’s Graduate School
of Business in New York.

4

SAUL HAS A FIRST CLASS
HONOURS DEGREE
IN ECONOMICS FROM
THE UNIVERSITY
OF TASMANIA, AND
A GRADUATE DIPLOMA
IN APPLIED FINANCE
AND INVESTMENT
FROM THE SECURITIES
INSTITUTE OF AUSTRALIA.

 A social vision
for Tasmania
TasCOSS CEO
In the three years since the ﬁrst TCCI Tasmania Report
the story of Tasmania has evolved and our vision and
sense of who we are and who we want to be is starting
to look very diﬀerent.
Education and health, low household incomes, housing
aﬀordability and the essentials of life such as energy,
healthy food and transport continue to be major issues.
Every year 5000 households go without meals, 7000 can’t
aﬀord to heat their homes and over 21,000 struggle
to pay their bills on time.
But the evidence is building: We don’t want this to be the
story of our future. The people of Tasmania know that
things can change.
The ﬁrst indication of this major change was the outcome
of the federal election in 2016 and the loss of three House
of Representative members who demonstrated a deep
ignorance of the views of their constituency. Our rejection
of those views at the polls was the ﬁrst strong evidence that
Tasmanians wanted a new way of thinking and the ﬁrst major
twist in our traditional story. The 63.6% Yes vote for marriage
equality from Tasmania shows that this isn’t a one oﬀ.
These messages paint a strong picture of who we are:
progressive change-makers who want our communities
and our state to be fair, equal and inclusive.
This hasn’t always been our traditional narrative.
Our story has long been one of power that sat with
a few and often negatively impacted many – the sobering
data in the Tasmania Report is the legacy of this approach.

But change is hard. Our story, the culture and the
perceptions of who we are, runs deep. We tend to default
to discussion about our deﬁcits and, in doing so, quickly lose
sight of our greatest potential asset – our people. People are
not born a liability. Our systems, our cultures, our ingrained
attitudes can cause people to be marginalised and not able
to participate, socially or economically. In fact, people are the
competitive advantage we have to leverage a new future.
To change, we need to invest diﬀerently – in communities
and people, in the same way we invest in projects of state
signiﬁcance, in industries, in tourism infrastructure.
Our story should be about all, not some.
We need a bold government to take us there. A government
striving for truly “balanced books”, not just measuring that
balance economically, but also outcomes for people.
This then pays dividends, in health, education, employment,
participation rates and the strength and resilience
of our communities.
The ﬁrst chapters of our new story of our state have been
written by all of us and they herald a Tasmania that is fair,
just and inclusive. We are poised at the start of our next
chapter and it is our job as Tasmanians to act and to tell
our decision-makers what we want our story to be.
Kym Goodes
CEO
Tasmanian Council of Social Service

People and communities matter to Tasmanians, it is at the
heart of who we are. It is what connects us all, the threads
of humanity that run through a small state like Tasmania.
This is why Tasmanians want the voices and needs
of those on the margins brought to the centre.

TCCI TASMANIA REPORT 2017

The evidence is building: We don’t want this to be the
story of our future.

5

  
SECTION
ONE

 
ECONOMY

 
Tasmania’s overall economic
performance in 2016-17
Tasmania’s economy – as measured by chain-volume or ‘real’
gross state product (GSP)1 – grew by 1.1% in 2016-17, in line
with the most recent Treasury forecast (though well below the
original 2016-17 Budget forecast of 2¼%), and down slightly
from 1.3% in 2015-16. Over the past four years, Tasmania’s
economy has grown at an average annual rate of 1.3%, up
from an average of 0.8% over the preceding three years. The
ABS has upwardly revised its previously published estimates
of Tasmania’s economic growth since 2000-01 – for further
discussion see Box 1.

2008-09 (Chart 1.1). Over the eight years since then,
Tasmania’s economy has grown at an average annual rate
of 1.0%, well below the national average of 2.6% per annum.
As a result, Tasmania’s share of the national economy has
continued to decline, from 1.9% in the years preceding the
onset of the global ﬁnancial crisis, to 1.7% in 2016-17.

Chart 1.1: Growth in real gross state product, Tasmania and
mainland

Chart 1.2: Growth in real gross state product, states and
territories, 2016-17

TCCI TASMANIA REPORT 2017

Tasmania’s economy grew more slowly than the national
average in 2016-17, as it has done every year since

Tasmania’s growth rate in 2016-17 was slower than that
of any other state or territory, with the exception
of Western Australia, where economic activity contracted
by 2.7% in 2016-17 (Chart 1.2). Western Australia’s result was
the worst outcome for any state or territory since 1991-92.

8

1
For a more detailed explanation of what GSP measures and how it is derived, see ABS, Australian System of National Accounts: Concepts, Sources and Methods, 2015 (5216.0), Chapter
21, pp. 468-523, or the explanatory notes to ABS, Australian National Accounts: State Accounts 2016-17(5220.0). The Tasmanian Treasury continues to harbour signiﬁcant reservations
about the ‘reliability and volatility’ of ABS estimates of GSP and other key data for Tasmania (see Tasmanian Government, Budget Paper No. 1, May 2017, p. 28). Nonetheless, the ABS
data provide the only basis for analysing the performance of the Tasmanian economy over time, and for making comparisons between Tasmania’s economic performance and that
of other states and territories, and hence are used throughout this Report.

 The latest ABS State Accounts incorporate signiﬁcant revisions
to previously published estimates of the growth rate and size
of the Tasmanian economy. As a result, Tasmania’s real gross
state product is now estimated to have grown at an average
annual rate of 2.2% between 2000-01 and 2015-16, as against
1.8% according to the corresponding estimates published this
time last year.

poorly over the following four years as previously reported,
growing at an average annual rate of 0.8% between 2009-10
and 2012-13 rather than contracting at an average annual
rate of 0.1% as previously reported. The previously reported
growth rate for the three years to 2015-16 has been revised
down by 0.2 pc points per annum, to 1.3% per annum (see
Chart B1.1 below).

In particular, the Tasmanian economy is now estimated to
have grown more rapidly over the ﬁve years to 2008-09, at an
average annual rate of 3.1%, 0.7 pc points per annum faster
than previously reckoned; and not to have fared quite as

As a result of these revisions, Tasmania’s economy is now
estimated to have been $4.2bn, or 8.3% larger in 2015-16
than reported a year ago (Chart B1.2).

Chart B1.1: Latest and previous estimates of growth in
Tasmania’s real gross state product

Chart B1.2: Latest and previous estimates of the size of
Tasmania’s gross state product

These revisions are the result of signiﬁcant historical revisions
to the ABS national accounts which are made every ﬁve years
or so to incorporate updated data sources (including the 2016
Census) and changes in methods and classiﬁcations, as well
as other revisions to state-based data. On this occasion the
revisions have been larger for Tasmania (and the ACT) than for
other states (or the NT), or for Australia as a whole.

Among other things this means that Tasmania’s per capita
gross product did not decline as sharply relative to that of
Australia as a whole as previously reported (and discussed
in last year’s Tasmania Report. The signiﬁcance of this is
discussed in more detail later in this Section. The revisions also
imply that measures such as government spending or net debt
will be slightly smaller when expressed as percentages of gross
product (all else being equal) than previously reported.

TCCI TASMANIA REPORT 2017

Box 1:
Tasmania’s economy is larger than previously thought

9

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As is traditionally the case, Tasmania’s relatively slow
population growth detracted from its economic performance
by comparison with the rest of Australia. Tasmania’s
population increased by 0.6% in 2016-17, the fastest growth
rate since 2010-11. However that was still a percentage point
below the national average.

TCCI TASMANIA REPORT 2017

Chart 1.3: Growth in real gross state product, per capita, states
and territories, 2016-17

10

Abstracting from diﬀerences in population growth, Tasmania’s
per capita gross product increased by 0.5% in 2016-17. This
was slightly above the national average of 0.4% (a ﬁgure which
was dragged down 0.7 percentage points by the 3.3% decline
in Western Australia) (Chart 1.3), but lower than in any year
since 2013-14.
Over the past four years, Tasmania’s per capita real growth
rate has, on average, matched the national ﬁgure of 0.9%
per annum, a performance exceeded only by New South
Wales and the two Territories. This comparison has not been
greatly aﬀected by the revisions to previously published ABS
estimates described in Box 1 above.
However, those revisions have signiﬁcantly raised Tasmania’s
per capita real growth rate over the previous decade – from
an average of 0.9% per annum previously reported to an
average of 1.6% per annum according to the latest estimates.
By contrast, the average real per capita growth rate of the
mainland states and territories over the ten years to 2012-13
remains unaﬀected by these revisions, at 1.4% per annum.
Put diﬀerently, Tasmania’s economic performance as
measured by real per capita growth in gross state product
exceeded that of the rest of Australia by a wider margin than
previously thought over the years preceding the onset of the
ﬁnancial crisis; and fell behind that of the rest of Australia by
a smaller margin than previously thought over the four years
after the ﬁnancial crisis.

Chart 1.4: Growth in real per capita gross state product,
Tasmania and mainland

 Performance of key sectors of
Tasmania’s economy in 2016-17
The industry detail of the ABS State Accounts (see Chart
1.5 below) suggests that the growth in Tasmania’s economy
during 2016-17 was largely driven by four sectors – public
administration and safety, the estimated output (gross
value added) of which increased by 14.2% (more than
reversing a 7.7% decline in 2015-16); health care and social
assistance (the largest individual sector of the Tasmanian
economy), where output increased by 6.1%; agriculture,
forestry and ﬁshing (the second-largest sector of the
Tasmanian economy), which recorded a 4.9% increase in
value added, following on from a 4.7% increase in 2015-16
(previously reported as an 8.2% decline); and wholesale
trade, in which output rose by 9.5%.
Other sectors recording growth in 2016-17 included
accommodation and food services (where value added
increased by 3.8%), electricity, gas, water and waste
services (3.3%), retail trade (1.7%), and education and
training (0.7%).

Value added in mining fell by 9.1% in 2016-17, the third
consecutive large decline, while the ﬁnancial and insurance
services sector contracted by 11.2% (partially reversing
a reported 30.8% increase in 2015-16) and the construction
sector by 5.2% (following an 8.9% decline in 2015-16).
The declines in activity in these three sectors sliced almost
1.5 percentage points oﬀ Tasmania’s overall economic growth
rate in 2016-17. Other sectors to record signiﬁcant declines
in value added in 2016-17 were transport, postal and
warehousing services (down 5.1%), art and recreation
services (down 5.9%), and manufacturing (down 1.0%,
after a 9.4% decline in 2015-16).
It’s unclear what has driven the large recorded swings in the
public administration and safety, and ﬁnance and insurance
sectors over the past two years. It is hard to reconcile these
with other data (including on employment in these sectors),
or with anecdotal evidence.

The reported slow growth in the accommodation and food
services, and education and training sectors, and the reported
contraction in the art and recreation sectors in 2016-17, also
seem hard to reconcile with other data, including on visitor
numbers and (in the case of art and recreation services)
employment.

•

the health care and social assistance sector expanded by
almost 18% over the ﬁve years to 2016-17, accounting for
nearly 60% of the increase in Tasmania’s real gross state
product over this period (growth in this sector reﬂects
not only traditional health services but also aged and
disability care including the NDIS);

From a longer-term perspective the latest ABS State Accounts
suggest that most of the growth in the Tasmanian economy
over the past ﬁve years has come from just two sectors:

•

while the agriculture, forestry and ﬁshing sector has
expanded by 19% over the past ﬁve years, accounting for
45% of the increase in real GSP since 2011-12.

TCCI TASMANIA REPORT 2017

Chart 1.5: Change in real gross value added by industry, Tasmania, 2016-17

11

 Other sectors to have recorded strong growth over the past
ﬁ ve years were information, media and telecommunications
(20%); rental, hiring and real estate services (23%); and
(despite the large decline in 2016-17) ﬁnance and insurance
services (11%).

past ﬁ ve years – including manufacturing (-11%), mining
(-22%), and electricity, gas, water and waste services (-17%)2.
Charts 1.6 and 1.7 illustrate some of the more signiﬁcant
changes in the structure of Tasmania’s economy since the
turn of the century.

Conversely some of the more traditional mainstays of the
Tasmanian economy have contracted signiﬁcantly over the

Chart 1.7: Selected sectors’ shares of Tasmanian gross state
product

TCCI TASMANIA REPORT 2017

Chart 1.6: Selected sectors’ shares of Tasmanian gross state
product

12

As with the ﬁgures for 2016-17, it seems hard to reconcile the reported very slow growth of just 2.5% in the accommodation and food services sector, or the decline of 0.7% in the
arts and recreation sectors, over the past ﬁ ve years with other indicators.

2

 Major expenditure components
of Tasmania’s economic growth
Chart 1.8 below shows the changes in the major expenditure components of Tasmania’s gross state product in 2016-17,
alongside corresponding ﬁgures for the mainland states and territories as a group.
Chart 1.8: Changes in major expenditure components of real gross state product, 2016-17

The decline in the total household consumption spending
seems to have been driven by a large deterioration in ‘net
interstate expenditure’ – the diﬀerence between what
Tasmanians spend interstate and what mainlanders spend in
Tasmania. Abstracting from that factor, Tasmanian household
consumption spending increased by 1.4% in 2016-17.
This deterioration in net interstate spending seems diﬃcult
to reconcile with the available evidence on the number of
visitors to Tasmania – although there is far less data available
on the number of Tasmanians visiting the mainland, or how
much they spend whilst there.

However, growth in most other categories of household
spending was relatively subdued in 2016-17 – apart from
communications (spending on which rose 6.6% in real terms)
and furnishings and household equipment (where spending
rose by 4.1%).
This likely reﬂects the subdued growth in Tasmanian
household incomes. Aggregate Tasmanian household
disposable income was unchanged in real terms in 201617, the weakest outcome since 2013-14, largely reﬂecting
a decline in real terms in total wage and salary income,
together with a (surprising) decline in income from social
security beneﬁts.
An even more striking feature of Tasmania’s economic
performance in 2016-17, according to the ABS State
Accounts, was an 18.7% decline in housing investment,
following a 4.3% decline in 2015-16 and an 18.1% increase
in 2014-15. This decline lowered Tasmania’s overall economic
growth rate in 2016-17 by 0.9 of a percentage point. The level
of housing investment spending in 2016-17 was the lowest,
in real terms, since 2001-02. By contrast, housing investment
spending in the rest of Australia rose by 2.7% in real terms
in 2016-17, to a new record high (Chart 1.8).

TCCI TASMANIA REPORT 2017

Household consumption spending fell by 0.6% in
real terms in 2016-17, after a 4.0% increase in 2015-16.
Tasmania was the only state or territory in which consumer
spending fell in 2016-17. Year-on-year declines in household
spending are in fact comparatively rare: in the history
of the ABS State Accounts (which goes back to 1990-91)
they have never been recorded in New South Wales,
Queensland or Western Australia, and only once in
Victoria (in 1990-91), South Australia (in 1992-93), the ACT
(in 2008-09) and the Northern Territory (in 2014-15). It has
only occurred once before in Tasmania (in 2012-13).

13

 The outsized ﬂuctuations in housing activity in Tasmania
over the past three years appear largely attributable to the
eﬀects of the $30,000 ‘First Home Owners Boost’ originally
introduced in the 2013-14 State Budget, and extended (at
lower levels) in subsequent budgets.
As has almost always been the case on other occasions and
in other jurisdictions, the principal eﬀect of cash grants to

ﬁrst home buyers is to ‘bring forward’ purchases which would
otherwise have been made at a later date (as well as, in many
instances, to increase purchase prices by the amount of
the grant, resulting in a temporary ‘spike’ in housing activity
followed by a subsequent decline (see Charts 1.9 and 1.10).
This episode again demonstrates (if it needs demonstrating)
that there is no long-term economic beneﬁt to be derived from
such schemes.

Chart 1.9: Finance commitments to ﬁrst home buyers
in Tasmania

Chart 1.10: Housing commencements and
completions in Tasmania

Partly oﬀsetting the weakness in household consumption and investment spending was a 5.3% increase in business investment,
the best outcome in ﬁve years and in contrast to a 6.9% decline in business investment on the mainland.
The increase in business investment in Tasmania in 2016-17 largely reﬂects a 16% real increase in new engineering
construction. More than half of this was on telecommunications projects, but there were also signiﬁcant increases in business
spending on roads and subdivisions, water storage and supply, and recreation projects (Chart 1.11).

TCCI TASMANIA REPORT 2017

Chart 1.11: Private sector engineering construction work done, Tasmania

14

 Private new non-residential building expenditure declined
by 1.8% in real terms in 2016-17, after three years of very
strong gains (although average prices in this sector rose by
5½%). More work was done on ‘short-term accommodation
facilities’ (mainly hotels) in 2016-17 than in the previous ﬁve
years combined (Chart 1.12).

There was also a signiﬁcant increase in work done on aged
care facilities, while oﬃce construction work remained at
a high level. However, work done on new factories fell to
its lowest level in 15 years, while work on agricultural and
aquacultural facilities declined sharply from elevated levels
in the previous two years.

The other major component of business investment,
expenditure on machinery and equipment, increased by
3.0% in real terms in 2016-17, the largest increase in ﬁve years.
Public sector spending in Tasmania rose by 5.6% in real
terms in 2016-17, in contrast to a marginal decline on the
mainland. This was the result of strong growth in both
consumption and investment spending by both the national
and state governments, and in investment spending by
Commonwealth public enterprises (presumably reﬂecting
NBN-related work), partly oﬀset by a decline in investment
spending by state and local public enterprises.

Public sector consumption and investment expenditure
has directly contributed more than 80% of the increase
in Tasmania’s real gross state product over three years to
2016-17, according to the latest ABS State Accounts. This is in
stark contrast to mainland Australia, where public spending
(as measured in the national accounts) has declined over the
past three years3.
The performance of Tasmania’s state public sector is discussed
in more detail in Section 7.

Note that the measures of public sector expenditures in the ABS national and state accounts only include purchases of goods and services by governments and public
corporations, and do not include cash transfers to individuals (pensions and beneﬁts), businesses (subsidies) or other government (grants).

3

TCCI TASMANIA REPORT 2017

Chart 1.12: Private non-residential building work done, Tasmania

15

 Tasmania’s
trade
The dollar value of Tasmania’s international exports
of goods rose by 3.8% in 2016-17, compared with a 19.6%
increase in the value of mainland exports (Chart 1.13). Based
on the limited information available publicly, the increase in
the value of Tasmania’s exports appears to reﬂect increases
in exports of metals (which would have beneﬁted from higher
prices, especially for aluminium and zinc), dairy products
and paper, partly oﬀset by lower exports of meat, fruit and
vegetables, and vessels.
The ABS State Accounts dissects this increase in the value
of Tasmania’s goods exports into an estimated 7.9% increase
in average prices, and a 3.8% decline in the volume of
international exports – partially reversing an estimated 10.6%
decline in prices and a 19.7% increase in volumes in 2015-164.
The value of exports to Taiwan, Korea, the US and the EU also
fell in 2016-17, oﬀset by a large increase in exports to ASEAN
countries (who collectively represent Tasmania’s largest export
market), Japan, Hong Kong and India. Chart 1.14 shows the
change in the destination of Tasmania’s merchandise exports
over the past decade.

Chart 1.13: Value of merchandise exports, Tasmania and mainland

Chart 1.14: Tasmania’s merchandise exports, by destination

TCCI TASMANIA REPORT 2017

By destination, the value of Tasmania’s merchandise exports
to China fell by 23% in 2016-17 after surging by almost 80% in
2015-16 (suggesting that some large one-oﬀ exports to China
in 2015-16 may have been a signiﬁcant factor in the large
swings in export volumes reported in the ABS State Accounts).

16

4
As noted in last year’s Tasmania Report, the swings in the estimates of the average prices of Tasmania’s exports contained in the annual ABS State Accounts occasionally seem
implausibly large, resulting in similarly implausible movements in estimates of export volumes. To at least some extent, any measurement errors in these estimates of export
prices and volumes are oﬀ set in the ‘balancing item’ between the production- and expenditure-based measures of gross state product.

 The value of Tasmania’s international exports of services
rose by 16.7% in 2016-17, the third consecutive large gain
(Chart 1.15). Services exports now account for 19% of the total
value of Tasmania’s international exports, up from 10.7% in
2006-07, and for 2.7% of gross state product, up from 2.2% a
decade ago. However, Tasmania is still some way behind the

mainland with regard to the importance of services exports,
which account for 21.9% of total mainland exports and 4.7%
of mainland gross product (Chart 1.16).

Chart 1.15: Value of services exports, Tasmania and mainland

Chart 1.16: Services exports as percentages of gross product

TCCI TASMANIA REPORT 2017

Tourism has been a signiﬁcant contributor to the growth in
Tasmania’s services exports in recent years – see Box 2.

17

 Box 2: Tasmania’s tourism industry
Tasmania’s tourism industry has experienced signiﬁcant growth over the past ﬁve years. Total visitor numbers rose by more than
48% over the ﬁve years to 2016-17, compared with less than 4% over the preceding ﬁve years (Chart B2.1). More than one-quarter
of this increase is attributable to international visitors, whose numbers have grown by almost 80% over the past ﬁve years, while
the number of interstate visitors has grown by 44% over this period.
Although the average number of nights spent by visitors to Tasmania has not changed much over this period, the average visitor
spend has increased by about 15%, so that total visitor spend has increased by more than 70% over the ﬁve years to 2016-17
(Chart B2.2), or from about 5% to about 7¾% of gross state product.
Employment in tourism-related sectors (accommodation and food services, and art and recreation services) has increased
by almost 122,000 – more than half the increase in total employment in Tasmania over the past ﬁve years.

TCCI TASMANIA REPORT 2017

Tasmania’s tourism industry was adversely aﬀected by the appreciation of the A$ during the ‘mining boom’ and has beneﬁted
from the substantial depreciation which occurred between 2012 and 2015. However, the continued growth in visitor numbers
despite a gradual rise in the A$ since early 2016 suggests that other factors have also been important – including the
development of new attractions (such as MONA and its associated festivals, other cultural and sporting events,

18

food and wine tourism, and new walking and hiking trails), the enhanced exposure provided by Chinese President
Xi Jinping’s visit in November 2014, successful marketing, and improved access through growth (of over 40%) in the
number of aircraft seats into Tasmania.
As noted earlier in this section, the growth in Tasmania’s tourist industry suggested by these statistics does not appear to be fully
reﬂected in the industry detail of the ABS State Accounts, for reasons that are not immediately clear. It may be that some of the
growth in spending by visitors to Tasmania has been oﬀset by growth in spending by Tasmanians interstate (something on which
far less data is available, but which would have also been facilitated by growth in airline capacity, among other things).

 Another contributor to the growth in Tasmania’s services
exports is education. The number of overseas students
enrolled at the University of Tasmania (including the Australian
Maritime College) has risen from just over 4,800 in 2013 and
2014 to almost 5,500 in 2016 (the latest year for which data are
available). However, this remains short of the peak level
of enrolments attained in 2011.

Tasmania has less than 1½% of Australia’s total overseas
higher education student enrolments, below its 2% share
of Australia’s total population. This suggests that there is
potential for further growth in overseas student numbers
in Tasmania – something which would also contribute to
further growth in international visitors, via students’
families and friends.

By contrast, overseas enrolments at mainland higher
education institutions have grown more rapidly than
in Tasmania over the past three years, and are now well
in excess of their previous peak in 2011 (Chart 1.17).

Tasmania’s direct international imports of goods and
services rose by 14.4% in real terms in 2016-17, the largest
increase in ﬁve years. This was presumably driven by the
increase in business investment in machinery and equipment
(which is particularly import-intensive) noted earlier (and
possibly by increased spending on tele-communications
networks), as well as by a 10% increase in services imports.
In practice, a large share of Tasmania’s imports come via the
mainland, just as a proportion of Tasmania’s exports leave
Australia via the mainland. These trans-actions, together with
Tasmania’s exports to and imports from the rest of Australia
and changes in the level of business inventories – none of
which are directly measured – are implicitly captured in the
‘balancing item’ on the expenditure side of the ABS State
Accounts. As shown in Chart 1.8 above, this ‘balancing item’
contributed 1.5 percentage points to growth in Tasmania’s
gross state product in 2016-17, the ﬁrst positive contribution
in four years.
At face value, this suggests that interstate trade (that is,
between Tasmania and the mainland) contributed positively
to growth in Tasmania’s economy in 2016-17, in ways not
otherwise captured in the ABS State Accounts – although given
that this ‘balancing item’ also includes other items (including
measurement errors) it is diﬃcult to be deﬁnitive on that score.

TCCI TASMANIA REPORT 2017

Chart 1.17: International higher education student
enrolments, Tasmania and mainland

19

 Near-term
prospects for
Tasmania’s
economy
The analysis in this section thus far has shown that Tasmania’s
economy has continued its recovery from the recession of
2011-13 (a recession which wasn’t as severe as previously
reported, and which followed a period of stronger growth
than previously reported). It has highlighted some areas of
encouraging strength, particularly in agriculture, health, aged
and disability care, tourism and commercial construction
(especially infrastructure and hotels). However it has also
shown that the recovery has been heavily dependent on
continued growth in public sector spending; and that it has
been constrained by weakness in household spending,
in particular on dwelling construction).
The improving outlook for the world economy, as noted by
both the IMF and the OECD in their most recent forecasts5 is
a positive development for the Tasmanian economy, given that
exports account for more than 12% of Tasmania’s economy.
But the two most important elements to sustaining
the recovery in Tasmania’s economy are a revival
in household spending, and continuation of the upturn
in business investment.

Chart 1.19: Retail sales, Tasmania and mainland

TCCI TASMANIA REPORT 2017

Chart 1.18: Consumer conﬁdence, Tasmania and Australia

Consumer conﬁdence appears to have picked up in
Tasmania in recent months, after an extended period
in which Tasmanian consumers were notably more pessimistic
than the Australian consumers as a whole (Chart 1.18).
However, this is yet to translate into any pick-up in retail sales
(Chart 1.19). Tasmanian retailers are as exposed as their
counterparts elsewhere in Australia to heightened competition
from new channels for selling goods to consumers.

20

5
The IMF forecast, in its most recent World Economic Outlook released in October 2017, growth in the global economy of 3.7-3.8% per annum from 2018 through 2022, stronger than
in any year since 2011; while the OECD’s latest Economic Outlook, published in late November, says that ‘the global economy is now growing at its fastest pace since 2010, with the
upturn becoming increasingly synchronised across countries’.

 exposed to increases in energy costs than households in
mainland eastern states. A continued gradual increase in the
growth rate of Tasmania’s population should also be helpful,
at the margin, for growth in household spending.

Tasmanian households are, in general, less indebted than their
mainland counterparts and hence devote a smaller percentage
of their incomes to interest payments (4.1% in 2016-17) than
households elsewhere in Australia (5.8%). They are therefore
less likely to be concerned by the prospect of higher interest
rates at some point in the future. And although Tasmanian
households spend the same proportion of disposable income
(2.1%) on energy as the national average, they have been less

Chart 1.20: Residential building approvals, Tasmania and
mainland

However, the most important obstacle to a sustained upturn
in growth in Tasmanian household spending is continued
weak growth in household incomes. As discussed in Section
2 below, recent developments in employment growth in
Tasmania are somewhat encouraging from that perspective
– although it remains to be seen whether the recent strong
growth in employment will be sustained. However, Tasmanian
employee households, like their counterparts in other states,
are continuing to experience unprecedentedly slow growth
in wage and salary earnings – something which, according
to the Reserve Bank6 and others, seems likely to persist for
some time yet.
Hence, the best that can probably be hoped for is very
moderate growth in Tasmanian household spending in
2017-18 and 2018-19.
The signiﬁcant downturn in dwelling construction which,
as noted earlier in this section, sliced almost a full percentage
point oﬀ Tasmania’s overall economic growth rate in 2016-17,
seems likely to be reversed in the current ﬁnancial year.

However, it seems to be taking longer than usual for
construction to get under way after approvals have been
granted. The number of dwellings commenced in the June
quarter 2017 was only 7½% higher than a year earlier, while
the number of dwellings under construction in the June
quarter was almost 3% lower than a year earlier.

6

Reserve Bank of Australia, Statement on Monetary Policy, November 2017, pp. 68-9.

TCCI TASMANIA REPORT 2017

The number of residential building approvals granted
by local governments in Tasmania has risen by almost
47% since August last year, which suggests that there
should be a signiﬁcant increase in residential building
work in 2017-18 (Chart 1.20).

21

 The reasons for this extended backlog are not clear.
However, if it can be reduced, then residential construction
should make a positive contribution to growth in the
Tasmanian economy in 2017-18 and beyond.

TCCI TASMANIA REPORT 2017

The level of non-residential building approvals has tailed
oﬀ over the past year in Tasmania, in contrast to the trend
on the mainland (Chart 1.21). Nonetheless, the ‘pipeline’ of
work to be done on projects already under way remains high

22

by historical standards (Chart 1.22), reﬂecting the volume of
work now under way on new hotels, oﬃces and University
of Tasmania projects. There is also almost $600bn of work
to be done on engineering construction projects around
Tasmania. All of this constitutes a solid basis for expectations
that commercial construction will continue to provide an
important source of impetus for the Tasmanian economy in
2017-18 and perhaps beyond.

Chart 1.21: Non-residential building approvals, Tasmania
and mainland

Chart 1.22: Value of non-residential building work yet
to be done, Tasmania and mainland

More generally, the ongoing relatively high level of business
conﬁdence in Tasmania augurs well for the prospects for
continued growth in business investment.

policies, which has generally been much higher in Tasmania
than in other states or territories since the last state election
in 2014 (Charts 1.23 and 1.24). The history of the series
depicted in Chart 1.24 (and of the equivalent series for
other states) suggests that declines in business conﬁdence
occur gradually – typically when a government has been
in oﬃce for an extended period – and are followed by an
abrupt improvement when an election results in a change of
government (as happened in New South Wales in 2011, and
in Tasmania in 2013). Abrupt declines following changes of
government are much less common.

The most widely-regarded measures of business sentiment,
though more volatile for Tasmania than for Australia as a
whole, have on average indicated higher levels of business
conﬁdence in Tasmania than the national average in recent
years (Charts 1.23 and 1.24).
One of the reasons for that is the continuing conﬁdence of
small and medium businesses in state government economic

 Chart 1.23: Expected business conditions –
NAB Business survey

Chart 1.24: Small & medium enterprise business
conﬁdence – Sensis survey

Chart 1.25: SMEs assessment of state & territory government
policies, September 2017

Chart 1.26: SMEs assessment of Tasmanian
Government policies

However, in order to narrow the long-standing gap
in economic performance, and in material living

standards, between Tasmania and the rest of Australia,
the Tasmanian economy will need a sustained period of
growth at a pace of 2½% per annum or better. What needs
to be achieved in order to attain that objective will be
considered in greater depth in Section 7.
TCCI TASMANIA REPORT 2017

In the absence of any unforeseen shocks, it seems
reasonable to anticipate that Tasmania’s economy
will continue to grow at a pace similar to the 1-1½% per
annum of the past three years, possibly reaching 2% in
2017-18 – although the 2½% growth forecast for 2017-18
in the most recent State Budget may be a stretch.

23

 Chartered Accountants Australia and New Zealand
is made up of more than 117,000 members who
provide expert insight to businesses, organisations,
governments and communities locally, nationally
and overseas.
We are a member of the International Federation
of Accountants, connected globally through the
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together leading accounting bodies in Australia,
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and South Africa to support Chartered Accountants
in more than 180 countries.
At a local level, we support Chartered Accountants
in your communities to provide the ﬁnancial and
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skills also help accountants contribute to the
development of strong, prosperous and sustainable
communities.
Our future[inc] thought leadership series provides
a detailed analysis of Australia’s economic policy
debate and seeks to encourage discussion around
how we plan for our long-term prosperity.
Tasmania’s economy, as measured by ‘real’ gross
state product, grew by 1.1% in 2016-17 to $28.58
billion, slightly down on the 1.3% increase in the last
two ﬁnancial years and down on the national growth
of 2.0%, the 26th consecutive year of national
economic growth in Australia.1 Private business
investment grew by 3.7% and it is exciting to see
that sectors such as Agriculture, Forestry and
Fishing as well as Healthcare and wholesale trade
increasing by 4.9%, 6.1% and 9.5% respectively.

Driving the
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TCCI TASMANIA REPORT 2017

While the economic numbers represent only one
thread in the tapestry that is Tasmania, they do
reveal there are opportunities to advance our
overall health, education, and productivity, and
to reduce our dependency on government
beneﬁts. This report provides rich insights into how
businesses can partner with government to turn
Tasmania’s challenges into opportunities.

24

It is Chartered Accountants Australia and New
Zealand’s pleasure to be a sponsor of the annual
Tasmania Report, and to be a part of the continuing
growth and success of Tasmania’s economy

PAUL BREEN
Chair – Tasmanian Regional Council
Chartered Accountants Australia and New Zealand

charteredaccountantsanz.com/AoP
1
Australian Bureau of Statistics, Key National Accounts Aggregates, http://www.abs.gov.au/
AUSSTATS/abs@.nsf/DetailsPage/5204.02016-17?OpenDocument

©2017 Chartered Accountants Australia and New Zealand
ABN 50 084 642 571 (CA ANZ). Formed in Australia. Members
of CA ANZ are not liable for the debts and liabilities of CA ANZ.

 SECTION
TWO

 
LABOUR
MARKET

 
Employment in Tasmania
until the winter of 2016, followed by a strong rebound which
continued through to mid-2017, after which the level of
employment appears to have ﬂattened out (Chart 2.2).

Monthly labour force data suggests that this reﬂects a decline
in employment which began in late 2015 and continued

Chart 2.2 also highlights that in April 2017, employment in
Tasmania ﬁnally regained the level it had reached before the

Chart 2.1: Employment growth, states and territories, 2016-17

Chart 2.2: Level of employment, Tasmania, monthly

onset of the global ﬁnancial crisis in October 2008 (a milestone
the mainland passed in August 2009).

However the level of full-time employment is still some
15,200, or more than 9%, below its pre-ﬁnancial crisis peak.
The only other state where full-time employment remains
below pre-crisis levels is South Australia, where it is still
2% below the pre-crisis peak. For the mainland as a whole,
full-time employment is now more than 9% above its
pre-ﬁnancial crisis peak (Chart 2.4)7.

Two-thirds of the increase in employment since the recession
trough in late 2013, and all of the increase since the most
recent low in mid-2016, has been in the form of part-time
employment. Indeed, thanks to this most recent surge,
part-time employment in Tasmania has now grown almost
as rapidly since the ﬁnancial crisis as it has on the mainland
(Chart 2.3).

TCCI TASMANIA REPORT 2017

26

Employment increased by 0.8% in Tasmania, on average, in
the 2016-17 ﬁnancial year, slightly less than half the national
average (Chart 2.1).

For a more detailed analysis and discussion of changes in employment (including by age, gender and industry) between the 2006 and 2016 Censuses, see the recently-published
report by Lisa Denny of the Institute for the Study of Social Change at the University of Tasmania, The Changing Nature of Work in Tasmania, November 2017.

7

 Chart 2.3: Part-time employment, Tasmania and mainland

Chart 2.4: Full-time employment, Tasmania tand mainland

The weakness in full-time employment in Tasmania has been
especially pronounced among men.

By contrast, although full-time employment fell almost as
much among women as for men between 2008 and 2013, it
has since risen by almost 12%, to be just 1,700 or 3% below
the pre-ﬁnancial crisis peak (Chart 2.5).

Chart 2.5: Full-time employment by gender, Tasmania

Part-time employment has risen by roughly similar
proportions for both women and men (a little less and a little
more, respectively, than 25%) since the ﬁnancial crisis.

Chart 2.6: Part-time employment by gender, Tasmania

TCCI TASMANIA REPORT 2017

The number of males in full-time employment has fallen by
more than 13,000, or nearly 12%, since before the ﬁnancial
crisis, and is still less than 3% above the recession low in
mid-2013 (when it was lower than it had been at any time
since the beginning of 2003).

27

 This stark contrast between the employment experiences of
men and women in Tasmania is in large part the result of profound
structural changes in the industry composition of employment
over the past decade.

food services sector has also increased by more than 1,300 (or
nearly 20%) over the past two years – more than any other
sector except construction - after falling by 1,200 between
2007-08 and 2014-15.

Chart 2.7 shows changes in full- and part-time employment
in Tasmania by industry between 2007-08 (the year before
the ﬁnancial crisis) and 2016-17. Full-time employment in
manufacturing and agriculture, forestry and ﬁshing − sectors
traditionally dominated by males − fell by 6,300 (or nearly 32%) and
2,200 (or 19%) respectively, over this period. Full-time employment
in retailing – which employs a larger proportion of females – fell by
2,900 (or nearly 20%) between 2007-08 and 2016-17.

The rapid growth in the health care and social assistance
sector (noted previously in Section 1) has generated almost
5,500 new part-time jobs since 2007-08, an increase of
almost 44%. Many of these positions have been taken up
by women. Part-time employment in accommodation and
food services has increased by just over 2,600 (27%) over the
past nine years. Other sectors where part-time employment
has increased signiﬁcantly have been retail trade (1,800 or
15%), public administration and safety (1,800 or 65%), and
administration and support services (1,250 or 45%).

The only sectors to have experienced signiﬁcant growth in full-time
employment over the past nine years have been construction
(3,900 or 26%) and professional, scientiﬁc and technical services
(1,900 or 27%). Full-time employment in the accommodation and

TCCI TASMANIA REPORT 2017

Chart 2.7: Change in full- and part-time employment by industry, Tasmania, 2007-08 to 2016-17

28

 Tasmania’s (trend) unemployment rate fell by about ½ pc point
over the second half of 2016, but has since remained more or
less unchanged at 5.9-6.0%, the lowest since mid-2011 (Chart
2.8). By contrast, the unemployment rate on the mainland
was steady at 5.7-5.8% throughout 2016 and into the ﬁrst
quarter of 2017, but has since declined to 5.4%. After being
lower than three (or sometimes four) of the mainland states
between December 2016 and May 2017, since September
2017 Tasmania has once again had the highest (trend)
unemployment rate of any state or territory.

The extent of unemployment in Tasmania has traditionally
been masked by a markedly lower labour force participation
rate than in the rest of Australia – something which is in large
part, but not completely, explained by Tasmania having a
larger proportion of its ‘working age’ population (as deﬁned
by labour force statistics) being aged 65 or over than any
other state or territory. That diﬀerence, though still large, has
narrowed somewhat since mid-2016, with Tasmania’s (trend)
participation rate rising by 1.4 pc points to 60.9% as of October
2017, as against an increase of 0.4 pc point to 64.3% on the
mainland over the same period (Chart 2.9)8.

Chart 2.8: Unemployment rate, Tasmania and mainland

Chart 2.9: Labour force participation rate, Tasmania and mainland

The net eﬀect of the decline in Tasmania’s unemployment
rate and the increase in labour force participation since
mid-2016 is that the proportion of Tasmania’s working-age
population who are employed – the employment rate
– has increased by 1.7 pc points, to 57.3% (as of October
2017), the highest ﬁgure since mid-2011.

This is still lower than in any other state or territory, and
4.4 pc points below the corresponding average for the
mainland as a whole.

8
Hypothetically, if Tasmania’s participation rate remained unchanged at its July 2016 level and employment grown as it did between then and October 2017, Tasmania’s
unemployment rate would have fallen to around 4%. In practice, employment would not have grown as it did had the participation rate been unchanged, because a large
proportion of the jobs created during this period appear to have been taken up by new (or re-) entrants to the labour force.

TCCI TASMANIA REPORT 2017

Unemployment and
under-employment

29

 Chart 2.10: Proportion of ‘working age’ population aged
65 or over

However, given that almost 23½% of Tasmania’s ‘working
age’ population (4.3 pc points more than the corresponding
proportion of the mainland’s ‘working age’ population) are 65
or over (Chart 2.10), and that only 11% of them are actually
working (1.5 pc points less than the mainland’s

65-and-over population), it would be surprising if Tasmania’s
overall employment rate wasn’t signiﬁcantly lower than that
of the rest of Australia.
Indeed, as shown in Section 4 of last year’s Tasmania Report,
the gap in overall employment rates between Tasmania and
the mainland is likely to widen over time, all else being equal,
because Tasmania’s population is ageing much more rapidly
than the rest of Australia.
Rather more encouraging is that the proportion of 15-64
year old Tasmanians who are working has increased by 1.4 pc
points since October 2016 – and by 3.2 pc points from the low
point in early 2014 (Chart 2.11). Indeed, the employment rate
of 15-64 year old Tasmanians is now higher than at any time
other than between January 2008 and April 2009. And the gap
between this measure and the corresponding ﬁgure for the
rest of Australia is now, at 0.6 pc points, lower than at any time
in the past 25 years, apart from February-September 2009
and September-October 2015.

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Chart 2.11: ‘Employment rate’ for population aged 15-64

Nonetheless, it should be an objective of Tasmanian
Government policy to eliminate this gap altogether. Chart 2.12
shows that a lower proportion of Tasmanians in every age
group within the ‘working age’ population are in employment
than in the corresponding group of the population of the
rest of Australia – with the conspicuous exception of 15-19
year olds. And that exception should not be regarded as an
achievement, because it is the mirror image of the fact that
a smaller proportion of Tasmanians in this age group are
continuing in full-time education than of the same age group in
other states and territories.

(CC)

 Earlier in this section it was noted that most of the increase in
employment in Tasmania in recent years had been in the form
of part-time employment. Part-time work is often a preferred
option for people with caring responsibilities, people who are
undertaking some form of study or training, and older people
transitioning towards retirement.

However, Tasmania has a higher proportion of people who are
working fewer hours than they are willing and able to than in
any other State or Territory (Chart 2.13). Moreover, unlike the
unemployment rate, this proportion has not declined over the
past few years (Chart 2.14).

Chart 2.13: ‘Under-employment’ rates, states
and territories, 2016-17

Chart 2.14: ‘’Under-employment’ rates, Tasmania
and Australia, 2006-17

TCCI TASMANIA REPORT 2017

Chart 2.12: Private non-residential building work done, Tasmania

31

 Long-term and youth
unemployment
While Tasmania’s unemployment rate has been gradually declining over the past four years, there remains a signiﬁcant cohort of
Tasmanians who have encountered severe diﬃculties in ﬁnding or remaining in work. The proportions of Tasmania’s unemployed
who have been out of work for more than a year, and for more than two years, are each higher than in any other State or Territory
(Chart 2.15). Moreover, in contrast to the overall unemployment rate, the margin by which long-term unemployment in Tasmania
exceeds that for the rest of Australia has continued to widen (Chart 2.16)

Chart 2.15: Long-term unemployment rates, states and
territories

Chart 2.16: Very long-term unemployment rates, Tasmania
and mainland

Chart 2.17: Median duration of unemployment, Tasmania and Australia

TCCI TASMANIA REPORT 2017

The median duration of unemployment in Tasmania has
declined signiﬁcantly from more than 23 weeks in the second
half of 2014 to just over 18 weeks in 2017 – implying that
Tasmanians are, in general, taking less time to ﬁnd a job than
previously (Chart 2.17). Nonetheless, the median duration of
unemployment remains higher than the national average, and
it remains higher than before the recession of 2012-14.

32

Additionally, the job search experience for Tasmanians who
have been out of work for a long time has not improved very
much. Those out of work for two years or more are taking
an average of 109 weeks to ﬁnd a job, a decline of only eight
weeks from the most recent peak in 2016, and about ﬁve
weeks longer than the national average.

 Unemployment among young (15-24 year old) Tasmanians
has fallen signiﬁcantly over the past three years, from nearly
18% (of 15-24 year olds in the labour force) in late 2014 to just
under 14% as of October 2017 (Chart 2.18). This partly reﬂects
an increase in employment among 15-24 year-olds) but also,
importantly, an increase in the proportion of this age group
engaged in full-time education.

The number of so-called ‘NEETs’ (not in employment,
education or training) as a proportion of the total number of
15-24 year olds in Tasmania has fallen from a peak of around
18% in 2016 to 15.2% on average over the 12 months ended
October 2017, but is still higher than in any other jurisdiction
except the Northern Territory and Queensland (where it is the
same as in Tasmania) (Chart 2.19).

Tasmania’s youth unemployment rate remains above the
national average, although it is no longer the highest in
Australia, being some 2½ pc points lower than in South
Australia, and only marginally higher than in Western Australia,
Queensland and Victoria.

Expanding opportunities for young Tasmanians to engage in
education and training, and to enhance their capacity to ﬁnd
and hold down jobs, is critical to narrowing the gap in overall
labour force participation rates between Tasmania and the
rest of Australia discussed earlier in this section.

Tasmania also has an above-average proportion
of 15-24 year olds who are neither in the labour force
(that is, neither working nor actively looking for work) nor
in full-time education.

Chart 2.19: 15-24 year olds not in education, employment or
training states and territories

TCCI TASMANIA REPORT 2017

Chart 2.18: Youth unemployment rates, Tasmania and
Australia

33

 Labour
earnings
A common development across ‘advanced’ economies in
recent years has been the persistence of unusually slow
growth in employee earnings, even in economies where
unemployment has fallen to (or below) levels traditionally
regarded as being consistent with ‘full employment’. A
number of diﬀerent explanations have been proﬀered for
this, including the lingering eﬀects of the global ﬁnancial
crisis; heightened competition from workers in ‘emerging
and developing’ economies (via globalisation and ‘oﬀshoring’)
or from various forms of technological innovation (including
robots and computers); changes in the structure or regulation
of labour markets which have altered the ‘balance of power’
between employers and employees; and a widespread and
persistent slow-down in productivity growth which pre-dates
the ﬁnancial crisis.
This trend has been evident in Australia – especially since the
end of the ‘mining boom’ – and seems likely to persist for some
time yet to come given that Australia is still some way from
being at ‘full employment’ 9.
As measured by the ABS wage price index, nowadays the most
widely-used measure of movements in labour costs, wages
growth appears to have slowed slightly less in Tasmania over
the past few years than elsewhere in Australia (Chart 2.20).
This stems from the fact that, since the end of the ‘mining
boom’, public sector wages have risen by about ¼-½% per
annum more than private sector wages – and public sector
employees account for a larger share of total employment in
Tasmania (20%) than on the mainland (16.2%).

TCCI TASMANIA REPORT 2017

However, the wage price index, by design, says nothing
about the level of wages, and abstracts from the eﬀects
of compositional changes in the workforce – for example
between high- and low-paying jobs, or between full- and parttime jobs, both of which have been (as discussed earlier in this
Section) quite substantial in Tasmania in recent years.

34

An alternative measure which captures the eﬀects of these
changes can be derived, on a ﬁnancial year basis, from
the estimates of ‘employee compensation’ (wages and
salaries, plus superannuation contributions and workers’
compensation premiums) provided in the ABS State Accounts.

9

See Reserve Bank of Australia, Statement on Monetary Policy, November 2017, pp. 68-9.

Chart 2.20: Ordinary hourly rates of pay (excluding bonuses),
Tasmania and mainland

 Average employee compensation per hour worked in
Tasmania in 2016-17, of $33.13, was the lowest of any state
or territory, and 19% below the national average (Chart 2.21).
This represents a 0.6% decline from 2015-16 (presumably
as a result of changes in the ‘mix’ of employment). Over the
past ﬁve years, average hourly employee compensation has
increased by just 0.7% per annum, less than in any other state
or territory, and well below the national average of 2.0% per
annum.
Moreover, because Tasmanian employees work fewer hours,
on average, than workers in any other state or territory,
their average annual compensation of $52,932 in 2016-17
was nearly 23% below the national average of $68,474 (that
is, a larger margin than the diﬀerence in average hourly
compensation).
As previous Tasmania Reports have emphasised, and as again
discussed in more detail in Section 7 of this Report, the single
most important reason why Tasmanian wages and salaries are
lower than anywhere else in Australia is because Tasmanian
labour productivity is 12% below the national average: and one
of the most important reasons for that is because Tasmanian
employees are, on average, less educated and skilled than
those in other parts of Australia.

Chart 2.22: Annual growth in compensation per hour,
Tasmania and mainland

TCCI TASMANIA REPORT 2017

Chart 2.21: Employee compensation per hour worked, states
and territories, 2016-17

35

     
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SECTION
THREE

 
RESIDENTIAL
PROPERTY
MARKET

 
TCCI TASMANIA REPORT 2017

38

For most of the past two decades, Tasmania’s residential property market has been less vibrant than those
of other states and territories – with fewer transactions (relative to the size of the state’s population) and
much more subdued movements in prices than other parts of Australia, and in particular by comparison
with the capital cities of the mainland states.
That has changed over past couple of years, with the Tasmanian market ‘out-performing’ other states
and territories on many dimensions. While there are many positive aspects to this, there is also a downside,
particularly for those who do not own residential property, and are exposed to increases in the cost
of rental accommodation.

 Residential property prices
Tasmanian residential property prices rose by 9.2% over
the 12 months to October 2017, according to the hedonic
indices complied by CoreLogic - faster than in any state
or territory except Victoria, and compared with a national
average of 6.6%. Over the past decade, Tasmanian residential
property prices have risen by 21.2% - less than half the
national average of 46.6%. However the national average

Chart 3.1: Hedonic home value indices, Tasmania,
metropolitan and regional averages

reﬂects gains averaging nearly 57% in the ﬁve largest cities on
the mainland (including 87% in Sydney and 79% in Melbourne).
By comparison, residential property prices outside the
mainland capital cities have risen by only 15.3% over the
past decade (ie, less than in Tasmania) (Chart 3.1). However,
Tasmanian property prices remain, on average, below those
in non-metropolitan areas of other states (with the exception
of regional South Australia), and well below those in mainland
capital cities (Chart 3.2).

Chart 3.2: Median sale prices, Tasmania, metropolitan
and regional averages

Note: Hedonic indices measure the ‘organic change’ in underlying sale values of properties using the hedonic imputation methodology. They are designed to show rates of change
in property prices rather than the level of prices. The median price is the middle (50th percentile) price of all transactions during the preceding three months. Source: CoreLogic
Property Market Indices.

Chart 3.4: Median sale prices, Hobart,
Launceston and NW Coast

TCCI TASMANIA REPORT 2017

Chart 3.3: Hedonic home value indices,
‘Greater Hobart’ and regional Tasmania

39

 Residential property prices have risen further in Hobart and
surrounding areas than in the rest of Tasmania. The CoreLogic
hedonic home value index for ‘Greater Hobart’10 rose
by 13.4% over the twelve months to October 2017, more
than in any other capital city; and by 26.5% over the past ﬁve
years (Chart 3.3), more than in any mainland capital city
except for Sydney and Melbourne.
By contrast, home values across the rest of Tasmania rose
by only 5.4% over the twelve months to October, and
by 15.5% over the ﬁve years to October 2017. The latter
is in line with the corresponding ﬁgure for regional Australia,
which reﬂects outright declines in regional Queensland
and (especially) WA, oﬀset by much larger increases
(of 37-42%) in regional NSW and Victoria.
Data compiled by the Real Estate Institute of Tasmania
present a similar picture of larger price increases in Hobart

TCCI TASMANIA REPORT 2017

Chart 3.5: Median time on market, ‘Greater Hobart’
and regional Tasmania

40

than in the rest of Tasmania, although they do suggest
that property prices have begun to rise at a faster rate in
Launceston and (to a lesser extent) along the North West
Coast during 2017 than at any time since 2009 (Chart 3.4).
CoreLogic data suggests that properties in Hobart are
selling much more quickly than at any time in the past decade
– typically in 20 days or less this past spring, compared with
more than 70 days during 2013 (Chart 3.5), and with 27-30
days in recent months in Sydney and Melbourne. Properties
are typically on the market for longer periods in the rest of
Tasmania, but even so have recently been selling within less
than 60 days, compared with more than 100 days in 2012-13.
Vendors in Hobart are also having to discount their initial
asking prices by less than at any other time in the past decade
in order to complete a sale – over the past spring by around
3½-3¾%, compared with 6½-6¾% in 2012-13.

Chart 3.6: Volume of residential property sales, Tasmania

Residential property sales volumes have continued to rise gradually in Hobart, although they remain below the levels
experienced in the years preceding, and immediately after, the global ﬁnancial crisis (Chart 3.6). However the volume
of sales in Launceston and along the North West Coast – which have typically been less volatile than in Hobart – are now
approaching the peaks experienced a decade ago (Chart 3.6).

10

‘Greater Hobart’ includes Sorell, Richmond, Dodges Ferry, Lewisham, Brighton, Pontville, Margate and Snug.

 Housing ﬁnance

However the value of ﬁnance commitments has continued
to rise steadily (Chart 3.8), reﬂecting the ongoing rise in
the size of the average mortgage taken out by Tasmanian
home borrowers, from an average of $226,400 in 2015-16 to
$241,600 in the ﬁrst three months of 2017-18, an increase of
6.7%. This compares with an increase of 2.1% in the size of the
average new mainland mortgage since 2015-16 (although the

Chart 3.7: Number of housing ﬁnance commitments
to owner-occupiers

average new mortgage taken out by mainland home buyers
is of course much larger, at $375,500 in the ﬁrst three months
of the current ﬁnancial year).
As noted in Section 1, the further extension of the $20,000
‘First Home Owners Boost’ in the most recent State Budget
does not appear to have had any material impact on demand
from ﬁrst home buyers. Indeed ﬁrst home buyers’ share
of total lending for housing thus far in 2017-18 has been lower
than in any year since 2003-04.
Instead, the recent growth in lending to home-buyers appears
to have been largely attributable to people buying second or
subsequent homes, or reﬁnancing existing loans (Chart 3.9).

Chart 3.8: Value of housing ﬁnance commitments
to owner-occupiers

TCCI TASMANIA REPORT 2017

The number of housing ﬁnance commitments to
owner-occupiers has levelled oﬀ in 2017, after rising steadily
over the preceding two years, in contrast to the trend on the
mainland where a modest decline during the ﬁrst half of 2016
has been followed by a gradual recovery over the past winter
and spring (Chart 3.7).

41

 TCCI TASMANIA REPORT 2017

42

Lending to residential property investors in Tasmania has
been rising strongly since the middle of 2016, and by late
2017 had reached record levels, exceeding the previous peak
in mid-2015, ahead of the introduction of tighter standards
for lending to investors at the instigation of the Australian
Prudential Regulatory Authority.

The rebound in lending to investors has been much more
pronounced in Tasmania than on the mainland (Chart 3.10).

Chart 3.9: Re-ﬁnancing and lending for home purchase,
Tasmania

Chart 3.10: Value of housing ﬁnance commitments
to investors

Nonetheless, investors still only account for 23% of total
housing lending in Tasmania, a smaller proportion than
in any other state or territory, and well below the national
average of 36%.

Together with Tasmania’s slower population growth rate, and lower average household incomes, this is an important reason
why property prices have risen by less, and housing remains more aﬀordable (for buyers) than elsewhere in Australia.

 Home ownership
Tasmania has the highest rate of home ownership of any
state or territory, at 69.2%, according to the results of the
2016 Census.
Tasmania’s home ownership rate has declined by just
0.2 percentage points over the 25 years since the 1991
Census, compared with a decline of 1.5 percentage points
in the national home ownership rate.

Tasmania’s above-average home ownership rate is also
a by-product of Tasmania’s older-than-average population,
since home ownership rates typically increase with age,
and home ownership rates nationally have declined by
much less among people aged 55 or over (who comprised
33.5% of Tasmania’s population at the 2016 Census,
compared with 27.3% of mainland Australia’s) than among
younger age groups.

Tasmania is the only state or territory where more than half
of all home-owners own their homes outright – that is,
without any outstanding mortgage debt.

Chart 3.11: Home ownership rates, states and territories,
2016 Census

As a result, housing aﬀordabililty (for buyers and owners)
hasn’t deteriorated nearly as much in Tasmania as it has in
other states. According to Real Estate Institute of Australia
calculations, debt service payments on an average-sized
mortgage absorbed 23.9% of average household income
in Tasmania in mid-2017, compared with 31.4% across
Australia as a whole11.

11

Real Estate Institute of Australia, Housing Aﬀordability Report, June Quarter 2017.

TCCI TASMANIA REPORT 2017

Tasmania’s above-average home ownership rate is partly
attributable to the slower rate of increase in residential
property prices over the past two decades, both in absolute
terms and relative to household incomes. As noted earlier
in this section, that partly reﬂects the fact that prospective
home-buyers have faced less competition from investors in
Tasmania than they have in other parts of Australia. There has
also been relatively less demand from overseas immigrants.

43

 The rental housing market
The rental housing market has tightened, particularly in Hobart, over the past year. Median rents for houses and units
have risen by 7.4% and 8.0%, respectively, in Hobart over the year to the September quarter 2017. Elsewhere in Tasmania
there has been less upward pressure on rents, although in Launceston, typical apartment rents increased by 6.0% over the
year to the September quarter. One exception is apartments on the North West Coast, for which median rents declined
by 3.6% over the year to the September quarter (Charts 3.12 and 3.13).

TCCI TASMANIA REPORT 2017

These data are consistent with the measure of rents included in the consumer price index, which for Hobart rose
by 4.1% over the year to the September quarter, compared with an average of just 0.8% for all capital cities.

44

Chart 3.12: Median rents, 3-bedroom houses

Chart 3.13: Median rents, 2-bedroom units

The upward pressure on rents in Hobart reﬂects the
signiﬁcant decline in vacancies over the past four years.
Hobart’s vacancy rate fell below 2% in the September
quarter for the ﬁrst time in nine years, to its lowest level
since the March quarter of 2004; the annual moving
average rate (a better indicator of the underlying trend) is
now down to levels not seen in seven years (Chart 3.14).

Vacancy rates remain much higher, and have fallen
by less in Launceston and along the North-West Coast.
It has been suggested that the decline in the supply
of rental accommodation in Hobart may have been
exacerbated by property owners electing to make their
properties available to tourists (using online platforms
such as Airbnb) rather than to tenants12.

See, for example, Larry Schlesinger, ‘Airbnb keeping Hobart housing market robust’, Australian Financial Review, 14th June 2017; Loretta Lohberger, ‘Solid research needed to
measure the impact of Airbnb on rental properties’, The Mercury, 23rd June 2017.

12

 Certainly, the number of Hobart properties listed on Airbnb
has increased signiﬁcantly over the past year. However it’s
unclear to what extent this is driven by property owners
seeking to rent out rooms in their own homes, as distinct from
investment properties which would otherwise have been
rented to tenants.

A measure of housing aﬀordability for low-income rental
households is compiled by National Shelter, Community Sector
Banking and SGS Economics and Planning. It is based on the
ratio of median income to the income at which median rent
would represent 30% of income (30% of income being the
most widely-used threshold for identifying housing stress)13.

Although rents in Tasmania are typically lower than in other
states and territories, so are household incomes. Moreover,
a higher proportion of households in Tasmania are on low
incomes (that is, have incomes which place them in the bottom
40% of the national income distribution) than in the rest of
Australia. Hence, housing is typically less ‘aﬀordable’ for renters
in Tasmania than it is for home buyers.

By this measure, rental aﬀordability for low income households
in Hobart has deteriorated signiﬁcantly in Hobart over the
past three years, and in the June quarter of 2017 was lower
than in any other capital city except Sydney (Chart 3.14). Rental
aﬀordability in regional Tasmania has been more stable over
the past four years – but this has been in contrast to a gradual
improvement in rental aﬀordability in the regional areas of
mainland states over this period (Chart 3.15).

Chart 3.15: Rental aﬀordability, regional Tasmania
and regional mainland states

TCCI TASMANIA REPORT 2017

Chart 3.14: Rental aﬀordability index,
Hobart and mainland capitals

13

For further details see SGS Economics and Planning, Rental Aﬀordability Index, November 2017.

45

 SECTION
FOUR

 
POPULATION AND
SOCIETY

 
Population growth
Tasmania’s population increased by 0.6% in 2016-17, the
fastest growth rate since 2010-11, and marginally ahead of its
average growth rate since the turn of the century. As it has
been every year since 2004-05, Tasmania’s population growth
rate was slower than that of any other state, although for

the third year in a row it was faster than that of the Northern
Territory (Chart 4.1). The margin between the growth rate of
Tasmania’s population and that of the rest of Australia was the
smallest in six years (Chart 4.2).

Chart 4.1: Population growth, states and territories, 2016-17

Chart 4.2: Population growth, Tasmania and mainland Australia,
2000-01 to 2016-17

TCCI TASMANIA REPORT 2017

The gradual pick-up in the growth rate of Tasmania’s
population has been driven by a turnaround in interstate
migration, from a net outﬂow which peaked at more than
2,800 people in the year ended September 2013, to a net
inﬂow of 681 people (the highest in nearly eight years) in the
year ended March 2017 (Chart 4.3).

48

This reﬂects both a decline in the number of people leaving
Tasmania and an increase in the number of people moving to
Tasmania from the mainland, compared with the years 2012-15
− although each remains well below the levels prevailing during
the ﬁrst decade of this century (Chart 4.4).

Net overseas immigration continues to add just over 1,000
people to Tasmania’s population each year. This represents
0.5% of Australia’s total net immigration intake – well below
Tasmania’s 2.1% share of Australia’s population. An instructive
comparison is with South Australia, whose population is about
3¼ times larger than Tasmania – yet it receives eight times
as many overseas immigrants as Tasmania. This is the main
reason why South Australia’s population has grown at a faster
rate than Tasmania’s over the past ﬁve years, despite losing
a relatively larger share of its population to net interstate
migration over this period than Tasmania.

 Chart 4.3: Components of Tasmania’s population growth

The rate of ‘natural increase’ in Tasmania’s population (ie,
births minus deaths) has also continued to slow, adding just
0.3 of a percentage point to the growth rate of Tasmania’s
population over the year to March 2017, down from 0.6 of a
percentage point a decade ago – a much sharper slowdown
than for Australia as a whole (Chart 4.5).

Chart 4.4: Net interstate migration to Tasmania, by age groups

Chart 4.5: Contribution of ‘natural increase’ to population
growth, Tasmania and Australia

As discussed in this section of last year’s Tasmania Report,
Tasmanian women have a higher total fertility rate – that
is, they on average have more children over the course of
their ‘reproductive years’ – than women in any other part of
Australia except the Northern Territory.

In addition, because Tasmania’s population is, on average,
older than that of the rest of Australia, and because
Tasmanians die at a (slightly) younger age than people in
the rest of Australia (with the conspicuous exception of the
Northern Territory and, marginally, Queensland), Tasmania’s
crude death rate, of 8.9 per 1,000 population in 2016, is
signiﬁcantly higher than the national average of 6.5.

TCCI TASMANIA REPORT 2017

But because women in their ‘reproductive years’ represent
a smaller proportion of the female population than that of
any other state or territory, Tasmania’s crude birth rate – 11.0
per 1,000 population in 2015 – is the lowest of any state or
territory, and well below the national average of 12.8.

49

 The composition of interstate migration to and from
Tasmania continues to have a signiﬁcant impact on the
age proﬁle of Tasmania’s population.

Chart 4.6: Net interstate migration to Tasmania, by age group

Tasmania has long been a ‘net exporter’ of people aged
under 45 – and, in particular, people who are more likely
than those in other age groups to be undertaking higher
education, to be employed, and to be forming families – and
a ‘net importer’ of people aged 45 or over, who on average
are less likely to participate actively in the labour market.
The contrasting age proﬁle of people moving to and from
the mainland inevitably reinforces the trend in Tasmania’s
birth and death rates discussed above.
Against that background, some encouragement may
be drawn from the fact that the turnaround in net
immigration since 2013 stems largely from a decline
in the ‘net outﬂow’ of young adults. However, this
development would need to strengthen further, and
be sustained for an extended period, even merely to slow
the rate at which Tasmania’s population is ageing.

Characteristics of Tasmania’s
population
Tasmania has the oldest, and most rapidly-ageing
population of any Australian state or territory. At the
August 2016 Census, the median age of Tasmania’s
population was 42 (that is, half of Tasmania’s population
was younger than 42 and half older), ﬁ ve years above the
corresponding ﬁgure for mainland Australia (Chart 4.7).
At the 2006 Census, Tasmania’s median age of 39 years
was only 2 years higher than the mainland average.

TCCI TASMANIA REPORT 2017

19.4% of Tasmania’s population at last year’s Census was
aged 65 or over, the highest of any state or territory, and
3.7 percentage points above the average for mainland
Australia. (Chart 4.8). The proportion of Tasmania’s
population aged 65 or over has risen by 4.4 percentage
points since the 2006 Census, whereas the corresponding
proportion for mainland Australia has only risen by
2.4 percentage points.

50

Conversely, 29.0% of Tasmania’s population at last
year’s Census were aged between 20 and 44, the lowest
of any state or territory and 5.7 percentage points below
the mainland average. A decade earlier, the proportion of
Tasmania’s population in this age range was only
2.4 percentage points below the mainland average.

 Chart 4.7: Median age, states and territories, 2016 Census

Chart 4.8: Population aged 65 and over, states and territories,
2016 Census

While Tasmania’s population is considerably older than that of any other state or territory, this in large part reﬂects
the younger demographic proﬁle of the capital cities of Australia’s mainland states and territories.
Tasmania’s median age, and the share of its population aged 65 or over, are much closer to the corresponding averages
for the non-metropolitan areas of the mainland states, and actually lower than the averages for the non-metropolitan
regions of New South Wales, Victoria and South Australia (Charts 4.9 and 4.10).

Chart 4.10: Population aged 65+, Tasmania and regions of mainland
states, 2016 Census

TCCI TASMANIA REPORT 2017

Chart 4.9: Median age, Tasmania and regions of mainland
states, 2016 Census

51

 Tasmania’s population is much less culturally diverse than
that of any other state or territory. Only 12% of Tasmania’s
population at the 2016 Census were born overseas, less than
half the national average (Chart 4.11). Just 2.6% of Tasmania’s
population were born in East, South-East or South Asia,
compared with 9.9% of Australia’s total population. One or
both of the parents of 23% of Tasmania’s population were
born overseas, compared with 45% of the national total.
Only 5.4% of Tasmanians speak a language other than
English at home, a quarter of the national average of 20.8%.

Again, however, these diﬀerences are largely attributable
to the capital cities of the mainland states. The proportion
of Tasmanians born overseas is actually slightly higher
than that of the people living outside the capitals of the
three mainland south-eastern states (Chart 4.12), while the
proportion of Tasmanians speaking a language other than
English at home is only slightly lower than that of the nonmetropolitan populations of New South Wales and Victoria,
and higher than that of regional South Australia.

Chart 4.11: Overseas-born population, states and territories,
2016 Census

Chart 4.12: Overseas-born population, Tasmania and
mainland regions, 2016 Census

Household income
Tasmanians are poorer, on average, than people living in other states and territories. Median personal income in Tasmania
according to the 2016 Census was $573 per week, lower than in any other state or territory, and 13.4% below the national average.
And median Tasmanian household income of $1,100 per week was 23.5% below the national average at the 2016 Census (Chart 4.13).

TCCI TASMANIA REPORT 2017

If the mainland state capitals and Canberra are excluded from the comparison, then the median Tasmanian household income at
last year’s Census was only 8.6% below the average for the non-metropolitan regions of the mainland states, and not signiﬁcantly
diﬀerent from those in regional New South Wales, Victoria and South Australia (Chart 4.14).

52

 Chart 4.13: Median household incomes, states and territories,
2016 Census

Chart 4.14: Median household incomes, Tasmania and
mainland regional areas

Tasmania’s low median household income is not because Tasmania’s low-income households have lower incomes than
their counterparts in other states and territories, but rather because a much higher proportion of Tasmanian households
earn low incomes; because there are relatively fewer high-income households in Tasmania than in other states and territories;
and because the incomes of Tasmanian households which are classiﬁed as ‘high income’ are nonetheless typically not
as high as those of high-income households in other states and territories.
Thus, as Chart 4.15 shows, 46% of Tasmanian households have a (gross) income of less than $1,000 per week – more than
in any other state or territory, and more than 10 percentage points above the national average (though only 3½ percentage
points above the average for the non-metropolitan regions of the mainland states).

TCCI TASMANIA REPORT 2017

Chart 4.15: Weekly household income, by income range, 2016 Census

53

 TCCI TASMANIA REPORT 2017

54

Conversely, only 23% of Tasmanian households have a gross
income of over $2,000 per week, fewer than in any other
state or territory, and more than 12 percentage points
below the national average (although only 4 percentage points
below the average for the areas outside the capital cities
of mainland states). At the top end of the income distribution,
only 3.1% of Tasmanian households earn $4,000 per week
or more, less than half the national average of 7.6% (and
even 1.2 percentage points below the average for regional
areas in mainland states).

payments, and pension and other beneﬁts received) averaged
just over $41,000 per person in Tasmania in 2016-17, which was
just under $7,000 or 13½% below the national average (Chart 4.17).

National income redistribution systems therefore play a more
important role in the well-being of households in Tasmania
than they do in other states and territories. Data from the
ABS State Accounts shows that primary household income
(that is, wages and salaries, small business income, and
interest, rent and dividends) averaged just under $40,000 per
person in Tasmania in 2016-17, almost $12,700 or 24% less
than the national average (Chart 4.16). However, household
disposable income (that is, net of income tax and interest

Tasmania is the only state or territory where households
(in aggregate) receive more from the social security system
than they contribute to the personal income tax system.
This represented a net transfer to the Tasmanian economy
(from the federal government) in 2016-17 of $791mn
(equivalent to 2¾% of gross state product). For households
in mainland states, the net impact of the personal income
tax and social security systems is a transfer to the federal
government equivalent to 4.3% of gross product.

Chart 4.16: Gross household primary income per person,
states and territories, 2016-17

Chart 4.17: Household disposable income per person, states
and territories, 2016-17

This largely reﬂects the fact that Tasmanian households
(as a group) pay less in personal income tax (an average of
$5,621 per person in 2016-17, 33½% less than the national
average) than they receive by way of pensions and other
beneﬁts (an average of $7,154 per person in 2016-17, 32%
above the national average) (see Charts 4.18 and 4.19).

 Chart 4.19: Social security beneﬁt receipts per person, states
and territories, 2016-17

This should not be seen as any sort of achievement – on the contrary, it would be far preferable if Tasmanians’ circumstances
were such that they could be ‘net contributors’ to the national tax-transfer system as households (in aggregate) in other
states and territories are. But since that isn’t the case, it underscores the continuing importance to the well-being
of Tasmanians of a progressive income tax system and an adequate social ‘safety net’.

TCCI TASMANIA REPORT 2017

Chart 4.18: Personal income tax payments per person, states
and territories, 2016-17

55

 Health and disability
Last year’s Tasmania Report presented data from the
ABS National Health Survey, conducted in 2014-15, which
showed that a lower proportion of Tasmanians assessed
their health status as ‘excellent’ or ‘very good’, and a higher
proportion as ‘fair’ or ‘poor’ than of the population of any
other state or territory14.
Further data from this survey released over the past year
indicates that Tasmanians consult health professionals
marginally more frequently, on average, than people all
Australians – with the exception of dentists, whom they
consult less frequently (Chart 4.20). 33% of Tasmanians

However, Tasmanians are notably more intensive in their
use of hospital facilities than people living in other states
and territories. According to the National Health Survey, 14%
of Tasmanians had been admitted to a hospital as an inpatient
during the previous 12 months, more than in any other state or
territory, and 2.6 percentage points above the national average;
9.6% had visited an outpatient clinic, 2.0 percentage point above the
national average; and 14.6% had visited emergency or casualty,
2.6 percentage points above the national average (Chart 4.21).

Chart 4.20: Consultations with health professionals in past 12 months

Chart 4.21: Use of hospital or medical facilities in the past 12 months

The 2014-15 National Health Survey also showed that 17.7% of
Tasmanians had time away from work, study or school due to
illness in the two weeks prior to the survey, 2.7 percentage points
above the national average and a higher proportion than in any
other state or territory. These outcomes are not surprising in view
of Tasmania having a higher proportion of its population in older
age groups, as noted previously in this section.
Data from the 2016 Census indicates that Tasmanians are
more aﬀected by disability than people in other states and
territories (Chart 4.22).
Perhaps surprisingly, however, this is not a corollary of
Tasmanians being older, on average, than other Australians. The
proportion of Tasmanians aged 65 or over needing assistance
with ‘core activities’ at last year’s Census, of 16.7%, was actually
lower than in any other state except WA, and 0.7 percentage pts
below the national average.

TCCI TASMANIA REPORT 2017

56

Rather, 2.9% of Tasmanians aged under 15, and 4.2% of
Tasmanians aged 15-64, needed assistance with ‘core activities’,
in each case above the corresponding national averages of 2.6%
and 2.9%, respectively.

14

hadn’t seen a dentist within the past two years, compared
with 26% of Australia’s population as a whole.

Tasmania Report, 2016, pp. 51-52.

Chart 4.22: People needing assistance with ‘core activities’,
states and territories, 2016 Census

 Socio-economic status
This section has thus far presented data showing that
Tasmanians are older, poorer, less healthy and more likely
to be aﬀected by disability than other Australians. Section 2
showed that Tasmanians are less likely to be employed than
other Australians, and to earn less when they are employed;
while Section 5 will show that they remain less well-educated,
on average, than people living in other states and territories.
All of these factors are contributors to the fact that
Tasmania has relatively greater concentrations of economic
and social disadvantage than any other state or territory
– and conversely, fewer concentrations of social and
economic privilege than other parts of Australia.

of each state and territory government to raise revenue from
its own resources, and the requirements for expenditure on
public services, indicate that 31.3% of Tasmanians are in the
most disadvantaged socio-economic status (SES) quintile
(ﬁfth) of Australians – 11.3 percentage points more than would
be the case if socio-economic advantage and disadvantage
were evenly spread across the country; while a further 23.3%
of Tasmanians are in the second-most disadvantaged SES
quintile – 3.3 percentage points more than if advantage and
disadvantage were evenly spread (Chart 4.23).

Calculations undertaken by the Commonwealth Grants
Commission as part of its annual assessments of the capacity

Conversely, only 8.9% of Tasmanians are in the highest SES
quintile – 11.4 percentage points less than if advantage were
evenly spread across Australia – while 15.5% were in the secondmost advantaged SES quintile – 4.6 percentage points than if
there were an even spread of social and economic advantage.

Chart 4.23: Low SES status as a pc of population,
December 2015

Chart 4.24: High SES status as a pc of population,
December 2015

Conversely, there are almost two-and-a-half times as many people in the most disadvantaged quintile of the Australian
population living in Tasmania as there are in the Northern Territory and ACT combined, even though the two territories’
combined population is only 23% larger than Tasmania’s.

TCCI TASMANIA REPORT 2017

There are actually almost 4,500 more people among the most socio-economically advantaged ﬁfth of the Australian
population living in the Northern Territory than in Tasmania, even though the Northern Territory’s total population is less
than half of Tasmania’s. There are more than 4½ times as many people in the highest SES quintile living in the ACT as there
are in Tasmania, even though the ACT’s population is only three-quarters of Tasmania’s.

57

 Other dimensions of ‘well-being’
Much of this section has presented a less-than-ﬂattering
impression of the economic and social condition of
Tasmania’s population. However, it’s worth remembering
that, important as income, wealth and health are, they are
not the only dimensions of ‘well-being’. Clearly, a very large
proportion of Tasmanians choose to remain in the state,
notwithstanding that they might well be able to earn a higher
income if they moved elsewhere. Among the things that
Tasmanians value are things that are diﬃcult to put a dollar
value on – but they are no less important for that.
Some of these other dimensions of well-being were
highlighted in the 2016 Tasmania Report – for example,
relatively fewer Tasmanians experience housing stress than
people in other states and territories; Tasmanians spend
less time travelling to and from work or study than people
in any other state or territory; Tasmanians have more
frequent contact with family and friends outside their own
households than people in other states or territories; and
the proportion of people who feel they are ‘able to have
a say, most or all of the time’ on ‘important issues’ is higher
in Tasmania than in any other state or territory15.

As one example of this, the Census found that 17.5% of
Tasmanians aged 15 and over undertake voluntary work

Chart 4.25: People aged 15 and over doing voluntary work,
2016 Census

Chart 4.26: Occupied private dwellings with internet access,
2016 Census

TCCI TASMANIA REPORT 2017
15

This wasn’t simply a function of a higher proportion
of Tasmanians being aged 65 or over (even though
people in this age group, wherever they live, are more
likely to volunteer their time than people in younger
age groups). The proportion of Tasmanians aged 15-64
who undertake some form of voluntary work was, at 16.8%,
higher than in any other state, and 1.8 percentage points
above the national average.
A diﬀerent dimension where Tasmania does not compare
so favourably is in regard to internet access. According
to last year’s Census, 78.0% of Tasmanian homes had
access to the internet – less than in any other state or
territory, and more than 5 percentage points below the
national average of 83.2% (Chart 4.26). Unlike some other
indicators highlighted in this section, this comparison is not
greatly aﬀected by excluding the mainland metropolitan
centres. The proportion of Tasmanian homes with access
to the internet is lower than the average for the nonmetropolitan areas of the mainland states – and, in particular,
lower than for regional Queensland or Western Australia
(where distance might have been expected to have been
a factor aﬀecting internet access), though higher than
in regional New South Wales and South Australia.

The results of last year’s Census, released over the past
six months, provide some further instances where various
aspects of ‘well-being’ or ‘social capital’ in Tasmania compare
favourably with other states and territories.

58

for an organisation or group, a higher proportion than in any
other state or territory except for the ACT and (marginally)
South Australia, and 2 pc points above the national average.
(Chart 4.25). It was also 2.1 percentage points above the
average for non-metropolitan regions of mainland states.

Tasmania Report, 2016, pp. 51-52.

 SECTION
FIVE

 
EDUCATION
SYSTEM

 
The importance of education
The ﬁrst Tasmania Report, published two years ago, quoted
the inaugural Professor of Economics at the University of
Tasmania, Douglas Copland, as saying “not merely ﬁnancially,
but in the moral and social ﬁeld, education is the most
proﬁtable investment a community can make”16. However, it is
not only economists who stress the importance of education.
Nelson Mandela once said, “Education is the most powerful
weapon which you can use to change the world”17.
The ﬁrst Tasmania Report cited a range of international and
Australian evidence demonstrating strong linkages between
both the quantity of education (as measured by years of
schooling, or the attainment of post-school qualiﬁcations) and
the quality of education(as measured by standardized test
scores) and economic outcomes, for individuals and nations18.

In particular, a person with at least 12 years of schooling is
almost 60% more likely to have a job than a person who has
had 10 years of schooling or less; and a person with a postsecondary qualiﬁcation is, if he or she is employed, about 25%
more likely to have a full-time job than a person without one.

Chart 5.2: Educational attainment vs full-time employment
as a pc of total, May 2016

TCCI TASMANIA REPORT 2017

Chart 5.1: Educational attainment vs
employment-to-population ratio, May 2016

More recent Australian data shows that the higher a person’s
level of educational attainment, the more likely he or she is to
have a job (Chart 5.1); and the more likely it is that his or her
job will be a full-time one (Chart 5.2).

16

60

17
18

Marjorie Harper, Douglas Copland – Scholar, Economist, Diplomat, The Miegunyah Press, Melbourne, 2013, p. 48.
Nelson Mandela, Speech at the launch of the Mindset Network, University of Witwatersrand, Johannesburg, 16 July 2003.
Tasmanian Chamber of Commerce and Industry, Tasmania Report, December 2015, pp. 34-35.

 Chart 5.3: Educational attainment and median weekly
earnings, August 2016

There is also a clear correlation between educational
attainment and earnings in employment (Chart 5.3).
People with post-secondary qualiﬁcations (Certiﬁcate III/
IV or higher) earn an average of 56% more than those who
have either no post-secondary qualiﬁcations (or a Certiﬁcate
I/II); and people with a university degree earn 6% more, on
average, than those who don’t have one (or 75% more than
those who have no post-secondary qualiﬁcation at all.
Findings such as these are directly relevant to the main
themes of this report.

Educational attainment
in Tasmania
Tasmanians are, in general, less well-educated than people living in other parts of Australia.
Only 19.3% of Tasmanians aged 15-75 have a university degree or higher, the lowest proportion of any state or territory,
and more than 7½ percentage points below the national average (Chart 5.4). This proportion has risen by 2.4 percentage
points over the past three years – but the corresponding national average has risen by 2.8 percentage points over the same
period, so the gap has actually widened since 2014.

Chart 5.5: Population aged 15-75 with no qualiﬁcation
beyond Year 10, May 2017

TCCI TASMANIA REPORT 2017

Chart 5.4: Population aged 15-75 with bachelor degree
or higher, May 2017

61

 Conversely, 27.5% of Tasmanians aged 15-75 have no
qualiﬁcation beyond Year 10. This is (by a wide margin) the
highest of any state or territory, and 8.2 percentage points
above the national average (Chart 5.5). More encouragingly,
the proportion of 15-75 year old Tasmanians with no
qualiﬁcations beyond Year 10 has fallen by 6.6 percentage
points over the past three years, compared with a decline of
2.9 percentage points in the corresponding national average −
so this gap is at least moving in the right direction.
Data from last year’s Census shows that Tasmania’s belowaverage levels of educational attainment cannot be ‘explained’
by the fact that a larger proportion of Tasmania’s population

TCCI TASMANIA REPORT 2017

Chart 5.6: Population aged 15 & over with no qualiﬁcations
beyond Year 10 – non-capital city regions, 2016 Census

62

lives outside the capital city than that of any other state
or territory, or that Tasmania lacks a large metropolitan area
the size of the other state capitals.
A higher proportion of people aged 15 and over living
in regional Tasmania (that is, outside of Hobart) have no
educational qualiﬁcations beyond Year 10 than that of people
living outside the capital cities of any other state (Chart 5.6).
And the proportion of people aged 15 and over living in
Hobart who have no educational qualiﬁcations beyond
Year 10 is higher than that in any of the six mainland ‘
provincial’ cities shown in Chart 5.7 with which Hobart
might reasonably be compared.

Chart 5.7: Population aged 15 & over with no qualiﬁcations
beyond Year 10 – ‘provincial cities’, 2016 Census

Conversely, the proportion of people aged 15 and over who have completed Year 11 or Year 12 is much lower in regional
Tasmania than it is in the non-metropolitan areas of any mainland state (Chart 5.8); while the proportion of people aged
15 and over living in Hobart who have completed Year 11 or Year 12 is lower than in any of the mainland ‘provincial’ cities
shown in Chart 5.9, apart from Townsville.

 Chart 5.8: Population aged 15 & over who have completed
Year 11 or Year 12 – non-capital city regions, 2016 Census

Chart 5.9: Population aged 15 & over who have completed Year
11 or Year 12 – ‘provincial cities’, 2016 Census

The below-average proportion of Tasmanians with university qualiﬁcations, and the above-average proportion who have never
progressed beyond Year 10 of high school, partly reﬂects the patterns of interstate migration discussed in Section 4.
However it is also a legacy of persistently below-average participation in, and completion of, senior secondary school
in Tasmania compared with the rest of Australia.

A smaller proportion of Tasmanian Year 10 students continue
their studies on to Year 12 than of those in any other state
or the ACT – or in the Northern Territory if the Indigenous
population is excluded from the comparison (Chart 5.10).

By contrast, the retention rate at government schools declined
by 0.4 of a percentage point, but was still the second-highest
on record (albeit still 6.1 percentage points below the national
average retention rate for government schools).

Tasmania’s apparent retention rate to Year 12 fell back
by 1.8 percentage points, to 70.8%, in 2016, after rising
by 5 percentage points between 2012 and 2015. By contrast,
the national average apparent retention rate rose to a new
record high of 82.9% (Chart 5.11). Apparent retention rates
in the ACT and in South Australia are now both over 90%.

Apparent retention rates are based on enrolment
ﬁgures – that is, the number of students enrolled in (in this
case, Year 12) courses at the beginning of each year.

The decline in Tasmania’s Year 12 retention rate in 2016 was
largely due to a 2.6 percentage point fall in the retention rate
at non-government high schools, to its lowest level since 2010.

TCCI TASMANIA REPORT 2017

Educational participation
in Tasmania

63

 Chart 5.10: Apparent retention rates from Year 10 to Year 12,
states and territories, 2016

They do not convey any information about the extent
to which students successfully complete the courses
in which they enrol.

TCCI TASMANIA REPORT 2017

Tasmania’s Year 12 completion rate - the number of students
who meet the requirements of a Year 12 Certiﬁcate or
equivalent expressed as a percentage of the potential
Year 12 population (in turn deﬁned as one ﬁfth of the
population aged 15-19) – was just 51% in 2015, the latest
year for which data for all states and territories are publicly
available. As shown in Chart 5.12, this was lower than in any
other part of Australia except the Northern Territory.

64

Tasmanian Government data indicate that the Year 12
completion rate rose signiﬁcantly, to 56.4%, in 2016 – though
this is still well below the national average (Chart 5.13).

19

Chart 5.11: Apparent retention rates from Year 10 to Year 12,
Tasmania and Australia, 1990-16

It is sometimes argued that Tasmania’s Year 12 certiﬁcate
(the TCE) is ‘harder to obtain’ than the equivalents in other
states, because since 2009 it has, unlike other states and
territories, required students to demonstrate ‘ordinary adult
capacity to use computers and the internet’ – and hence that
comparisons with other states’ and territories’ completion
rates are misleading. In practice, only a very small proportion
of Tasmanian students fail to attain a TCE because of an
inability to meet this requirement. A more detailed study,
which included an assessment by principals in other states
of how their Year 12 completion requirements compared
with Tasmania’s, concludes that, if anything, the TCE is “the
least demanding of all the states’ senior secondary certiﬁcate
requirements”19.

Michael Rowan and Eleanor Ramsay, The Great TCE Completion Conundrum, Education Ambassadors, 2 September 2015.

 Chart 5.13: Year 12 completion rates, Tasmania and Australia

It is also frequently asserted that Tasmania’s low Year 12
completion rates are the ‘inevitable’ result of the facts that
a larger proportion of Tasmanian students than of students
in other states and territories live in rural and regional areas;
and that a larger proportion of students in Tasmania than in
other states and territories come from low socio-economic
status (SES) households.

As shown in Chart 5.14, Year 12 completion rates are lower
in every geographic category in Tasmania than they are
in the corresponding regions of every mainland state.

Both of those facts are, by themselves, undeniable (as has
been acknowledged and discussed earlier in this report).
It is also true that, in general, students from rural and
regional areas tend to have lower Year 12 completion rates
than students from large cities; and that students from high
SES households tend to have higher Year 12 completion rates
than students from low SES households.

Similarly, Chart 15 shows that Year 12 completion rates are
lower in every SES grouping in Tasmania than they are in the
corresponding groupings in every mainland state.

However, data compiled by the Productivity Commission show
that neither of these factors explains why Tasmanian Year 12
completion rates are so much lower than those in other states.

Indeed, a student from Hobart is less likely to complete
Year 12 than a student from a remote area of any
mainland state.

A student from a high SES household in Tasmania is less likely
to complete Year 12 than a student from a low SES household
in any of the mainland states.

TCCI TASMANIA REPORT 2017

Chart 5.12: Year 12 completion rates, states
and territories, 2015

65

 Chart 5.14: Year 12 completion rates by location, States and Territories, 2015

TCCI TASMANIA REPORT 2017

Chart 5.15: Year 12 completion rates by SES status, States and Territories, 2015

66

It is more likely that the ‘causation’ runs the other way round from how it has often been portrayed – that is, Tasmania’s historically
low levels of educational participation and attainment are an important reason (albeit not the only one) why a higher proportion
of Tasmanian households than of households in other States are fall into the lowest socio-economic status, rather than the latter
‘causing’ the former.
Combined with the evidence presented at the beginning of this section about the correlation between educational attainment,
labour force status and earnings, it is highly likely that Tasmanians’ low levels of educational attainment are the reason for their
lower-than-average participation in employment (at any given age) and their lower-than-average incomes – rather than the
other way round.

 Spending on education
In the 2015-16 ﬁnancial year, the Tasmanian government spent
just over $13,900 per full-time equivalent student on school
education, almost $2,000 per FTE student (or 17%) more than

Chart 5.16: Government spending on school education
per FTE student, 2015-16

the average for all States and Territories, and more than any
other jurisdiction except the Northern Territory (Chart 5.16).
This was equivalent to 4% of Tasmania’s gross state product in
2015-16, more than for any other State or Territory, and some
1.2 percentage points above the average for all States and
Territories (Chart 5.17).

Chart 5.17: Government spending on school education
as a pc of GSP, 2015-16

If this above-average spending were producing better-than-average educational outcomes – as appears to be the case
in South Australia, for example – then that would be money well spent. However, Tasmania is spending more on education
than other states and territories, on average, and getting worse results20 .
More detailed data compiled by the Productivity Commission suggest that Tasmania’s above-average spending per student
on school education isn’t the result of above-average spending on teachers, but rather is due to above-average spending
on non-teaching staﬀ and on other operating costs (Chart 5.18).

The annual assessment by the Commonwealth Grants Commission, as part of its determination of GST revenue-sharing relativities, also concludes that Tasmania spends
(slightly) more (per head of population) on school education than it would need to in order to provide ‘the same standard of service’ as the average of all states and territories, after
taking account of diﬀerences in factors such as the proportion of the population which is of school age, the proportion of students attending government schools, the proportion
of students living in provincial or remote areas, and the socio-economic status of students’ families (CGC, 2017 Update Report, Tables S7-3 and S7-4).

TCCI TASMANIA REPORT 2017

Nor can Tasmania’s historically low levels of educational
participation and attainment be attributed to inadequate
levels of government spending on education.

20

67

 Chart 5.18: Spending per FTE student on government school education, by type, 2014-15

In the 2014-15 ﬁnancial year (the latest for which these data
are available), Tasmania spent only $253 (or 3.1%) more per
student than the national average on teachers in government
schools. But it spent $690 (or 29%) per student more on nonteaching staﬀ, and $438 (or 15%) per student more on other
operating expenses than the national average21.

TCCI TASMANIA REPORT 2017

As outlined in the two previous Tasmania Reports, one of the
reasons why Tasmania spends more on education, without
getting commensurately better results, is the relatively small
size of Tasmanian schools. Tasmanian government schools had
an average of 295 FTE students each in 2016, fewer than those
in any other state (on average), and well below the national
average of 373 students per government school.

68

Smaller schools will typically have higher overhead and ﬁxed
costs (eg for school leaders, administrative, support and
maintenance staﬀ ) per student than larger schools. However,
in the Tasmanian context, there is no evidence to suggest that
smaller schools produce better student outcomes.
Another reason why Tasmania spends relatively more
on schools whilst obtaining poorer outcomes is that
Tasmania’s long-standing system of senior secondary
schools is a relatively expensive way of educating the
relatively small proportion of eligible students who
attend them.

More detailed data compiled by the Productivity Commission
show that this is because Tasmania has relatively few large
primary schools (with more than 400 students), a relatively
large number of small secondary schools (with fewer than 300
students), and relatively few large secondary schools (with
more than 800 students).

21
The estimates of schools expenditure published by the Productivity Commission in its annual Report on Government Services include depreciation and a ‘notional user
cost of capital’, which are not included in the ABS ﬁgures used in Charts 5.16 and 5.17, and referred to in the accompanying discussion.

 Tasmania’s
college system
The most obvious and substantial structural diﬀerence
between the government school system in Tasmania and
elsewhere in Australia is that Year 11 and 12 courses have
traditionally been taught only in ‘colleges’, separate from
high schools which in Tasmania, unlike other states, have
traditionally only catered for Years 7 through 10. The only
other jurisdiction which provides senior secondary education
through separate colleges is the ACT – which, as shown
throughout this Report, is economically, culturally and in
almost every other way more diﬀerent from Tasmania than any
other part of Australia.
Colleges were originally established in Tasmania in the
1960s, as a ‘half-way house’ between the more structured
environment of schools and the relatively greater freedom of
universities, when the principal reason students undertook
Year 11 and 12 studies was in order to ‘matriculate’, that
is, qualify for entry into a university. They were intended
to attract “the best qualiﬁed teachers and most promising
students that one central college could provide”22. In 1995
the Catholic school system adopted the college model for
Years 11 and 12 in southern Tasmania.
This Report does not suggest that the colleges have done
a poor job of providing senior secondary education to the
students who have attended, or are attending them.

The separate college system has also led to the existence
of a number of obstacles confronting students who might
otherwise have been more likely to progress all the way to
Year 12, which do not exist in the integrated high school
systems of mainland states.
The ‘structural break’ in the Tasmanian education system
at Year 10 means that students in Years 7 through 10 at
government high schools do not come into regular contact
with Year 11 and 12 students who can serve as ‘role models’
for them, inspiring them to see Year 12 as the appropriate ‘exit
point’ from schooling, rather than Year 10. As some of them
have said, “you cannot be what you cannot see”.

However, it does appear that the college system is a relatively
expensive way of providing Year 11 and 12 courses.

TCCI TASMANIA REPORT 2017

One recent estimate, based on MySchool data for 2012,
suggested that the average cost per graduate (across the eight
colleges) was $58,525, compared with an average of $39,116 at
thirteen South Australian high schools whose students came
from a similar range of socio-economic backgrounds to the
Tasmanian colleges, and $33,789 at a sample of independent
schools in Tasmania and New South Wales. The average cost
per graduate at the Tasmanian colleges was also $10-14,000
more than the University of Tasmania charged overseas
students for two years of a BA or BSc course23.

Mike Frost, ‘Talking Point: Where our colleges went wrong’, The Mercury, 4 February 2016.
Michael Rowan and Eleanor Ramsay, ‘Tasmanian Colleges – Fit for the Purpose of Post-Compulsory Schooling?’ Education Ambassadors, August 2014, updated in Submission to the
State of Tasmania Years 9-12 Education Review: Attachment 1, Australian Council for Educational Research, September 2016.
22

23

69

 It means that students who do go on to Years 11 and 12 at
a college lose contact with subject teachers and other staﬀ
who have come to know their strengths and weaknesses over
their ﬁrst four years of high school, and have to ‘start again’
with college staﬀ who will only have two years to achieve the
same insights – and who are themselves ‘starting from
scratch’ with their new intakes each year.

Chart 5.19: Year 12 completion rates at 30 ‘extension’
high schools, 2012-2016

And of course it has traditionally meant that students from
other than the four centres where the colleges are located
have had to commute long distances, or board, in order to
complete Years 11 and 12 – which have often turned out
to be insurmountable hurdles.
One of the present Tasmanian Government’s most important
policy initiatives has been the extension of Year 11 and 12
courses in high schools outside the four major population
centres (where the colleges are located). 30 such schools
now oﬀer Year 11 and 12 courses.
42% of students enrolled in these schools in 2014 attained
their TCE in 2016, up from 29% of those enrolled in these
schools in 2010 who attained their TCE in 2012 – an increase
of 13 percentage points, compared with an increase of
10 percentage points in the completion rate for all Tasmanian
schools (including the ‘extension schools’).
The proportion of students at these schools in Year 10 who
had attained at least some Year 11 or Year 12 credits has risen
by 8 percentage points since 2012.
These ﬁgures suggest that providing the opportunity for
a ‘seamless transition’ from Year 10 to Years 11 and 12 does
have a positive eﬀect on retention and completion rates.

TCCI TASMANIA REPORT 2017

Against that background, the Government’s recentlyannounced commitment that, if returned to oﬃce at the
forthcoming state election, it will enable the 19 high
schools in the four major population centres (where almost
three-quarters of Tasmania’s population live) to oﬀer Year
11 and 1224 courses is a further important step towards
eliminating the gap between Tasmania’s Year 12 retention
and completion rates and those of the rest of Australia.

70

24

See, eg, Lucy Stone, ‘Rockliﬀ announces grades 11 and 12 rollout for all state schools if Liberal government re-elected’, The Examiner, 3 December 2017.

 It may well be that, as the Opposition has suggested, the
extension of Year 11 and 12 courses to all Tasmanian high
schools will render the colleges ‘unsustainable’25. But
this should be seen as a desirable consequence of the
Government’s proposal. Some if not all of the colleges
could be converted to comprehensive high schools
oﬀering classes from Year 7 through Year 12.
Ultimately, the question which should be asked is, if the
college system really has done such a stellar job of educating
Tasmanian students in the senior secondary years over
the past ﬁve decades, why is it that no other State has seen
ﬁt to copy it (other than the ACT which, as argued earlier,
might as well be Mars for all the relevance its circumstances
have to Tasmania)?

There is no other single thing within the power of
a Tasmanian Government to accomplish which would
do more to solve the challenge which Tasmania confronts
– of below-average engagement with the labour market,
below-average productivity, below-average incomes,
above-average incidence of multi-generational poverty,
and worse-than-average health outcomes (among others)
– than lifting Tasmanians’ educational participation and
attainment rates to mainland levels.
Increasing Year 12 retention and completion rates
is also critical to the success of the University of Tasmania’s
‘Northern Transformation Program’26, which envisages the
development of new inner-city campuses in Launceston
and Burnie, oﬀering new pathways to employment and/or
more traditional university degrees, in communities where
participation in tertiary education has historically been much
lower than in other parts of Australia.

The fact that no other state has seen ﬁt to emulate
Tasmania’s system – even outside of the mainland capital
cities – but have instead maintained a network of high
schools oﬀering integrated courses from Year 7 through
Year 12 (Year 8 through Year 12 in South Australia), in their
capital cities and in locations far more remote from those
capitals than any school in Tasmania is from Hobart – ought
to convey a very clear message about how Tasmania’s system
is regarded across the rest of Australia.

25
26

Nick Clark, ‘Education to be a major election issue as parties split on Year 12 school extensions’, The Mercury, 4 December 2017.
University of Tasmania, Transforming Lives. Transforming Cities - A partnership proposal to deliver an Education-Driven Revitalisation of Northern Tasmania, March 2016.

TCCI TASMANIA REPORT 2017

Ideally, this commitment will be matched by other parties
contesting the election.

71

 .1I.

. 
1 . u. #3

 
SECTION
SIX

 
PUBLIC SECTOR

 
Size of the public sector
Tasmania has a relatively large state public sector. At the end of the 2016-17 ﬁnancial year, the assets of the state non-ﬁnancial
public sector had a value equivalent to 88% of Tasmania’s gross state product for the year, a larger ﬁgure than for any other state
except Queensland, and well above the average for all states and territories of 73.5% (Chart 6.1)27.
Tasmanian state non-ﬁnancial public sector ‘operating expenses’ in 2016-17 were equivalent to 28.2% of gross state product,
a larger proportion than in any other state or territory, and well above the average of 15.7% for all states and territories (Chart 6.2).

Chart 6.1: State non-ﬁnancial public sector assets
as a pc of GSP, 30 June 2017

The size of Tasmania’s state public sector partly reﬂects the
relatively greater importance of its GBEs, whose assets at the
end of 2016-17 were worth 38% of gross state product, and
whose ‘operating expenses’ represented 10.5% of GSP
in 2016-17 – in each case higher than for any other state
or territory, and well above the averages for all states and
territories of 15.7% and 3.5% of GSP respectively.

Chart 6.2: State non-ﬁnancial public sector operating
expenses as a pc of GSP, 2016-17

Chart 6.3: State public sector employment
as a pc of total employment, 2016-17

Tasmania’s ‘general government’ (or core budget) sector was
also larger than that of most other states and territories,
with assets valued at the equivalent of 66% of GSP in 2016-17
(higher than in any other state except Queensland, and the
two Territories), and ‘operating expenses’ amounting to 19%
of GSP in 2016-17 (higher than for any other jurisdiction except
the Northern Territory, and well above the average for all
states and territories of 13.5%).

TCCI TASMANIA REPORT 2017

The state public sector is also a relatively large employer,
accounting for 16.2% of total employment in Tasmania
in 2016-17 – more than in any jurisdiction except the
Northern Territory, and 3.6 percentage points above the
average for all states and territories (Chart 6.3).

74

The Commonwealth Government is also a larger employer in Tasmania than in any other state, accounting for 2.2% of total
employment – although this is a smaller ﬁgure than for the Northern Territory or (especially, but unsurprisingly) the Australian
Capital Territory.
The value of assets owned by the entire Tasmanian state public sector, including the Tasmanian Public Finance Corporation (Tascorp) and the Motor Accident Insurance Board
(which are classiﬁed as public ﬁnancial corporations) was equivalent to almost 102% of GSP as at the end of the 2016-17 ﬁnancial year.

27

 Except for its very large unfunded superannuation liability
– on which more below – the Tasmanian public sector
is in a very strong ﬁnancial position.
Tasmania is one of only two jurisdictions where the ‘general
government’ sector is a net creditor – and the other, New
South Wales, will be in this position only temporarily, whereas
Tasmania’s general government sector is projected to remain
a net creditor throughout the current forward estimates
period, which ends in 2020-21(Charts 6.4 and 6.5)28.

Hence, even though Tasmania’s GBEs have a relatively large
amount of net debt – equivalent in 2016-17 to 7.9% of gross
state product, more than any other state or territory except
Queensland, and well above the average of 5.5% of GSP for
all states and territories29 – Tasmania’s total non-ﬁnancial
public sector debt is lower, as a proportion of gross product,
than that of any other state or territory except New South
Wales (Charts 6.6 and 6.7), and on the most recent state
budget projections will be the lowest of any state or territory
by 2020-21.

The NSW Government seems curiously unwilling to acknowledge that Tasmania shares its status as having no ‘general government’ net debt. Its 2017-18 Budget Paper No 1 makes no
fewer than eleven separate comparisons between NSW and other ‘mainland states’ or the ‘average of mainland states’ with regard to net debt, or growth in net worth – as if Tasmania’s
status as an island somehow disqualiﬁes it from relevance in this context. One wonders whether if it had been, say, South Australia, rather than Tasmania which was also a net creditor,
the NSW Budget Papers would have used ‘states whose capital cities begin with a consonant’ as a comparison. The refusal to acknowledge Tasmania’s position in this context is all the
more surprising when it is noted that Tasmania is the only other state or territory whose government is of the same political complexion as that of New South Wales.
29
As noted above, Tasmania’s GBEs also have more assets, as a pc of GSP, than any other state or territory.
28

TCCI TASMANIA REPORT 2017

Financial position and
performance of Tasmania’s
public sector

75

 Chart 6.4: ‘General government’ net debt as a pc of GSP,
30 June 2017

Chart 6.5: ‘General government’ net debt, Tasmania and
all states & territories

Chart 6.6: State non-ﬁnancial public sector net debt as a pc of
GSP, 2016-17

Chart 6.7: State non-ﬁnancial public sector net debt,
Tasmania and all states & territories

TCCI TASMANIA REPORT 2017

The extent to which this should be regarded as a ‘Good Thing’ is considered later on in this section.

76

The improvement in the ﬁnancial position of Tasmania’s general government sector reﬂects both tighter control over
spending (especially by comparison with the ﬁrst decade of this century) and reasonably buoyant growth in revenues
(by comparison with what had been expected at the time of the last state election). This has, in turn, resulted in much
lower ‘underlying’ net operating deﬁcits (that is, after abstracting from the impact of one-oﬀ capital payments from the
Australian Government, including in particular the $730mn payment associated with the transfer of the Mersey Community
Hospital back to the Tasmanian Government in the last days of the 2016-17 ﬁnancial year) in recent years, than between
2009-10 and 2014-15 (Chart 6.8).

 Chart 6.10: Growth in major categories of ‘operating expenses’

Chart 6.9: Growth in Tasmanian general government
operating revenue and expenses

After growing at an average annual rate of nearly 7% per
annum between 2001-02 and 2009-10, growth in ‘operating’
expenses was curtailed to 2.6% per annum between 201011 and 2013-14, and since then has been held at an annual
average rate of 3.8% per annum. Importantly, spending has
grown at a slower rate than revenue since 2010-11, in contrast
to the preceding decade (Chart 6.9).
The restraint in spending between 2010-11 and 2013-14
focussed primarily on education and public order and safety,
and to a lesser extent on health (Chart 6.10).
Under the present Government, spending on health has
grown at about the same rate as over the preceding three
years; spending on education and on public order and safety
at a faster rate than over the preceding three years; and all
other areas of spending at a slower rate.
The latest forward estimates imply unusually slow growth
in spending (in particular on health) over the four years to
2020-21. It is uncertain whether this will prove sustainable.

TCCI TASMANIA REPORT 2017

Chart 6.8: Tasmanian general government ‘net operating’
and ﬁscal balances

77

 The improvement in revenue growth since the last state
election reﬂects faster growth in state tax collections (in
particular, stamp duty and, to a lesser extent, payroll tax); an
increase in Tasmania’s share of the revenue from the GST; and
an increase in speciﬁc purpose payments from the Australian
Government – partly oﬀset by lower tax and dividend
payments from GBEs.

Chart 6.11: Growth in major categories of ‘operating revenues’

The stronger growth in state tax collections represents
a ‘dividend’ from the improved performance of Tasmania’s
economy (especially the property market); while the higher
level of GST revenue and other payments from the federal
government reﬂect factors entirely beyond the inﬂuence of
the Tasmanian Government.
It is possible that state taxation revenue could grow at
a faster rate over the four years to 2020-21 than projected
in the most recent state budget. However, as discussed later
in this Section, there is also some downside risk to Tasmania’s
share of GST revenue, arising from the review of ‘horizontal
ﬁscal equalisation’ currently being undertaken by the
Productivity Commission.

Public sector infrastructure
spending
State Government infrastructure spending has picked up strongly over the past three years, to a level similar to that of other states
and territories - but is projected to fall more sharply than in other states and territories over the next four years (Chart 6.12).

TCCI TASMANIA REPORT 2017

Chart 6.12: ‘General government’ purchases of non-ﬁnancial assets

78

Chart 6.13: GBE purchases of non-ﬁnancial assets

 It is worth considering whether Tasmania could aﬀord
to undertake a higher level of borrowings (rather than
continuing to be a net creditor) in order to fund higher levels of
infrastructure spending.
International economic agencies have in recent years
consistently advised that governments should be willing
to incur additional debt in order to fund increased
infrastructure spending, where they have the ‘ﬁscal space’
(borrowing capacity) to do so, especially given the historically
low interest rates at which governments have been able to
borrow in recent years.
Earlier this year, for example, the International Monetary Fund
advised that “the case for increasing public investment
is very strong almost everywhere in the world in light
of the low long-term borrowing costs and substantial
infrastructure deﬁciencies” 30.

This advice has been endorsed, in the Australian context, by
both the former and current governors of the Reserve Bank 31.
The key point made by all of these agencies is that borrowing
to fund the provision of assets which will generate economic or
social beneﬁts over a long period of time – provided that they
are selected on the basis of rigorous evaluation processes –
should be seen in a diﬀerent light from borrowing in order to
ﬁnance recurrent expenditures (such as pensions and beneﬁts,
wages and salaries, or interest and depreciation).
There are clearly areas where additional infrastructure
spending could produce substantial long-term beneﬁts in
Tasmania – including enabling all high schools to provide classes
up to Year 12; reducing the unmet demand for hospital facilities;
improving Tasmania’s transport infrastructure; expanding
Tasmania’s capacity to generate, store and transmit electricity;
and upgrading facilities in Tasmania’s national parks. In many
of these instances a sound business case could be made for
ﬁnancing part of the investment required by borrowing.
However, there is one very large obstacle standing in the way
of Tasmania’s capacity to borrow more in order to ﬁnance
additional infrastructure spending – and that is Tasmania’s very
large unfunded public sector superannuation liability, and the
substantial (and growing) call which this makes on Tasmania’s
available revenue each year).

International Monetary Fund, Fiscal Monitor, April 2017, p. x.
See, for example, Glenn Stevens, ‘An Accounting’, Address to the Anika Foundation, 10th August 2016; or Phillip Lowe, ‘Buﬀers and Options’, Address to the Committee for the Economic
Development of Australia (CEDA), 15th December 2016.

TCCI TASMANIA REPORT 2017

Capital spending by Tasmania’s GBEs is higher, as a proportion
of gross product, than in any other state or territory (Chart
6.13), principally as a result of the larger role which they play
in the Tasmanian economy (in particular, Tasmania is one of
only two states where the electricity supply industry is still
almost entirely owned by the state government). Even so, GBE
infrastructure spending is also projected to decline over the
four years to 2020-21.

30
31

79

 Tasmania’s
unfunded
superannuation
liability
The present value of the Tasmanian Government’s liability
to pay pensions and lump sums to current and former
employees (including judges and MPs) who are or were
members of (now closed) deﬁned beneﬁt superannuation
schemes was estimated to be $9.7bn as at the end of the
2016-17 ﬁnancial year. Partly oﬀsetting this, the value of ‘plan
assets’ (that is, the contributions made by members of these
schemes and the accumulated investment income earned
on them) was estimated to be $1.8bn – leaving an ‘unfunded
liability’ of $7.9bn. Adding in the unfunded liability in respect
of GBE employees, the total unfunded superannuation liability
was estimated to have been $8.5bn as at the end of the
2016-17 ﬁnancial year32.
This represents 29% of Tasmania’s 2016-17 gross product,
a larger proportion than for any other state or territory,
and more than three times the average for all states and
territories (Chart 6.14).
The cash cost of meeting the ‘general government’ component
of this liability is forecast to rise from about $280mn (equivalent
to 4.7% of operating cash receipts) in 2017-18 to a peak of
$443mn (5.4% of operating cash receipts) in 2026-27.

Chart 6.14: Non-ﬁnancial public sector unfunded superannuation
liabilities, June 2017

On present indications, the unfunded superannuation liability
will not be extinguished until 2078; servicing it will still be
absorbing 3¾% of operating cash ﬂows in 20 years’ time.

TCCI TASMANIA REPORT 2017

The unfunded superannuation liability constrains
Tasmania’s capacity to borrow in order to fund higher levels
of infrastructure investment in two ways. First, it means
that, nowithstanding Tasmania’s very strong position with
regard to net debt, its net ﬁnancial liabilities (which includes
superannuation) represent a higher proportion of its
revenues (a key ratio used by credit rating agencies) than that
of any other state except South Australia. This is one of the
main reasons why Tasmania doesn’t have a AAA rating, as
might otherwise be expected – which in turn results in the
Tasmanian Government paying slightly higher interest rates
on its borrowings than most other states.
Second, the relatively large annual cash cost of meeting the
Government’s obligations to retired public sector employees
means that it has less scope than other states or territories
to pay interest on debt without pushing the ‘net operating
balance’ into deﬁcit.

These estimates are highly sensitive to the discount rate used to calculate the present value of liabilities expected to fall due over the next 55 or so years. A 1 percentage point change
in the discount rate increases or decreases the State’s gross liability by an average of $1¾bn. The 2017-18 Budget forecast that the total unfunded superannuation liability will decline
to by $1.7bn, to $6.8bn by 30 June 2018, is driven largely by the use of a discount rate of 4.75%, as against 3.3% used in estimating the value of the liability as at 30 June 2017.

32

80

 The ﬁrst is to run persistent budget surpluses, and invest
those surpluses so as gradually to oﬀset the liability.
Previous Tasmanian governments did this in the late 1990s
and early 2000s, building up assets in what was called the
Superannuation Provision Account to a peak of nearly $1½bn
(enough to oﬀset 30% of the liability) by the end of the 2010-11
ﬁnancial year. However this account was drawn upon, and then
closed down, in order to ﬁnance the budget deﬁcits incurred
over the following three years. The Howard Government
established the Future Fund for the same purpose in
2006, but the enabling legislation prevented subsequent
governments from withdrawing funds deposited in it for
other purposes.
The second option is to sell assets and reserve the proceeds
for use in defraying unfunded superannuation liabilities.
The Howard Government also did this with the third and
ﬁnal tranche of the sale of Telstra. The value of the Future
Fund’s assets is now equivalent to about half the most
recent estimate of the Federal Government’s unfunded
superannuation liability. Some other state governments have
adopted similar strategies in the past.

33

It is unlikely that the present or any future Tasmanian
Government will want to run budget surpluses large
enough, for long enough, to defray a substantial proportion
of its superannuation liability – since that would inevitably
lead to growing pressure for tax cuts, or increases
in recurrent spending.
Hence the only practicable way open to the present or any
future Tasmanian Government to create ‘headroom’ for higher
levels of infrastructure investment funded by increased
borrowings is by undertaking asset sales, and investing the
proceeds in order to oﬀset part of the superannuation liability.
That’s not something which any government could
contemplate without an explicit electoral mandate.
And there are many assets for which a mandate is unlikely
ever to be forthcoming, and with good reason, such as
Hydro Tasmania or TT-Line33. However, a future Tasmanian
Government wishing to invest more in infrastructure may
see merit in seeking a mandate for the sale or lease of
TasNetworks, Aurora Energy or TasPorts, the equivalents
of which in other states have been sold or leased by
governments of both major political persuasions, and for
which superannuation funds (among others) have been
willing purchasers.
This possibility is considered further in Section 9.

Disclosure: the author of this report is a non-executive director of Hydro Tasmania, although his term will come to an end in September 2018.

TCCI TASMANIA REPORT 2017

There are only two broad options open to a government
wishing to reduce a large unfunded superannuation liability –
whether to improve its ﬁnancial position or to ‘make room’ for
increased borrowing for infrastructure investment.

81

 Risks to Tasmania’s share
of GST revenues
Tasmania has always been a major beneﬁciary of the
arrangements by which so-called ‘general revenue payments’
from the Commonwealth – since 2000-01, in the form
of revenue from the goods and services tax (GST) – are
distributed among the states and territories, in accordance
with the recommendations of the Commonwealth Grants
Commission (CGC).

Because the CGC assesses that Tasmania has less capacity
to raise revenue from its own sources, and faces in most areas
of service provision both greater demand and higher unit
costs, Tasmania typically receives a considerably larger share
of the revenue from the GST than its share of the population
– or than it would if the GST revenues were distributed
on an ‘equal per capita’ basis.

Each year the CGC recommends a distribution of GST revenue
so as to provide each state and territory with the capacity
to provide public services and the associated infrastructure
at the same standard, if each made the same eﬀort to raise
revenue from its own sources, having regard to diﬀerences in
their capacities to raise revenue and in the need for and cost
of providing those services – a process known as ‘horizontal
ﬁscal equalisation’34.

Thus in 2017-18, Tasmania will receive $2.4bn in revenue
from the GST, equivalent to $4,573 per head of population
(Chart 6.15). This is $1.3bn more than Tasmania would have
received had the GST revenue been distributed on an equal
per capita basis (Chart 6.16).

TCCI TASMANIA REPORT 2017

Chart 6.15: GST revenue shares per head of population, 2017-18

82

34

Commonwealth Grants Commission, Introduction to Horizontal Fiscal Equalization, 2017.

Tasmania’s share of revenue from the GST will provide
41% of its total ‘general government’ operating revenue in
2017-18 – a larger proportion than for any other jurisdiction
except the Northern Territory.

Chart 6.16: Diﬀerence in 2017-18 GST revenue shares from
equal per capita distribution

 Any changes to existing arrangements would inevitably force
Tasmania to raise state taxes, cut spending, run larger budget
deﬁcits (or some combination of all three).
The CGC was originally established in 1933 in response to
Western Australian grievances about the ﬁnancial impact
of federation, and Western Australia beneﬁted in much the
same way (though not to the same extent) as Tasmania from
the CGC’s recommendations for most of the ensuing 72
years. However, since the middle of the ﬁrst decade of this
century – as the ‘mining boom’ prompted largely by China’s
rapidly growing demand for the resources with

Chart 6.17: Taxation revenue per head of population, 2017-18

which Western Australia has been richly endowed by nature
made Western Australia richer than the rest of Australia
by a larger margin than any other state has ever been –
Western Australia has become a signiﬁcant ‘loser’ from the
system of horizontal ﬁscal equalisation.
As a result, Western Australia has joined New South Wales
and Victoria – who have always received a smaller share of
GST revenue (and before that, ﬁnancial assistance grants)
than their share of Australia’s population – in demanding
changes to the way in which the revenue from the GST is
distributed. At diﬀerent times over the past decade, Western
Australia has argued that the GST revenue should be
distributed on an equal per capita basis (as long sought by
New South Wales and Victoria); that a ‘ﬂoor’ be established
below which any state’s share of the GST revenue relative to
its population share cannot fall; or that revenue from mining
royalties be ‘discounted’ to some extent in determining each
state’s ‘revenue-raising capacity’.

Chart 6.18: Operating expenses per head of population, 2017-18

TCCI TASMANIA REPORT 2017

The distribution of GST revenues in accordance with the
principle of ‘horizontal ﬁscal equalisation’ in eﬀect allows
Tasmania to collect about $1,100 per head less in state
taxation than the average of other states and territories
(Chart 6.17) and spend around $980 more per head
on public services than the average of other states and
territories (Chart 6.18).

83

 Needless to say, any of these suggestions, if implemented,
would result in Western Australia gaining a signiﬁcant increase
in its share of the revenue from the GST at the expense of
some or all of the other states and territories.
Although two previous enquiries had not found any compelling
argument for any major changes to the system of ‘horizontal
ﬁscal equalisation’35 – and both the Howard and Gillard
Governments had rejected repeated demands for change
from Western Australia, New South Wales and Victoria
– ahead of this year’s state election in Western Australia
the Turnbull Government asked the Productivity Commission
to revisit the issue.
The Productivity Commission’s Draft Report36 rejects many
of the demands made by Western Australia and New South
Wales, in particular for an equal per capita distribution of GST
revenues, and for a ‘ﬂoor’ under states’ relativities.

TCCI TASMANIA REPORT 2017

Nonetheless, the Productivity Commission’s draft
recommendations still carry some signiﬁcant risks for
Tasmania. In particular, it suggests that the current system
“arguably takes equalisation too far” and that a “less
comprehensive form of equalisation” should instead be
sought. All of the various alternative models which it considers
in its Draft Report entail signiﬁcant increases in Western
Australia’s share of the revenue from the GST: the diﬀerences
among them are, in eﬀect, as to whether the positions of any
of the other larger states are also enhanced, and how the cost
of giving bigger shares to Western Australia or any of the other
large states should be shared among the ‘losers’.

84

The Productivity Commission’s ‘preferred option’, ahead of the
publication next January of its Final Report, appears to be what
it calls ‘equalisation to the second strongest state’, currently
New South Wales. That option would have given Western
Australia an additional $3¼bn of GST revenue in 2017-18, but
most of that would have been at the expense of New South
Wales, Victoria and Queensland; Tasmania would lose $77mn
under this approach, equivalent to 1.4% of its projected total

revenue under the current system (compared with a loss
of over $1bn, or nearly 20% of total revenue, under an equal
per capita distribution of GST revenue).
The Productivity Commission’s Draft Report hasn’t really
established any convincing rationale for departing from
the objective of ‘full equalisation’ of states’ and territories’
ﬁscal capacities. Nor has it persuasively established that the
existing system has actually prompted states or territories to
eschew eﬃciency- or productivity-enhancing reforms, or to
forego economic development opportunities, for fear of the
consequences for their GST revenue shares (although it says,
unconvincingly, that the ‘absence of evidence’ on this score
does not imply ‘evidence of absence’37).
Nonetheless, even if the Productivity Commission concludes,
in its Final Report, that the objective of ‘full equalisation’ is still
worth pursuing, it may still recommend changes to the way
in which the CGC determines how that objective is to be
realized, which have an adverse eﬀect on Tasmania’s share
of GST revenues.
It is also possible that, irrespective of what the Productivity
Commission recommends in its Final Report, the Turnbull
Government may, for political reasons, choose to direct
the CGC to change its methodology in ways that would
advantage Western Australia at the expense of Tasmania
and the two Territories38.
Ultimately, the best way of reducing the risks to the ﬁnancial
position of Tasmania’s public sector posed by the possibility
of adverse changes to GST revenue-sharing arrangements is
by sustainably improving Tasmania’s economic performance,
raising its capacity to raise revenue from its own sources, and
reducing the need for or lowering the cost of providing public
services, so that it is no longer as necessitous of favourable
treatment under ‘horizontal ﬁscal equalisation’ as it has long
been, and still is. That is the ultimate objective of all of the
suggestions made in Section 9 of this Report.

35
Industry Commission, Impediments to Regional Industry Adjustment, Volume 1, Melbourne, December 1993; John Brumby, Bruce Carter and Nick Greiner,
GST Distribution Review - Final Report, The Treasury.
36
Productivity Commission, Horizontal Fiscal Equalisation, Melbourne, October 2017.
37
Using the same logic as was used by the Bush Administration to justify the invasion of Iraq in 2003, notwithstanding that UN inspectors had been unable to ﬁnd any evidence that Iraq
possessed any ‘weapons of mass destruction’).
38
It is worth noting in this context that the Liberal-National Party Coalition currently holds 11 of the 16 seats in the House of Representatives from Western Australia, but none from
Tasmania, the Northern Territory or the Australian Capital Territory – implying that they may perceive much to lose, and nothing to gain, from failing to implement changes to the GST
distribution arrangements which would beneﬁt Western Australia at the expense of Tasmania and the two Territories.

 SECTION
SEVEN

 
ECONOMIC
CHALLENGE

 
Thus far this report has shown that, notwithstanding the improvement in Tasmania’s economic performance,
including that of its labour and property markets, and the pick-up in the growth rate of its population, Tasmania
continues to lag behind the rest of Australia on a wide range of measures of economic and social well-being.

TCCI TASMANIA REPORT 2017

This section explores in more detail the key factors behind the diﬀerences between Tasmania’s economic
performance and that of Australia’s other states and territories – using the same framework as in the two
previous Tasmania Reports, but extending it to include some new, comparisons with the non-metropolitan
regions of the mainland states, with which Tasmania has, in some respects, more in common than it does
with the mainland capital cities. It also provides a ‘high level’ view of where there is scope for narrowing
those diﬀerences over the longer term.

86

 The annual ABS estimates of gross state product provide
the broadest, and most timely, basis for comparison of the
economic performance of each of Australia’s states and
territories, and of the material well-being of their populations.

This section therefore makes extensive use of the published
estimates of gross state product, whilst being aware of their
limitations, and being conscious of those limitations in the
conclusions which it draws.

Like its national counterpart, gross domestic product (GDP),
gross state product is an incomplete measure of both
economic performance and well-being. There are many things
which it doesn’t include, such as the value of unpaid work done
in homes and in the broader community, or the depletion
of ﬁnite natural resources39. Nor does it make any allowance
for the eﬀects of traﬃc congestion, pollution, deteriorating
housing aﬀordability, increasing inequality, or crime – the
lower incidence of all of which in Tasmania, compared with
other parts of Australia, is cherished by most Tasmanians.
As acknowledged in Section 1, there are also some speciﬁc
on-going concerns about the reliability and volatility of the
ABS estimates of gross state product for Tasmania.

Tasmania’s per capita gross state product, according
to the most recent ABS State Accounts, was $56,428 in
2016-17. That was lower than for any other state or territory.
It was also $15,543, or 21.6%, below the national average
of $71,971 per person (Chart 7.1).

Nonetheless, these estimates, and others based on them,
are widely used by governments, analysts and commentators.
They provide the only available basis for making broad
comparisons of the sort which this section seeks to make.

For a broader discussion of these issues see, eg, Joseph Stiglitz, Armatya Sen and Jean-Paul Fitoussi, Report by the Commission on the Measurement of Economic Performance and
Social Progress, Paris, September 2009; or Diane Coyle, ‘Rethinking GDP’, Finance and Development, Vol. 54, No. 1, International Monetary Fund, Washington DC, March 2017.

39

TCCI TASMANIA REPORT 2017

Tasmania’s economy compared
with that of mainland Australia

87

 TCCI TASMANIA REPORT 2017

88

Chart 7.1: Gross state product per head of population, states and
territories, 2016-17

Chart 7.2: Tasmania’s gross state product as
a pc of national average, 2000-01 to 2016-17

As a result of the revisions to previously published estimates
(discussed in Box 1 in Section 1), the margin between
Tasmania’s per capita GSP and that of the rest of Australia
is not as large as was reported this time last year (Chart 7.1).

Chart 7.2); and for that matter it is wider than it was
throughout the 1990s. Moreover, combining the economic
and population growth forecasts set out in the most recent
Tasmanian and Federal Government Budgets, the gap is
expected to remain at around 21% - that is, wider than in all
but six of the past 25 years – over the four years to 2020-21.

Rather than declining from 80% of the national average
in 2003-04 to less than 72% of the national average
in 2012-13 and 2013-14 (that is, a ‘gap’ of more than 28%),
the ABS now estimates that Tasmania’s per capita gross
product as a proportion of the national average ‘bottomed out’
at just under 77½% in 2012-13 and 2013-14 (a ‘gap’ of about
22½%); and that the margin between Tasmania’s per capita
GSP and the national average in 2015-16 was just under 21%,
rather than nearly 27%, as it estimated in November 2016.
While some comfort can be taken from the fact that the
diﬀerence between Tasmania’s per capita gross product
and the rest of Australia’s is not as large as previously
thought, it is still a very large gap. It remains wider than
it was between 2003-04 and 2010-11 (as indicated in

Because Tasmania’s population is older, and ageing
much more rapidly than that of the rest of Australia;
because Tasmania is so much smaller than the other
Australian states, and is therefore less able to reap
‘economies of scale’; and because Tasmania lacks, and
is never likely to have, some of the major economic ‘drivers’
present in most of the mainland states (ﬁnancial or
professional services sectors on the scale of Sydney and
Melbourne, or mining on the scale of Western Australia),
there is always going to be some margin between Tasmania’s
per capita gross product and that of the rest of Australia.

 However, that does not mean that Tasmania cannot do better
than it has been doing in recent years. It should not mean
that Tasmania needs to accept that the gap will continue to
widen (as it will, all else being equal, if only because of the
consequences for labour force participation of Tasmania’s
more rapidly ageing population). It should not mean that
Tasmanians have to embrace a future of ever-greater reliance
on ﬁnancial support from the national government – or other
states (as they would see it) – leaving Tasmanians vulnerable
to abrupt changes in the willingness of other Australians to
continue providing that support.
A useful framework for understanding why Tasmania’s per
capita gross product is so much lower than that of the rest
of Australia – and where it might be possible to ﬁnd ways of
preventing the gap from widening further, or of beginning
to narrow it – is the one which has been widely used by
economists to make long-run economic growth projections,
for example in the Intergenerational Reports produced by the
Commonwealth Treasury over the past ﬁfteen years .
This framework can be adapted to show that gross state
product per person can be disaggregated into three separate
components as follows:
GROSS STATE PRODUCT
POPULATION

=

EMPLOYMENT

=

EMPLOYMENT RATE

POPULATION

x

HOURS WORKED

x

AVERAGE HOURS WORKED

EMPLOYMENT

x

GROSS STATE PRODUCT
HOURS WORKED

Or, alternatively:
GSP PER CAPITA

x

PRODUCTIVITY

And it holds true by deﬁnition, as can be seen by ‘cancelling
out’ the employment and hours worked terms on the right
hand side of the equals sign, leaving the statement that
gross state product divided by population equals gross state
product divided by population. Inserting the employment and
hours worked terms serves simply to assist in understanding
where diﬀerences in, or growth in, gross state product per
capita come from.

40

See, for example, Australian Treasury 2015 Intergenerational Report: Australia in 2055, pp. 3, 16, 21-22, 23-25 and 29-30.

TCCI TASMANIA REPORT 2017

Note that there is no economic theory, and that there are
no assumptions, underlying this expression: it is simply an
algebraic expression.

89

 Participation in employment
46.4%, on average, of Tasmania’s total population were employed during the 2016-17 ﬁnancial year – a smaller proportion than in
any other state or territory, and 3 percentage points below the national average (Chart 7.3).
This measure of ‘employment participation’ fell by more than 1 percentage point during the recession which Tasmania experienced
between 2011 and 2013, but has since recovered to where it was immediately before that downturn (Chart 7.4). However it is still 1.3
percentage points below the pre-ﬁnancial crisis peak, a larger decline than that experienced by Australia as a whole.
As discussed in Section 2, the principal reason for Tasmania’s below-average participation rate is that 19.5% of Tasmania’s total
population is aged 65 or over, 3.7 percentage points more than the corresponding ﬁgure for Australia as a whole. After allowing for
the fact that children (under 15) also represent a smaller proportion of Tasmania’s population (17.7%) than of Australia’s as a whole
(18.7%), the proportion of Tasmania’s working-age population (conventionally deﬁned as those aged 15 and over) who are over 65 is
4.3 percentage points higher than that for Australia as a whole.

TCCI TASMANIA REPORT 2017

Chart 7.3: Employment as a pc of total population, states and
territories, 2016-17

90

Nonetheless, as Section 2 also showed, in every age group
other than 15-19 year olds, a smaller proportion of Tasmanians
than of mainland Australians are in employment (refer back to
Chart 2.10). The analysis in Section 5 suggests that the most
likely reason for this is Tasmanians’ lower level of educational
attainment, given the strong correlation between educational
attainment and employment (and, as also shown in Section 5,
the below-average level of educational participation among
young Tasmanians is the reason why 15-19 year olds are the
only group of Tasmanians more likely to be in employment
than their counterparts on the mainland).

Chart 7.4: Employment as a pc of population,
Tasmania and Australia, 2000-01 to 2016-17

Hence, although there is always likely to be a signiﬁcant gap
between Tasmania’s employment participation rate and that
of the rest of Australia, it should be feasible at least to slow the
rate at which that gap will widen (as a result of the more rapid
ageing of Tasmania’s population) – or even better, to narrow it
a little – through policies designed to improve the knowledge,
skills and employability of Tasmanians.
Higher rates of educational participation and attainment oﬀer
the best prospects for achieving that goal, although there may
also be potential to reduce the extent to which discrimination,
for example on the grounds of age or disability, has a greater
impact on the employment prospects of Tasmanians than of
other Australians.

 Hours of work
Those Tasmanians who did have jobs during 2016-17 worked an average of 30.7 hours per week, fewer than in any other state or
territory, and 1.4 hours per week less than the national average (Chart 7.5). Over the course of an entire year this diﬀerence adds
up to more than 72 hours. It’s as if Tasmanians had 11 more public holidays a year than other Australians.
Average hours worked have declined by more in Tasmania since the global ﬁnancial crisis than they have in any other state or
territory, notwithstanding a slight increase in average hours worked in Tasmania since 2013-14 while the national average has
continued to decline (Chart 7.6).

The diﬀerence in hours worked between Tasmania and the
rest of Australia stems largely from the fact that 36.5% of
employed Tasmanians work part-time, a larger proportion than
in any other state or territory except the Northern Territory,
and well above the national average of 31.9%. The proportion
of workers working part-time has risen by 5.3 percentage
points since 2007-08 (the year before the ﬁnancial crisis) in
Tasmania, compared with 3.4 percentage points for Australia
as a whole.
As discussed in Section 2, part-time employment is a matter of
choice for many people: and given that Tasmanian workers are,
on average, older than their mainland counterparts, many of
them are likely to be content with working part-time. However,
as also noted in Section 2, a higher proportion of part-time

Chart 7.6: Average hours worked, Tasmania and Australia,
2000-01 to 2016-17

workers in Tasmania than in the rest of Australia are willing and
able to work more hours than they currently do. Moreover,
as discussed in Section 5, more highly-educated people are
more likely to work full-time than those with lower levels
of educational attainment. Hence, it is probable that lifting
educational participation and attainment in Tasmania will, over
time, help to narrow the hours worked gap between Tasmania
and the rest of Australia.
TCCI TASMANIA REPORT 2017

Chart 7.5: Average hours worked, states and territories, 2016-17

91

 Productivity
For each hour that they worked in 2016-17, employed
Tasmanians produced $76.11 worth of goods and
services – less than in any other state or territory, and
$11.06 or 12.7% below the national average (Chart 7.7).
Over the past three years, gross product per hour worked
– or labour productivity – in Tasmania has actually declined
by 1.0% (after allowing for the eﬀects of inﬂation), whereas in
the rest of Australia labour productivity rose by 3.3% over this
period. As a result, the ‘productivity gap’ between Tasmania
and the rest of Australia has widened by 3.8 percentage points
over this period. Indeed, relative to the national average,
Tasmanian labour productivity was lower in 2016-17 than it
has been in any year since 2003-04 (Chart 7.8). And the decline
in labour productivity since 2013-14 has oﬀset much of the
improvement in Tasmania’s per capita gross product relative
to the national average that the increases in employment
participation and hours worked, relative to their national
averages, would otherwise have produced.

TCCI TASMANIA REPORT 2017

Chart 7.7: Gross product per hour worked, states and territories,
2016-17

92

There are two broad reasons why Tasmanian labour
productivity, as measured in the ABS State Accounts,
is so much lower than in the rest of Australia.
The ﬁrst of these is that intrinsically high (labour)
productivity industries – industries which are highly capitalintensive (such as mining, or IT and telecommunications), or
which are intensive in their use of highly skilled (or highly paid)
labour (such as ﬁnancial services) – tend to be
‘under-represented’ in Tasmania.
Chart 7.9 shows estimates of the national average level
of labour productivity in 2016-17 for each of the 19 diﬀerent
industry sectors into which the Australian Bureau of Statistics
divides the Australian economy, ranked from highest to lowest.

Chart 7.8: Gross product per hour worked, Tasmania
and Australia, 2000-01 to 2016-17

 Chart 7.9: Labour productivity (gross value added per hour worked) by industry, Australia, 2016-17

These estimates are, of necessity, approximations, and hence
the discussion based on these estimates should be regarded
as suggestive, rather than conclusive41.
Tasmania’s problem, in this context, is that the six industries
which, nationally, have above-average levels of labour
productivity – the industries represented by pink bars in
Chart 7.9 - account for less than 11% of total employment
in Tasmania, compared with more than 16% of national
employment (see Chart 7.10).

By contrast, the six industries where labour productivity
nationally is less than two-thirds of the national all-industry
average – represented by the yellow bars in Chart 7.9
– account for almost 48% of employment in Tasmania,
compared with less than 35% of employment nationally.

41
They have been derived by dividing gross value added for each industry by an estimate of hours worked in each industry, which is in turn obtained by multiplying the average
number of hours worked in the reference week for the middle month of each quarter during 2016-17 by 52, and then by the average number of people employed in the middle
month of each quarter (that being the frequency with which these data are published). These estimates of hours worked by industry are, at best, approximations, and usually
do not sum to the estimates of hours worked for Australia as a whole, or for each individual state or territory. The estimates of gross value added and hours worked are sourced
from diﬀerent surveys (of employers and households, respectively). Finally it should also be noted that estimates of gross value added for the public administration and defence,
education and training, and health care and social assistance sectors are based largely on estimates of labour input, so that the resulting estimates of labour productivity for
these sectors are less meaningful than those for sectors where the value of output is estimated more directly.

TCCI TASMANIA REPORT 2017

The seven industries whose labour productivity is
between two-thirds and 100% of the all-industry average
– represented by the green bars in Chart 7.9 – account for
about 42% of employment in Tasmania, compared with
49% of employment nationally.

93

 Chart 7.10: Industry composition of employment according to labour productivity nationally as a proportion of average for all industries,
Tasmania and Australia, 2016-17

The second reason why labour productivity is so much lower than the rest of Australia is that a majority of employed
Tasmanians work in industries where labour productivity is less than it is at the corresponding national industry level.
Chart 7.11 shows labour productivity in Tasmanian industries expressed as percentage of the corresponding industry
national average.

TCCI TASMANIA REPORT 2017

Chart 7.11: Labour productivity (gross value added per hour worked) by industry, Australia, 2016-17

94

 Chart 7.11 shows that there are ﬁve Tasmanian industries (represented by the pink bars) in which labour productivity is higher
than the national average for those industries. However, as shown in Chart 7.12, only 37% of working Tasmanians are employed
in those industries. Conversely, 73% of Tasmanian workers are employed in industries where labour productivity is less than the
national averages for those industries – including 23% who work industries where labour productivity is more than 20% below
the national average for those industries.

Chart 7.12: Industry composition of employment in Tasmania according to labour productivity as a proportion of the corresponding national
industry average, 2016-17

For example, in the absence of any discoveries of signiﬁcant
quantities of commercially recoverable mineral deposits, or
oil or gas ﬁelds, it is diﬃcult to contemplate the mining sector
accounting for a materially larger share of the Tasmanian
economy than it does at present.
Similarly, Tasmania’s relatively small population makes it an
unlikely location for activities which are more typically found
in large cities – such as ﬁnancial services (with the exception of
tax havens) or a range of specialist business services.

42

This point was succinctly made by Adam Smith more than
230 years ago:

“THERE ARE SOME SORTS OF INDUSTRY,
EVEN OF THE LOWEST KINDS, WHICH
CAN BE CARRIED ON NOWHERE BUT
IN A GREAT TOWN. A PORTER, FOR
EXAMPLE, CAN FIND EMPLOYMENT
AND SUBSISTENCE IN NO OTHER PLACE.
A VILLAGE IS MUCH TOO NARROW
A SPHERE FOR HIM; EVEN AN
ORDINARY MARKET TOWN IS SCARCE
LARGE ENOUGH TO AFFORD
HIM CONSTANT OCCUPATION42” .

Adam Smith, An Inquiry into the Nature and Causes of The Wealth of Nations, Straham and Cadell, 1776, p. 17.

TCCI TASMANIA REPORT 2017

There is not much that Tasmania can do about the ﬁrst
of these factors.

95

 As the Reserve Bank’s Assistant Governor (Economic)
noted when quoting this passage in a speech in November,
“So it is also with management consultants, medical
specialists and a myriad of other occupations that can
only be sustained in a large market”43.
There is, arguably, scope to expand the size of Tasmania’s
electricity generation and transmission industry through
Hydro Tasmania’s ‘Battery of the Nation’ initiative . And there
may also be potential to grow the information services,
telecom-munications and media sector in Tasmania.

TCCI TASMANIA REPORT 2017

But it may be no less important to avoid artiﬁcially
fostering the growth of inherently low-productivity
industries in Tasmania, unless it is in response to evident
demand or need in Tasmania for the goods or services
produced by such an industry.

43

96

There ought to be more that Tasmania can do to improve
labour productivity in the industries where it is below the
national average. And again, it seems likely that the most
eﬀective way of achieving that will be obtained by raising levels
of educational attainment of new entrants to the Tasmanian
workforce and, where possible, those already in the workforce
– given the strong correlation between educational attainment
and productivity which research demonstrates, and which
is evident in the earnings diﬀerentials between people with
diﬀerent levels of education.

44

Luci Ellis, ‘Where is the Growth Going to Come From?’, Stan Kelly Lecture, Melbourne, Reserve Bank of Australia,15 November 2017.
Hydro Tasmania, ‘Becoming the Battery of the Nation’

 Summarising the key inﬂuences
Drawing together the foregoing analysis, the diﬀerence of nearly $15,500 or 22% between Tasmania’s per capita gross state
product and the national average in 2016-17 can be disaggregated as follows:
 about $5,775 (or 37%) was due to the
employment participation gap – that
is, to the fact that the proportion
of Tasmania’s population with a job
was 3 percentage points below the
national average in 2016-17;

 about $6,450 (or 42%) was due to
the hours worked gap – that is, to the
fact that Tasmanians in employment
worked about 1.4 fewer hours per
week (or 11 days per year) than the
national average in 2016-17; and

 about $3,225 (or 21%) was due to the
labour productivity gap – that is, to
the fact that employed Tasmanians
produce, on average, nearly $11
(or 12%) less for each hour that
they work than the average for the
Australian workforce as a whole.

This disaggregation is depicted in Chart 7.13.

TCCI TASMANIA REPORT 2017

Chart 7.13: Components of the diﬀerence in per capita gross product between Tasmania and the Australian average, 2016-17

97

 How much diﬀerence does
Tasmania’s small scale make?
As has already been noted in this section – and elsewhere in
this report – Tasmania’s relatively small and more dispersed
population (by comparison with the mainland states, if not
necessarily with the two territories in both of these respects)
does detract to at least some extent from its capacity to match
the economic performance of other parts of Australia.
Hence, in at least some respects, comparisons with
other states may be unduly harsh in not allowing something
for Tasmania’s lack of a large city with a population of over
1 million, as every mainland state has.
One way of examining this in more detail is by comparing
Tasmania with the non-metropolitan areas of the other
states. This has been done in other sections of this report, for
example in discussing labour force participation (in Section 2)
and educational participation and attainment (in Section 5),
and has been considered in this section in the context of the
‘under-representation’ of high-productivity services activities
in the Tasmanian economy.

(the value of whose output has increased dramatically
as a result of the mining boom) (Chart 7.14).
Except during the recession of 2011-13, Tasmania’s per capita
gross product has typically grown at a faster rate than that
of regional New South Wales, Victoria and South Australia
since the turn of the century. As a result, every year since
2008-09, with the exception of 2012-13, Tasmania’s per capita
gross product has actually been slightly higher than the
average of the regional areas of the mainland states,
excluding Western Australia (Chart 7.15).
These estimates could be interpreted as implying that
Tasmania cannot realistically aspire to a higher level
of economic performance – and hence that Tasmanians
cannot expect to attain higher material standards of living
– than they have at present, because, so it might be argued,
Tasmania cannot ‘do any better’ than the regional areas of the
mainland states (leaving regional WA aside as a ‘special case’).
However, this is a needlessly limiting view.

TCCI TASMANIA REPORT 2017

It has not previously been possible to undertake a similar
analysis of diﬀerences in per capita gross product between
Tasmania and the non-metropolitan regions of other states,
because the ABS does not publish estimates of gross
product below the state and territory level.

98

45

However, SGS Economics and Planning does construct
estimates of gross product for cities and regions within
the ﬁve mainland states45, which can be used for this purpose.

In particular, while Hobart may not be anywhere near
as large as the capital cities of the mainland states,
it nonetheless has many of the growth-enhancing
accoutrements of a state capital, and is larger than all
but two non-capital cities (Gold Coast and Newcastle).
It should be capable of higher levels of economic
performance than (for example) Toowoomba, Tamworth,
Wagga Wagga, Bendigo, Mount Gambier or Bunbury.

According to these estimates, Tasmania’s per capita gross
product was slightly higher than that of regional New South
Wales and Victoria, and slightly lower than that of regional
Queensland and South Australia, but (like all of these regions)
was substantially below that of regional Western Australia

It was noted in Section 5 that people living in Hobart
ypically had lower levels of educational attainment than people
in mainland provincial cities, and that people in regional
Tasmania typically had lower levels of educational attainment
than people in the regional areas of mainland states.

SGS Economics and Planning, Economic Performance of Australia’s Cities and Regions 2016-17, December 2017.

 Chart 7.15: Tasmania’s gross state product
as a pc of regional averages, 2000-01 to 2016-17

If Tasmanians were to reach similar levels of educational
attainment as those of people outside the capital cities
of mainland states, it is highly likely that Tasmania’s
economy would be stronger than it currently is, and
that Tasmanians would enjoy higher material standards
of living, than they presently do.

Tasmania could reach the position where South Australia
is now by 2026 if it could sustain per capita economic growth
of ¾ percentage point per annum faster than the national
average – which Tasmania actually did do between
2000-01 and 2008-09. Less ambitiously, sustained
growth of ½ percentage point per annum faster than
the national average would see Tasmania reaching the
same proportion of the national average per capita gross
product which South Australia had in 2016-17 by 2030.

In other words, while it is quite unrealistic to expect
that Tasmania will be ever be able to match the levels of
economic performance – as indicated by gross product
per capita, or other indicators – of the mainland states in
aggregate, it should not be beyond the realms of possibility
to improve Tasmania’s per capita gross product from almost
22% below the national average, where it was in 2016-17, to
(say) 16% below the national average, which is where South
Australia was in 2016-17. South Australians, in particular,
would probably say that isn’t ‘setting the bar’ especially high.

The next Tasmanian Government should consider setting
a target such as this as a useful aid to calibrating the scope
for improving Tasmania’s economic performance, and the
living standards of Tasmanians, and for gauging the
progress (or lack thereof) to those ends.

TCCI TASMANIA REPORT 2017

Chart 7.14: Gross product per head of population, non-metropolitan
regions, 2016-17

99

  
SECTION
EIGHT

 
REGIONS

 
TCCI TASMANIA REPORT 2017

102

Tasmania is, arguably, Australia’s ‘most regional’ State.
Unlike most of the non-metropolitan areas of other
States, Tasmania’s regions were not settled by people
‘fanning out’ from the colonial centre of administration,
but have their own history, independent of that of the
State’s capital. Regional cities are much more important
‘points of entry’ into (and exit from) Tasmania – for
both people and products - than they are in most other
States. A larger proportion of Tasmania’s population
lives outside of the capital city than in any other State or
Territory. Partly for that reason, Tasmania’s regions have
more inﬂuence in Tasmania’s ‘power structures’ than
regions typically do in other States.

Many of the economic, social and other diﬀerences
between Tasmania and the rest of Australia, discussed
in the earlier sections of this report, can also be found
to at least some extent between Hobart and other parts
of Tasmania. People living in the North, the North-West,
the East and West Coasts and on the Bass Strait islands
are on average older, have less formal education, are
less likely to be in paid employment and earn less, than
people living in or close to Hobart (Table 8.1).

 Table 8.1: Tasmania’s regions: selected characteristics

CHARACTERISTIC

UNIT

YEAR

GREATER
HOBART

SOUTH
EAST

LAUNCESTON
& NORTH EAST

NORTH WEST
& WEST

Population

000

2016

224.6

38.0

143.6

111.7

Population growth

% pa

2011-16

0.75

0.28

-0.01

-0.45

Median age

years

2016

39.7

47.4

42.7

43.7

Population aged 20-45

%

2016

32.1

24.0

28.9

27.4

Population aged 65 and over

%

2016

17.3

21.3

19.4

20.0

Median employee income

$ pa

2016

51,298

37,494

41,266

41,456

Bachelor degree or higher

%

2016

23.5

14.5

15.6

10.8

Diploma or adv. diploma

%

2016

8.7

8.7

8.0

7.8

Cert III or IV

%

2016

18.1

19.9

19.8

22.5

Working-age population
employed

%

2016-17

57.9

53.2

55.1

55.9

Unemployment rate

%

2016-17

5.8

6.7

5.7

6.1

Composition of employment

% of total

2016

Agriculture, forestry & ﬁshing

1.9

14.7

6.3

8.4

Mining

0.3

0.5

0.8

3.1

Manufacturing

5.3

6.6

7.7

9.5

Construction

7.5

8.7

7.6

7.4

10.8

8.3

11.5

11.1

7.8

7.8

7.6

7.2

Public admin & safety

10.7

7.0

5.4

5.0

Education & training

10.1

7,5

9.2

8.1

Health care & social assistance

14.8

11.0

14.7

13.1

Other

30.8

27.9

29.2

29.5

Retail trade
Accommodation & food svces

Note: Data on educational qualiﬁcations are for people aged 15-75. ‘Greater Hobart’ includes Sorell, Richmond and Dodges Ferry; ‘South East’ includes the Derwent Valley
and Central Highlands. Sources: ABS, 2016 Census Community Proﬁles; Labour Force, Australia (6202.0), October 2017.

TCCI TASMANIA REPORT 2017

Post-school qualiﬁcations

103

 Regional Tasmania is more dependent on agriculture, forestry
and ﬁshing, manufacturing and, in the case of the NorthWest and West, mining; while Hobart has a much greater
concentration of employment in services – and, in particular,
public services where employment is typically more stable and
in many cases carries higher remuneration.
Regional Tasmania has been particularly hard-hit by the decline
in Tasmanian manufacturing since 2008-09. The decline in
Tasmanian manufacturing output since the global ﬁnancial crisis
has been considerably greater than that in South Australia,
while the loss of employment in Tasmanian manufacturing
has been of proportionately the same order of magnitude
as in South Australia – yet far more assistance (in the form of
subsidies, and preferential government procurement policies)
has been directed towards manufacturing in South Australia
over the past year (and prospectively) than to manufacturing in
Tasmania.

TCCI TASMANIA REPORT 2017

Of course, many Tasmanians living in regional areas would
argue that the beneﬁts of living and working where they do
– many of which are diﬃcult if not impossible to measure in
monetary terms, or capture in statistical collections – oﬀset
or outweigh the disadvantages, in much the same way as it
was noted in Section 4 that there are signiﬁcant advantages to
living and working in Tasmania that most Tasmanians see as
at least partly ameliorating some of the social and economic
disadvantages that have long aﬄicted this State.

PROUDLY SUPPORTING

The Tasmanian Chamber
of Commerce and Industry
104

27429

This Report doesn’t seek to dispute such contentions. It does,
however, lend support to the view that there have been some
signiﬁcant divergences in the relative economic fortunes of
diﬀerent parts of Tasmania, and that there is a case for policy
measures aimed at ensuring that social and economic progress
is widely and fairly shared. It also suggests that these regional
divergences are not simply a matter of “Hobart is doing well
and everywhere else is missing out”: in particular, the NorthWest Coast has been demonstrating considerable economic
resilience.

 Building activity
As noted in Section 1, housing activity declined signiﬁcantly
in Tasmania in 2016-17, with the number of new residential
buildings approved by local governments falling by 28% (after
a 17% decline in 2015-16), to their lowest level since 2012-13.

fell by more than 20% in both Hobart and the North-West and
West, as well as by another 12% in the South-East (a region
which had accounted for a disproportionately large share of
residential building activity between 2011-12 and 2013-14).

This decline was particularly marked in Launceston and the
North-East, where the number of new dwelling approvals fell
by 43% in 2016-17, after having been the only region to record
an increase in 2015-16 (Chart 8.1). But dwelling approvals also

Residential building activity has weakened further in the
North-West and West in the ﬁrst four months of the current
ﬁnancial year, but has picked up modestly in Tasmania’s other
regions.

Chart 8.3: Value of non-residential building approved,
Tasmanian regions

The value of non-residential building approved in the North-West and West region in 2016-17 was the highest in ﬁve years (Chart
8.2): nearly half of this was in Devonport, presumably reﬂecting the ‘Living City’ development. By contrast the value of nonresidential building approval declined in Launceston and the North-East (after two years of strong increases) and in Hobart;
although the level of non-residential approvals in Hobart remained high by historical standards (especially if the approval of the
Royal Hobart Hospital re-development in 2013-14 is excluded), and the volume of on-going work on construction projects already
under way is also historically high.

TCCI TASMANIA REPORT 2017

Chart 8.2: Number of new residential buildings approved,
Tasmanian regions

105

 The labour market
The turnaround in Tasmania’s labour market during
2016-17, discussed in Section 2, was concentrated in
Hobart, where the number of jobs increased by 8,200 over
the course of the year (June 2016 to June 2017) and by 0.8%,
on average, for the ﬁnancial year as a whole (Chart 8.2).
Employment also increased very strongly in the South-East
region, by an average of 3.4% for the year as a whole, after
falling by 7.1% in 2015-16 46.

Chart 8.4: Employment growth, Tasmanian regions

Chart 8.5: Unemployment rates, Tasmanian regions

Chart 8.6: Labour force participation rates,
Tasmanian regions

Chart 8.7: Employment-to-working age population ratios,
Tasmanian regions

The rebound in employment in Hobart appears to have
drawn previously discouraged job-seekers back into the labour
market (as shown by the rise in Hobart’s participation rate in
Chart 8.4). Even so, Hobart’s unemployment rate continued to
edge lower, to a ﬁve-year low of 5.6% in the ﬁrst few months of
the 2017-18 ﬁnancial year (Chart 8.5).

TCCI TASMANIA REPORT 2017

106

The number of jobs in Launceston and the North-East
rose by 3,450 over the course of 2016-17, and by 0.2%
on average for the year as a whole, after a 0.6% decline in
2015-16. By contrast, the North-West and West experienced
a 0.6% decline in employment, on average, in 2016-17, after
gains of almost 4% per annum in both 2014-15 and 2015-16.

Unemployment fell by more than 1 percentage point in
Launceston and the North-East, largely because most of the
newly-created jobs appear to have gone to people already
actively looking for work, rather than to new entrants to the
labour force; nonetheless, at 6.6% on average over the year to

October, Launceston and the North-East’s unemployment rate
remains the highest of Tasmania’s three major regions.
The opposite appears to have occurred in the North-West and
West, where the slow-down in employment growth has been
paralleled by a decline in the participation rate, so that the
unemployment rate has remained steady at around 5¾%. The
‘employment rate’ of people aged 15 and over is more recently
once again lower than in Tasmania’s other regions, as it has
been for most of the past ﬁfteen years.

The South-East region accounts for less than 7% of total Tasmanian employment, but has contributed a much larger share of the changes in total employment over the last three
years. This may reﬂect people moving between jobs in Greater Hobart and the surrounding areas which make up the South-East region.

46

 Tourism
Tourism has been one of the strongest-performing sectors
of the Tasmanian economy in recent years, with total visitor
numbers rising by more than 48% over the ﬁve years to
2016-17 to more than 1¼ million, visitor nights rising by 38%
to nearly 11 million, and total visitor spending rising by 70% to
over $2¼bn.
The epicentre of the Tasmanian tourism boom has been in
Hobart, reﬂecting (among other things) the appeal of MONA
and the growing number of cultural events in Tasmania’s
capital city, and the increase in the number of scheduled air
services to Hobart from mainland capitals. Just over 40% of all
visitor nights are spent in Hobart and its surrounds (including
New Norfolk, Sorell and Richmond).
However, tourism is a mainstay of other Tasmanian regional
economies, and in recent years they have been participating
in the growth in Tasmanian tourism. For most of the past
four years the fastest-growing destination for interstate and

international visitors has been the ‘other Southern’ region −
particularly Port Arthur and the Tasman Peninsula (aided by
the opening of the Three Capes Walk), Bruny Island and Cygnet
− although this growth stalled in 2016-17, partly because
of a sharp drop in the number of visitor nights in Huonville
(after two years of very strong growth). By contrast, Oatlands
experienced a spectacular increase in visitor nights in 2016-17,
with more stays than in the previous three years combined.
Growth in visitor nights spent in the North slowed in 201617, partly because of a decline in the number of nights in
Launceston after a large increase the previous year. The standout in this region continues to be Derby, where visitor nights
have increased ﬁve-fold over the past two years thanks to its
success in attracting mountain bikers to its recently developed
network of trails. Evandale has also experienced very strong
growth in tourism over the past three years, partly based on
the success of its cultural events.

TCCI TASMANIA REPORT 2017

Chart 8.8: Visitor nights, by region, 2012-13 to 2016-17

107

 TCCI TASMANIA REPORT 2017

The North-West Coast has experienced slower but steadier
growth in visitor numbers over the past ﬁ ve years. Devonport
has the highest number of visitor nights of any North-West
Coast destination, reﬂecting its status as the key entry point
for visitors using the Bass Strait ferries, but its visitor night
tally fell slightly in 2016-17. At either end of the North-West
Coast, Sheﬃeld and Arthur River (gateway to the Tarkine)
have enjoyed strong growth in visitor numbers over the
past few years.

108

Visitor numbers to the West Coast have now fallen for three
years in a row: it now accounts for less than 4% of all visitor
nights spent in Tasmania. The East Coast, a bit like the
North-West, has experienced slower, but steadier, growth
in visitor numbers.

Tourism is likely to continue to grow in importance as a
contributor to regional economies, provided that the exchange
rate remains competitive, and that Tasmania continues to
develop and strengthen its reputation for premium and
distinctive visitor experiences – in food and wine, arts and
culture, and various forms of recreation, in particular.
The development of new international air connections
(enhanced by the lengthening of the runway at Hobart
Airport), and the opening of new accommodation facilities
should aid further growth in tourism over the next few
years, although it may prove diﬃcult to maintain the
growth rates of the past few years.

 Promoting
regional
development
The proﬁle of Tasmania’s regions has become more nuanced
over the past couple of years. It is not simply a matter
of “Hobart doing well and everywhere else missing out”:
other parts of Tasmania have also had some experience
of improving economic conditions.
That said, there is no argument that regional Tasmania faces
even bigger challenges from its demographic proﬁle, the
breadth of its economic base, and its levels of educational
participation and attainment than Hobart.
From a longer-term perspective, the keys to improving
economic performance in regional Tasmania are the same as
those to improving economic performance in Tasmania as a
whole – in particular, increased participation in employment,
and higher levels of labour productivity.
The Tasmanian Government’s initial emphasis on oﬀering
Year 11 and 12 courses at high schools in rural centres has
been an appropriate – and, thus far, eﬀective – response
to those challenges. And its commitment to extending senior
secondary classes to high schools in Launceston, Devonport
and Burnie (as well as in Hobart) will contribute to raising
educational participation and attainment in the North and
North-West regions.

As is also the case for Tasmania as a whole, the future for
Tasmania’s regions will not be secured by seeking to recreate
their past. Tasmania’s regions need to play to their existing
comparative advantages, and strive to develop new ones,
rather than continue to hope that industries and jobs which
have departed can somehow be restored.
TCCI TASMANIA REPORT 2017

Sustained growth in tourism is also likely to require
greater levels of investment in road infrastructure,
especially in regional areas, and in the maintenance and
upgrading of facilities in Tasmania’s iconic national parks
and reserves. In some areas, it is possible that capacity
constraints may limit the scope for continued growth
in visitor numbers.

The University of Tasmania’s Northern Transformation
Program has the potential to be a ‘game changer’ for both the
North and the North-West – through the initial impact of the
jobs created in the construction phase of these two projects,
and over the longer term by the new pathways which they
will provide to higher levels of educational participation and
attainment, and by the way in which they change the ‘face’ and
‘feel’ of the cities of Launceston and Burnie.

109

  
SECTION
NINE

 
LOOKING FORWARD:
THE 2018 ELECTION
AND BEYOND

 
This year’s Tasmania Report has intentionally sought to
reiterate many of the themes identiﬁed and discussed in its
two predecessors.
It has again documented that Tasmanian material living
standards are, on average, lower than those of other
Australians. Tasmanians are less likely to have jobs, and more
likely to be reliant on some kind of government support, than
other Australians. Tasmanians who do have jobs typically work
fewer hours, and earn less, than their counterparts on the
mainland. Tasmania’s economy is more narrowly-based, more
vulnerable to external shocks, and less productive than the
economies of the mainland states.
There is of course more to ‘well-being’ than those factors to
which numerical or monetary values can be assigned, such as
employment or income.

TCCI TASMANIA REPORT 2017

There are many aspects to their ‘quality of life’ which
Tasmanians justiﬁably regard as preferable to those
experienced by other Australians, especially those living in
large cities. But, as this Report has also shown, there are other
important dimensions of well-being, not easily represented
in dollar terms, where Tasmanians are less well-oﬀ than other
Australians – particularly in terms of education and health.

112

This Report does not pretend that all of the diﬀerences
in economic performance, or other aspects of community
and individual well-being, between Tasmania and the
rest of Australia can or should be eliminated. Tasmania’s
comparatively small population, relative isolation, and
demographic proﬁle make it unlikely that it will ever be as well
oﬀ, in a monetary sense, as other Australian states – a point
highlighted by the comparisons this Report has sought to
make with the non-metropolitan regions of mainland states.
Tasmania is not unique in that regard – as shown in last year’s
Tasmania Report, many other islands, in other countries around
the world, share these characteristics.
However, one of this Report’s key themes is that Tasmania
can do better on many dimensions of economic performance
than it has been doing – and that if it does, then many of the
other problems which Tasmania faces are likely to be less
diﬃcult to resolve.
Indeed, the risk is that if a sustained eﬀort is not made to
improve Tasmania’s economic performance, the almost
inexorable forces of demographic and technological change
will see the diﬀerences in living standards between Tasmania
and the rest of Australia widen even further, over time.

This Report has sought to highlight many of those diﬀerences –
with a view to identifying areas where improvement is possible,
to calibrating how much improvement may be feasible, and
to provide some ideas as to what should be done in order
to bring about feasible improvements in the well-being of
Tasmanians, relative to that of other Australians.

Tasmanians go to the polls in 2018 to choose who will govern
them for the next four years. This section puts forward
some proposals which, if endorsed by Tasmanian voters at
that election, would help to improve Tasmania’s economic
performance and thus help narrow the diﬀerences in living
standards between Tasmania and other Australians.

It seeks to provide those who want to achieve positive
changes in Tasmania’s economic and social circumstances
with evidence that can be used to help make the case for
those changes.

These do not purport to constitute a comprehensive strategy
to address all of the challenges Tasmania faces. Nor, of course,
should it be interpreted as an endorsement of any particular
political party.

 Establish a target for economic
performance
The Canadian educator and self-described ‘hierarchologist’
Laurence J Peter, best known for the ‘Peter principle’ (‘in
a hierarchy every employee tends to rise to his level of
incompetence’), also once wrote, “If you don’t know where
you’re going, you’ll probably end up somewhere else” 47.
Having a clear, measurable and achievable target for
Tasmania’s economic performance could assist in focussing
public and government attention on what needs to be
done in order to reduce the gap between Tasmanians’ living
standards and those of other Australians, and in assessing
how much progress is being made, year by year, towards
meeting that goal.
It was suggested in Section 7 that a feasible target could
be to lift Tasmania’s per capita gross product to the same
proportion of the national average as South Australia,
given that South Australia’s demographic proﬁle and many
of its other characteristics are closer to Tasmania’s than
are those of any other state. That would imply increasing
Tasmania’s per capita gross product as a proportion of the
national average from about 78½% to about 83½% - or by
about $3,759 per head of population (in 2016-17 dollars), an
increase of about 6½%.

Tasmania was receiving a larger share of GST revenues (and
they were growing more rapidly), and there was a spurt of new
home-building prompted by an inﬂux of mainland immigrants.
Nonetheless, if the A$ remains at its current reasonably
competitive levels, the recent gradual improvement in net
interstate immigration can be sustained, in the absence of any
adverse external shocks, a repeat of that performance should
not be seen as beyond reach. Even if Tasmania’s per capita
real growth rate exceeds the national average by ½ percentage
point per annum, Tasmania’s per capita gross product would
reach parity with South Australia by 2030.
Of course, setting a target is only a statement of aspiration,
and a measuring stick. The challenge then is to implement
policies and strategies which are directed towards, and
capable of, reaching the target.

Chart 9.1: Real per capita GSP growth, Tasmania and Australia

This is not an implausible aspiration. Tasmania has actually
done it before - between 2001-02 and 2008-09 (inclusive),
when Tasmania’s real per capita gross product grew at a rate
0.8 pc points per annum faster than the national average
(Chart 9.1).
Admittedly, that was in circumstances which were in some
respects more conducive to faster growth in the Tasmanian
economy than now – in particular, the A$ was much lower,

47

Laurence J Peter, Ideas for Our Time, William Morrow & Co., New York, 1977, p. 125.

TCCI TASMANIA REPORT 2017

As noted in Section 7, this target could be achieved within a
decade if Tasmania were able to sustain per capita growth of
¾ of one percentage point per annum faster than the national
average (all else being equal).

113

 Education
A consistent theme throughout this Report and the two
previous Tasmania Reports is that Tasmanians are, on
average, less well-educated than other Australians, and that
this is the most important single reason why Tasmanians
are less likely to be employed by other Australians, work
fewer hours and produce less for each hour they work
if they are employed than other Australians, and earn less
in employment than other Australians.
The comparisons made in this Report and its predecessors
have also demonstrated that Tasmania’s relatively lower
levels of educational participation and attainment are
not the result of Tasmania’s smaller or more dispersed
population, of its relatively greater proportion of low
socio-economic status households, of any innate lack
of capability on the part of Tasmanian students, or of
insuﬃcient levels of spending on education.
Rather, the single biggest reason for Tasmania’s relatively
poor educational outcomes – the most obvious diﬀerence
between Tasmania’s public education system and that of
the rest of Australia – is the delivery of upper secondary
education through a small number of separate colleges,
rather than through comprehensive high schools.

TCCI TASMANIA REPORT 2017

If this system had been a resounding success, other
states would surely have copied or adapted it – even if only
for their non-metropolitan regions, with which Tasmania
has more in common than the large mainland capital cities.
None of them has.

114

On the contrary, the evidence thus far is that the current
Government’s program of extending Year 11 and 12 courses
to high schools outside the four major population centres
is having a positive impact on retention and TCE completion
rates (although it is probably too early to regard the evidence
as conclusive). The Government’s more recent proposal to
oﬀer the same opportunities to students attending high
schools in Hobart, Launceston, Burnie and Devonport to
complete Year 12 where they begin Year 7 is likely to have
equally positive results, over time.
Ultimately, these changes should lead to the closure of the
separate senior secondary colleges, and their amalgamation
with or conversion into comprehensive high schools.

It is diﬃcult to think of any other single thing which it is
within the power of the Tasmanian Government to achieve,
which would do more to lift Tasmania’s potential economic
growth rate over the longer term, than to ensure that every
Tasmanian student has access to the same opportunities to
gain a full and complete education, as students in every other
part of Australia.
It would also bring a range of non-economic beneﬁts,
including in all likelihood that Tasmanians would make
diﬀerent ‘lifestyle choices’ which would in turn lead to better
health outcomes.

 Health and community services
This report has not analysed or discussed Tasmania’s
health outcomes in the same degree of detail as it has the
performance of its education system. However, this report
and last year’s have shown (as does other evidence) that
Tasmanians generally experience poorer health (and have
shorter lives) than other Australians (excluding Australia’s
Indigenous population); and that, partly as a result, they
make greater use of health facilities. Some, but not all, of
these diﬀerences are the result of Tasmania’s population
being older, on average, than that of the rest of Australia.
Reﬂecting this, the Commonwealth Grants Commission, as
part of the analysis it undertakes each year in formulating
its recommendations as to the distribution of GST revenues
among the states and territories, assesses that Tasmania
needs to spend more than other states and territories per
head of population on health, in order to provide health
services of a similar standard to the average of all states and
territories 48. In its most recent assessment, it concluded
that Tasmania needed to spend just under $3,000 per head

on health in the 2015-16 ﬁnancial year – more than any other
state or territory except the Northern Territory, and $570 per
head more than the national average – in order to provide
Tasmanians with a similar standard of health services to that
provided by all states and territories, on average49.
There is of course no requirement that any state or government
actually spend the amount assessed by the Grants Commission
as being necessary to provide a similar standard of service
to the national average – on health or any other area.
Governments may, and do, choose to spend more than the CGC
benchmark on some services, and less on others.
Successive Tasmanian Governments have in practice spent
materially less on health, in particular, than the amounts
assessed by the Grants Commission as being required to match
the national average standard of services – by an average of
$146mn per annum (or 10½%) – over the ﬁ ve years to 2015-16
(Chart 9.2).

TCCI TASMANIA REPORT 2017

Chart 9.2: Diﬀerences between Tasmanian Government actual spending and Grants Commission assessment of spending
required to provide ‘ national average’ level of services

48
This assessment, together with similar assessments regarding most other categories of state government spending, and an assessment that Tasmania has less capacity to raise
revenue than other states and territories, is why the CGC consistently recommends that Tasmania should get a larger share of the revenue from the GST than its share of the
population.
49
Commonwealth Grants Commission, Report on GST Revenue Sharing Relativities - 2017 Update, April 2017, Supporting data, revenue and expense ratios.

115

 Successive Tasmanian Governments have also ‘underspent’,
relative to the CGC benchmarks, on community services and
welfare (Chart 9.2), justice, and transport; and ‘overspent’
on school education (albeit marginally), services to industry
and ‘other expenses’ (for the most part, public service
running costs).

TCCI TASMANIA REPORT 2017

It is theoretically possible that ‘under-spending’ relative
to the CGC benchmark is due to greater eﬃciency in
the delivery of services; likewise ‘over-spending’ could
theoretically be the result of a conscious decision to provide
a better-than-average standard of services. However, as
noted in Section 5, Tasmania’s ‘over-spending’ on education
has not resulted in better-than-average educational
outcomes; and it would be hard to believe that Tasmania’s
lower-than-average spending on health is the result of
greater eﬃciency in delivering health services.

116

However, while it probably will be necessary to spend
more on health services over the next four years than
currently envisaged, spending more money alone will not
address Tasmania’s health challenges. The Productivity
Commission’s recently published Productivity Review,
intended as the ﬁrst of a ﬁ ve-yearly series, highlights the
health sector Australia-wide as being in need of serious
reform, to encourage a focus on patients rather than
suppliers, improve co-ordination of care, facilitating
experimentation and the use of new technologies and
data-sharing, and addressing ‘lifestyle risks’ 50.
These reforms should be closely examined in Tasmania.

It seems likely that the next Tasmanian Government will face
greater pressure for increased spending on health services.
And, as noted in Section 5, the most recent State Budget
provides for growth in health spending of less than 2% per
annum – implying virtually no growth in real terms – which
seems unlikely to be sustainable.

50

Productivity Commission, Shifting the Dial: 5-year productivity review, October 2017, pp. 44-79.

 State taxation reform

Wide-ranging taxation reform is of course politically diﬃcult,
if not impossible, to implement without an electoral mandate:
part of the problem has been that political parties have been
unwilling to seek such a mandate, preferring to rule out any
prospect of change rather than obtain voters’ permission to
make change.
Hence one of this Report’s pleas is that those seeking to
form government at the next election consider seeking an
electoral mandate for reform of Tasmania’s taxation system
– whether it be for the purpose of raising additional revenue
in order to fund additional spending on health (for example),
fostering economic and employment growth by making
Tasmania’s taxation system more competitive with that
of other states, or improving housing aﬀordability and the
eﬃciency of land use.
Two broad reforms which are worthy of consideration
in this context are:

•

Lowering the rate and broadening the base
of payroll tax; and

•

Replacing stamp duty on land transfers with
a broadly-based land tax

Tasmania’s payroll tax rate of 6.1% is the highest of any
jurisdiction other than the ACT51. Tasmania tax-free threshold
of $1.25mn per annum is also the highest of any state
(though the two territories have higher thresholds). In other
words, Tasmania levies a higher rate of payroll tax on a
narrower base than most other jurisdictions. This means
that a larger proportion of small businesses are exempt
from payroll tax in Tasmania than in the other states: but it
also means that large businesses pay a higher rate of payroll
tax than in other states (and by comparison with Victoria,
Queensland and South Australia, each of whose payroll
tax rate is less than 5%, much higher). This may be one
reason why Tasmania does not have a large number of large
businesses.
This is the opposite of what most economists regard as one
of the principles of ‘good tax design’ – imposing the lowest
possible rate across the broadest possible base, consistent
with raising the required amount of revenue.
Tasmania’s relatively high tax-free threshold for payroll tax
means that the State Government will collect $192mn less
in 2017-18 than it would if all employers paid the 6.1% rate –
equivalent to 56% of what it actually expects to collect from
those employers who do pay payroll tax52.
If all employers were liable to payroll tax, the rate could be
lowered to less than 4% without any net cost in terms of
revenue.
Small business would, understandably enough, vociferously
object to the idea that they should pay payroll tax. But there
is no sound or valid economic reason why small business
should receive preferential tax treatment53. And if payroll
tax were to be collected by the Australian Taxation Oﬃce
in the same way that PAYE income tax deductions are
collected from all employers (irrespective of their size), then
there would be no greater administrative burden on either
employers or the Tasmanian Government than results from
current payroll tax collection arrangements.

Western Australian employers with a national payroll in excess of $100mn per annum will pay a tax rate of 6.5% on that part of their payroll in excess of $1.5bn per annum from
2018-19 through 2022-23.
Tasmanian Government, Budget Paper No 1, 2017-18, p. 93.
53
See, for example, Richard Holden, ‘Is small business really the engine room of the economy?’, The Conversation, 10 June 2016; or Dora Benedek et al, The Right Kind of Help? Tax
Incentives for Staying Small, IMF Working Paper No. 17/139, Washington DC, June 2017.

TCCI TASMANIA REPORT 2017

Although successive State Governments have tinkered with
Tasmania’s taxation system, altering rates of tax or making
small changes to the base of particular state taxes, it has
been a long time since any Tasmanian Government embarked
upon a program of wide-ranging state taxation reforms.

51

52

117

 Having Australia’s lowest payroll tax rate could be
a signiﬁcant advantage in attracting investment and
employment to Tasmania. It would be more sustainable,
and arguably more ethical, than cutting ‘secret deals’
with prospective employers to attract them to establish
or expand operations in Tasmania.
If it is considered necessary to oﬀer some kind
of preferential tax treatment to some businesses in order
to stimulate investment or employment, a far more sensible
basis for doing so than the size of the business concerned
is to give preferential treatment to new businesses –
whether they are new Tasmanian businesses, or established
businesses setting up in Tasmania for the ﬁrst time. New
businesses are much more likely than small ones to create
new jobs; and they are more likely to engage in innovation
than small businesses. Preferentially taxing new businesses
also avoids the perverse incentives inherent in any system
of preferential treatment for small businesses, prompting
them to refrain from hiring the marginal employee who will
push them above the tax-free threshold.

TCCI TASMANIA REPORT 2017

The case for replacing stamp duty with a more broadlybased land tax has been articulated on many occasions,
including by the Henry Review and more recently by the
Productivity Commission54. Stamp duties are among the
most ineﬃcient taxes ever devised: they add to the cost
of housing, and discourage people from moving to be closer
to jobs, family networks or educational opportunities.

118

54
55

The revenue from them is volatile and unpredictable
– in contrast to the revenue from land taxes. Land taxes
do not distort decision-making; they are a more eﬀective
deterrent to ‘land banking’ and other forms of speculation;
and they are almost impossible to avoid.
The Grattan Institute has estimated that replacement of
stamp duties with a broadly-based land tax on a national
scale would ultimately boost GDP by $9bn annually55.
Tasmania’s share of that could be $100-200mn (or ¼-½%
of gross state product).
Any such reform would need to be phased in over a number
of years, and be accompanied by transitional arrangements
to avoid ‘double taxation’ of recent property purchasers.
Provision would also need to be made for low-income
property owners (such as pensioners), similar to those
made by some local governments whereby rates can be
made a charge against an estate. And consideration would
need to be given to the possible impact of any such change
on Tasmania’s share of revenue from the GST.
The ACT Government has already commenced this
transition – and survived an election at which the alternative
government campaigned against the replacement of stamp
duties with a combination of higher municipal rates and
a broader land tax.
The next Tasmanian Government should give consideration
to a similar reform.

Ken Henry et al. Australia’s Future Tax System - Final Report: Part 1 - Overview, May 2010, pp.48-50; Productivity Commission, Shifting the Dial: 5-year productivity review, October 2017, pp. 149-152.
John Daley and Brendan Coates, Property Taxes, Grattan Institute, Melbourne, July 2015.

 Asset sales and the ﬁnancing
of infrastructure investment
As discussed in Section 5 of this report, there is a sound
case for governments to borrow, especially given the current
historically low interest rates at which governments can borrow
for long terms, in order to invest in infrastructure projects
which have been rigorously selected on the basis of their
capacity to meet demonstrated economic or social needs, and
which are subject to appropriate governance arrangements.

It is now widely recognised that previous ‘privatisations’ of
government-owned businesses have in many cases not
delivered the beneﬁts originally promised, particularly
to consumers or users of the services provided by those
businesses; and in some of those, and in others, the costs
of ‘privatisation’, in terms of job losses or the withdrawal of
services have been greater than initially indicated.

In principle, given its relatively low level of public sector debt
(including the ‘debt free’ status of its general government
sector), Tasmania should be able to do what other states (and
governments in other countries) are doing, taking on more debt
in order to fund investments which the private sector is unlikely
to undertake, and which meet the above criteria.

This Report does not seek to argue that there are any
‘eﬃciency’ gains necessarily to be had from the sale of
government-owned businesses, or that there can be any
credible guarantees of lower prices. However, it is possible
– particularly if the primary motivation for a sale (or lease) is
not to gain the highest possible price – to design regulatory
structures which ensure continuing public oversight over the
pricing and availability of such services, over the location of
head oﬃces, and over asset maintenance standards and similar
matters.

It was argued in Section 5 that the only options available for
reducing this constraint were to run large budget surpluses and
invest them with a view to building up a stock of ﬁnancial assets
suﬃcient to defray the superannuation liability; or to sell assets
and apply the proceeds to the same end.

Nor does this Report suggest that every government-owned
business should be a candidate for possible sale or lease.
In particular, this Report does not advocate the sale of Hydro
Tasmania, TT-Line, TasRail, Metro Tasmania, or (were it to be
taken over by the State Government) TasWater (for diﬀerent
reasons in each case).

TCCI TASMANIA REPORT 2017

However, as also discussed in Section 5, Tasmania’s capacity
to fund higher levels of infrastructure investment through
borrowings is tightly constrained by its very large unfunded
public sector superannuation liability, the servicing of which has
in eﬀect ‘eaten up’ all the headroom that might otherwise have
been available to meet higher levels of interest payments on
debt used for worthwhile infrastructure investment.

119

 However, consideration could be given to the possible sale
or lease of TasNetworks, Aurora Energy, the Motor Accidents
Insurance Board and/or TasPorts. Similar entities have
been sold or leased by governments of both major political
persuasions in other states in recent years – in many cases
to Australian superannuation funds for whom such assets
provide an ideally suited income stream.

TCCI TASMANIA REPORT 2017

By way only of illustration, some back-of-the-envelope ﬁguring
based on recent transactions suggests that a sale or longterm lease of TasNetworks could be worth $2-2½bn to the
Tasmanian Government (depending on the conditions that
were attached to any such transaction).

120

That would represent a signiﬁcant oﬀset to the unfunded
superannuation liability of $8½bn. A future state government
which undertook such a transaction could arrange for the
proceeds to be managed by the Australian Government’s
Future Fund, and legislate similar restrictions to those which
have applied to funds transferred by previous Federal
Governments to the Future Fund to prevent them from being
used for any purpose other than defraying superannuation

liabilities (or until those liabilities have been otherwise
discharged).
Recent political history suggests that such a transaction could
not be undertaken by a government which did not have an
explicit mandate for it. But it also suggests that it is possible
to obtain such a mandate if the case for doing so is clearly
and consistently articulated to the electorate beforehand, and
the electorate is convinced that the beneﬁts – for example in
terms of increased investment in infrastructure that would not
otherwise be possible – outweigh the potential risks.

 Conclusion
The foregoing discussion is not intended to represent a comprehensive list of everything that could or
should be done by whichever government takes oﬃce after the next state election.
The purpose is rather to assert that the economic and social challenges facing Tasmania, over the next
four years and well beyond, cannot be addressed by a government which has sought a mandate for doing
nothing more than ‘minding the store’, however competently they promise to do that.

TCCI TASMANIA REPORT 2017

Tasmania has made some genuine and tangible progress in recent years. There is a greater sense of
optimism about what may be possible. This is a moment in Tasmania’s history where those who seek to
shape its future should be imaginative and bold, rather than cautious or timid. It is a time, to paraphrase
Robert Kennedy, to think of what could be, and ask “why not?”

121

 HOW

TCCI

JOIN TODAY!

from as little as
$210

MEMBERSHIP

benefits your business
The Tasmanian Chamber
of Commerce and Industry
is an independent membership
organisation that positively
leads and supports the
Tasmanian business
community.
TCCI provides valuable support to its members
through advocacy and a range of programs
and services including:
> Customised membership to achieve
your business objectives
> Workplace relations advice and solutions
> Workplace health and safety
> Networking and promotion
> Training and workforce development
> Events

Tasmanian Chamber of Commerce and Industry
Hobart   Launceston

www.tcci.com.au
20189

Ph: 1300 559 122