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Tasmania Report 2020

EVENT PARTNERS

CONTENTS Executive Summary

From the Chair

About The Author

Tascoss Forward

Chapter 1 TASMANIA’S EXPERIENCE OF COVID-19

Chapter 2 TASMANIA’S ECONOMY BEFORE THE ONSET OF COVID-19

Chapter 3 TASMANIA’S ECONOMY DURING COVID-19

Chapter 4 THE ROLE OF GOVERNMENTS AND COMMUNITY ORGANISATIONS

Chapter 5 THE TASMANIAN ECONOMY IN THE POST-COVID WORLD

Chapter 6 UNRESOLVED QUESTIONS

EXECUTIVE SUMMARY Covid-19 has brought sickness to

Despite all these favourable developments, the

almost 68 million people around the

Covid-19 recession appears to have hit Tasmania’s

world, and death to over 1½ million. The virus, and the measures deemed

or territory, with the obvious exception of Victoria, with its unique (in the Australian experience) ‘second

necessary by governments to contain

wave’ of infections. In particular, Tasmanians have

its spread, have induced what for most

encountered greater difficulty in getting back to work

countries around the world has been,

after the job losses incurred during the early part of

the most severe recession in decades, if not since the Great Depression.

the recession, than people anywhere else in Australia other than Victoria. This has not been for any want of effort by

Tasmania has done exceptionally well in managing

the Tasmanian Government. The Tasmanian

the health risks posed by the virus, especially once

Government has been more generous in the support

allowance is made for the outbreak at the North-

it has provided to households and businesses in this

West Regional Hospital (NWRH), which was

state than any other state or territory government

subsequently traced to failings which occurred

– which it was able to be because it entered the

elsewhere in Australia. Tasmania’s experience

pandemic in a stronger financial position, in most

compares favourably not just with other parts of

respects, than other state and territory governments.

Australia, but with much of the rest of the world.

Support from the Federal Government has also been

Prior to the onset of Covid-19, Tasmania’s economy

of crucial importance in ameliorating the economic

had been performing strongly in most respects,

damage wrought by the pandemic, while local

both by comparison with its experience earlier in the

governments and community organisations have

decade, and with the performance of other states

also played vital roles.

and territories. In particular, Tasmania recorded

There are no grounds for concern over the magnitude

faster economic growth per capita than any other

of the budget deficits which the Tasmanian

state or territory in the two years to 2018-19; its

Government expects to incur over the next four years,

unemployment rate had dropped to below the

or the debt which it will accumulate as a result.

national average by the March quarter of this year; and its residential property market had been the strongest in the nation.

The deficits are entirely in accordance with the advice given to governments by credible international agencies, and by Australia’s own Reserve Bank.

Both as a consequence of these and other

The debt can be readily serviced at current and

developments, and as a contributor to them,

prospective interest rates, and will in any event be

Tasmania’s population growth rate had picked up,

smaller relative to the size of Tasmania’s economy

as fewer Tasmanians left to seek more favourable

than that of any other state or territory except

opportunities on the mainland, more people moved

Western Australia.

from the mainland to Tasmania, and Tasmania attracted its largest share of the national overseas migration intake in at least five decades.

economy more severely than that of any other state

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If it needs to, the Tasmanian Government has scope to do more to support the economic recovery process.

The fact that Tasmania’s economy was doing well going

There are also other questions which are important for

into the Covid-19 recession, and the State Government

Tasmanians to consider.

has provided and will continue to provide significant fiscal policy support, unfortunately does not guarantee that Tasmania will emerge from the recession ahead of, or more rapidly than, the rest of Australia. Tasmania’s experience during each of the last three recessions, over the past four decades, counsels strongly against such hopes. Tasmania’s economy is too small, too narrowly-based, and too exposed to forces outside the control of the State Government, or individual

Crucial though it has been to the improvement in Tasmania’s economic performance over the past five years, have we now become ‘too dependent’ on tourism, given the challenges which that industry faces as a result of Covid-19? Have we become ‘too reliant’ on China as an export market, given the rapid deterioration in the bilateral political relationship between Australia and China?

Tasmanian businesses, to be at all confident that this

Are we ‘too comfortable’ with the extensive fiscal

piece of history will not repeat itself.

support Tasmania receives from the Federal Government

To be sure, the changes wrought by Covid-19, and Tasmania’s success in managing them, have opened up new opportunities for Tasmania – in particular, as a ‘safe’

– and if so, what are we prepared to do, including by way of reform to our state tax system, to reduce the risks we might face if that support were to be lessened?

place for people to call home, and as a place from which

The next State election is now at most only 15 months

new digital technologies, new ways of working or doing

or so away. Ideally, between now and then, Tasmania’s

business, can be exploited.

political leaders – both those currently in government,

But Covid-19 and the recession in its wake have also attenuated challenges and vulnerabilities which have confronted Tasmania for a very long time, and have brought new ones.

and those who aspire to be – will seek to engage with Tasmanians on issues such as these, and others, with a view both to ascertaining what Tasmanians hope for, and what they are prepared to undertake in order to realise those hopes, and to persuading Tasmanians to give

In particular, they have brought – or should bring – a

them an electoral mandate to implement the changes

renewed focus on the importance of remedying the flaws

which will be necessary to address the challenges which

in Tasmania’s education and health systems, which

Tasmania faces (both long-standing, and more recently

will be crucial to Tasmania’s success or otherwise in

as a result of Covid-19), and to make the most of the

attracting people from other parts of Australia, and the

opportunities which now present themselves.

world, as well as retaining more of our own people.

Tasmania didn’t really have that kind of engagement

The growing importance of digital access and skills, as

in the lead-up to the last State election in 2018. Having

a means of accessing education, social connections,

foregone that opportunity during more prosperous times,

essential services, employment and a growing range

it is perhaps to be hoped that the onset of more difficult

of goods, as well as ‘doing business’ – which has been

times will be seen as a reason to be bold and imaginative

dramatically accelerated during 2020 – underscores

– as it has been in some other states – rather than an

the urgency of addressing the ‘digital divide’, something

excuse to ‘hunker down’ and be timid.

which is especially pronounced both between Tasmania and the rest of Australia, and within Tasmania itself.

T C C I TA S M A N I A R E P O R T 2 0 2 0

FROM THE CHAIR PA U L R A N S O N

It is with great pleasure and pride that I introduce this sixth Tasmania Report to you. The report which is an important annual milestone in analysing our progress as a community, is only possible due to the unique partnership that makes the funding of the report possible. The powerful concept, initiated by the TCCI in 2015, was that a report combining economic and social aspects of the entire Tasmanian community was essential

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.

to inform debate on strategic goals and policy

Traditionally, business has not examined the

implementation for every Tasmanian. TCCI together

qualitative indicators of Tasmaniaâ€™s success

with TasCOSS, Tasplan Super, TPT Wealth, Telstra

such as housing, education and health. The TCCI

and media partner The Mercury combine in a

believes that the true measure of a successful

partnership that provides key data and independent

Tasmania must include improved achievements in

analysis to better inform all Tasmanians.

these areas as well as the quantitative indicators

As engaged Tasmanians, we know the significance of accurate data in measuring and managing key objectives. We also know the benefits of positive relationships with stakeholders who join with us

of employment, infrastructure development, levels of taxation and the costs of doing business in an island state with a small decentralised population, and limited transport options.

in striving to achieve a better Tasmania for all, and

Entering 2020 Tasmania was enjoying its best

who recognise that prosperity and wellbeing are

economic performance in 15 years with our

intrinsically linked at an individual and community

performance relative to our mainland peers

level. The significance of economic indicators

trending positively. However, March 2020 saw

alone can cloud vision and judgement. The

the Covid-19 pandemic arrive in Australia and

combination of social and economic indicators

the subsequent disruption due to strict border

informs a fuller appreciation and prompts debate

controls, physical distancing, limitations on

about the priorities that Tasmania must set.

gatherings and freedom of movement resulted

Of course, the State Government plays a huge part in the achievement of community priorities

in a shock to the Tasmanian community from an economic and social perspective.

as does the Australian Government and local

While governments, businesses and communities

government, health and education institutions,

have pulled together to mitigate the effects of the

industry, businesses, community groups and

pandemic and we appear to be on a path to recovery,

individuals all of whom have a responsibility to

the return to normal is still some way off and patchy

look beyond self- interest and understand and

as international borders are mainly closed and

act for the needs of Tasmania as a whole.

restrictions on physical distancing and gatherings are likely to remain in place until an effective vaccine has been deployed and taken up by the community.

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This yearâ€™s edition will focus on the impact of the pandemic on our economy, as well as opportunities for recovery moving forward. Of interest will be understanding whether the recovery can be used as a catalyst to take bold steps to make changes that will make significant inroads into improving the long-term outcomes for the Tasmanian community. From any crisis there is always opportunity for communities to learn and grow. For example, the pandemic has accelerated trends in the shift from physical to digital and remote work while supporting local businesses has become more prevalent. While these are opportunities where we can embed changes that will benefit society more broadly, care needs to be taken not to embed disadvantage. In particular, the shift to digital and remote work requires communities to have access to affordable and responsive telecommunications infrastructure and this is an area where some communities are inherently disadvantaged at present. 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 sixth Tasmania Report, the TCCI will continue to track Tasmaniaâ€™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. Paul Ranson Chair Tasmanian Chamber of Commerce and Industry

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ABOUT THE AUTHOR SAUL ESLAKE

Saul Eslake worked as an economist in the Australian

Saul has a first-class honours

financial markets for more than 25 years, including as

degree in Economics from the

Chief Economist at McIntosh Securities (a stockbroking firm) in the late 1980s, Chief Economist (International)

University of Tasmania, and a

at National Mutual Funds Management in the early

Graduate Diploma in Applied

1990s, as Chief Economist at the Australia & New

Finance and Investment from the

Zealand Banking Group (ANZ) from 1995 to 2009, and as Chief Economist (Australia & New Zealand) for Bank

Securities Institute of Australia. In

of America Merrill Lynch from 2011 until June 2015.

December 2012 he was awarded

He has now established his own independent

an Honorary Doctor of Laws degree

economics consultancy business, based in Tasmania,

by the University of Tasmania. He

and has a part-time appointment as a ViceChancellor’s Fellow at the University of Tasmania. He

has also completed the AICD’s

served for 10 years on the board of Hydro Tasmania,

Company Directors’ Course

and five years as Chair of the Tasmanian Arts Advisory

(with an Order of Merit) and the

Board; and is currently a non-executive director of the Macquarie Point Development Corporation. He is

Senior Executive Program at

also a member of the (Federal) Parliamentary Budget

Columbia University’s Graduate

Office’s Advisory Panel, and of the Australian Taxation

School of Business in New York.

Office’s ‘Tax Gap’ project Expert Advisory Panel.

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TASCOSS FOREWORD Have you had a successful 2020? You may find that a hard question to answer... or

The fabric of our society, and indeed our economy, is

perhaps not. 2020 has truly been a year like no other

built on people — the volunteer bus drivers ferrying

for each and every one of us. We have had to live

people to health appointments, those on the frontline

differently, work differently and connect with each

distributing emergency relief hampers to people in

other differently. We have all had to realign the way

need, our domestic violence services providing timely,

our lives work and the way we interact with others, and

wrap-around support to those fleeing abusive homes

I daresay many of us will now be defining success —

during lockdown. Our ever-dependable essential

and perhaps wellbeing — in a different way than we

workers stepped up to provide support and assistance

would have back at the start of the year when Covid-19

to Tasmanians. We couldn’t have been in better hands.

was merely a problem for those a 12 hour flight away.

It is our people which have seen us through this crisis.

Many of us, including our Premier, define the success

This network of services and support makes up our

of our state as including both the good health of our

social infrastructure and is every bit as important as

people and the good health of a strong economy.

hard, physical infrastructure.

These two elements are inextricably linked in our minds in ways they may not have been before these past 12 months.

While there was undoubtedly suffering and hardship during Covid-19, I think we would all agree that the way the government, community service organisations,

Our physical and mental safety and wellbeing were

private business and the community as a whole

at the forefront of our state’s and wider community

banded together to reach out and support each other

response to the pandemic. And perhaps for the first

underpinned our state’s success in the face of extreme

time in decades, it was our collective wellbeing rather

disruption.

than the economy alone that drove our decisionmaking and was the yardstick by which to measure the effectiveness of our Covid-19 response.

It is TasCOSS’s view that we simply can’t afford to go back to business as usual, where a fifth of Tasmanian children start Year 7 below the national standard for

That raises the question that changing times need us

reading, where Tasmania has higher rates of obesity

all to ask: how do we measure success?

than any other state or territory, and where too many

Let’s consider it from a personal perspective: how do you measure your own personal success? Is it the

Tasmanians don’t have the skills and qualifications needed to take up the jobs of the future.

level of your bank account alone or do you consider

In line with the times, we need to start measuring our

other measures like how healthy you are, the quality

success in terms of our people as well as the economy,

of your relationships and whether you get to do things

just as I suspect you do for yourself and for your family.

you enjoy in life? And now that we’ve started thinking about it: how do you measure success for your family? For your children?

Our response to the pandemic shows we are capable of doing this. So as we turn our minds and energy to rebuilding Tasmania, I urge you to think about ways

Covid-19 has taught us many lessons. The obvious:

we can keep the best of our crisis response — our

wearing the same pair of pyjama bottoms for three

collective action to care for those around us — and

weeks’ straight probably isn’t a good idea. And the

make it our new normal.

nugget of truth amidst the oddness of it all: as a

Adrienne Picone

society we function better when we place our people

Chief Executive Officer

at the centre of everything we do and work together

TasCOSS

with a common purpose.

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 1 TASMANIAâ€™S EXPERIENCE OF COVID-19

Chapter 1: Tasmania’s experience of Covid-19 Covid-19 is far from being the most serious pandemic to have afflicted humanity –

Chapter 1: though it has thus far infected almost 68 million people world-wide and claimed the TASMANIA’S EXPERIENCE OF COVID-19 lives of over 1½ million people, those numbers are smaller both in absolute terms and as

a percentage of the world’s population than those attributable to HIV-AIDS, smallpox, the so-called ‘Spanish flu’ of 1918-20, and the three ‘great plagues’ of 541-2 (the Covid-19 is far from being the most serious to have afflicted humanity – though it has thus far infected ‘Justinian’ Plague), 1347-51 (the pandemic ‘Black Death’) and 1855-1960 (Public Health Online almost 68 million people world-wide and claimed the lives of almost 1½ million people. Those numbers smaller 2020). The H1N1 swine flu infected almost 61 million people between April 2009are and April both in absolute terms and as a percentage of the world’s population than those attributable to HIV-AIDS, smallpox, 2010, but caused fewer than 12,500 deaths (Newman 2020). the so-called ‘Spanish flu’ of 1918-20, and the three ‘great plagues’ of 541-2 (the ‘Justinian’ Plague), 1347-51 (the ‘Black

However, people’s fear of catching the virus, and the actions which governments implemented in order to contain and prevent its spread, have between them April 2009 and April 2010, but caused fewer than 12,500 deaths (Newman 2020). prompted the most severe economic downturn, in almost every country in the world, However, people’s fearDepression of catching theof virus, the actions which governments implemented in order to contain and since the Great theand 1930s. Death’) and 1855-1960 (Public Health Online 2020). The H1N1 swine flu infected almost 61 million people between

prevent its spread, have between them prompted the most severe economic downturn, in almost every country in the

Tasmania’s experience of covid-19 has been less severe than that of many other places around the world. Indeed, were it not for the outbreak at the North-West Regional Tasmania’s of Covid-19 has for been lessconfirmed severe than that of many other aroundrecorded the world. Indeed, Hospital experience – which accounted 138 cases (60% ofplaces the total in were it not for the outbreak at the North-West Regional Hospital – which accounted for 138 confirmed cases Tasmania) and 10 of the 13 deaths, and which was traced to two passengers who(60% hadof the total recorded in Tasmania) and 10 of the 13the deaths, andPrincess which was(Walker traced to two passengers who had originally originally arrived in Sydney aboard Ruby 2020: 253 and 266) – arrived in Sydney aboard the Ruby Princess (Walker 2020: 253 and 266) – Tasmania’s infection rate (confirmed cases Tasmania’s infection rate (confirmed cases per 100,000 population) would have been per 100,000 population) would have been theand lowest Australiarate (Chart 1.1). Its than fatalityNew rate would have been lower the lowest in Australia (Chart 1.1), itsinfatality lower South Wales’ (as than Wales’ (as wellhigher as Victoria’s), higher than that of other by a margin which wouldhave have been wellNew as South Victoria’s), and thanand that of other states bystates a margin which would consistent with Tasmania’s population (Chart 1.2). population (Chart 1.2). been consistent witholder-than-average Tasmania’s older-than-average world, since the Great Depression of the 1930s.

Chart 1.1: Confirmed cases per 100,000 population: states and territories 350

Cases per 100,000 population

300 250 200 National average

150 100

NWRH breakout

50 0

NSW

Vic

Qld

Tas

ACT

Note: Data up to 7 December. Sources: Coronavirus (COVID-19) in Australia; ABS, National, state and territory population, March 2020; Walker (2020).

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Chapter 1: TASMANIA’S EXPERIENCE OF COVID-19 Chart 1.2: Covid-19 deaths per 100,000 population: states and territories 14 Deaths per 100,000 population Chart 1.2: Covid-19 deaths per 100,000 population: states and territories 12 14

Deaths per 100,000 population

10 12 8 10 6 8

National average National average

4 6

NWRH breakout

2 4 0 2

NWRH breakout NSW

Vic

Qld

Tas

ACT

0 Data up to 7 December. Sources: Coronavirus (COVID-19) in Australia; ABS, National, state and Note: territory population, March Walker (2020). NSW Vic 2020; Qld SA WA Tas NT ACT Note: Data up to 7 December. Sources: Coronavirus (COVID-19) in Australia; th ABS, National, state and Tasmania has had only2020; two confirmed territory population, March Walker (2020).Covid-19 cases since 15 May, and none at

11th

all

since August – during which time Victoria has had over 5,000, New South Wales th May, and Tasmania has had only confirmed Covid-19 cases since 15since none at all time over 600, thetwo rest oftwo Australia over 300 (Chart 1.3). And Tasmania has –had no Tasmania hasand had only confirmed Covid-19 cases since 15 May, and none at all 11 August during which th related sttime since 11 August – during which Victoria has had over 5,000, New South Wales May, whereas Victoria has had 801, and the rest of Covid-19 deaths since 1 Victoria has had over 5,000, New South Wales over 600, and the rest of Australia over 300 (Chart 1.3). Tasmania has Australia over 600, 12. and thedeaths rest ofsince Australia over 300 (Chart 1.3). Tasmania has 12. had no had no Covid-19 related 1 May, whereas Victoria has had 801, And and the rest of Australia st Covid-19 related deaths since 1 May, whereas Victoria has had 801, and the rest of Chart 1.3:12. Daily new confirmed Covid-19 cases, Tasmania and Australia Australia 700 Number (7-day Number (7-day Chart 1.3: Daily new confirmed Covid-19 cases, Tasmania and Australia -

600 700

12 10

500 600 400 500

moving average) Number (7-day moving average)

Tasmania (right scale) Tasmania (right scale)

Australia (left scale) Australia (left scale)

moving average) Number (7-day moving average)

10 8 8 6

300 400

6 4

200 300 100 200

4 2

0 100

2 0

31 29 31 30 31 30 31 31 30 Jan Feb Mar Apr May Jun Jul Aug Sep 0 31 29 31 30 31 30 31 31 30 Note: Data up to 7 December. Source: Coronavirus (COVID-19) in Australia. Jan Feb Mar Apr May Jun Jul Aug Sep

31 Oct 31 Oct

30 Nov 30 Nov

31 Dec0 31 Dec

Note: Data up to 7 December. Source: Coronavirus (COVID-19) in Australia. T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter Tasmania’s 1: success in containing the spread of the virus (after the NWRH outbreak was brought under is largely attributable to the public health measures instituted by TASMANIA’Scontrol) EXPERIENCE OF COVID-19

the Tasmanian Government (including the closure of Tasmania’s borders to interstate travel) and to the willingness of the Tasmanian people to comply with them (without the need to resort to the ‘over-the-top’, heavy-handed policing strategies employed in Tasmania’s success in containing the spread of the virus (after the NWRH outbreak was brought under control) is Victoria) – although ABS analysis suggests that Tasmania’s restrictions during the largely attributable to the public health measures instituted by the Tasmanian Government (including the closure of September quarter were somewhat stricter than those of any other jurisdiction except Tasmania’s borders to interstate travel) and to the willingness of the Tasmanian people to comply with them (without New South Wales and, by a very large margin, Victoria (ABS 2020i). the need to resort to the ‘over-the-top’, heavy-handed policing strategies employed in Victoria), although ABS analysis

Data on mobility compiled by Apple andwere Google alsostricter attests Tasmania’s suggests thatindividual Tasmania’s restrictions during the September quarter somewhat thanto those of any other restrictions having been a little more thanVictoria those(ABS in other states jurisdiction except New South Wales and, by a verysevere large margin, 2020i).

and territories, on average, with the exception of Victoria (especially during its ‘second wave’) (Charts Data on individual mobility compiled by Apple and Google also attests to Tasmania’s restrictions having been a little 1.4a and b). The Apple indicators clearly show mobility in Tasmania falling by more, and more severe than those in other states and territories, on average, with the exception of Victoria (especially during recovering more slowly and by less in total, than the Australian average, even though its ‘second wave’) (Charts 1.4a and b). The Apple indicators clearly show mobility in Tasmania falling by more, and the latter was weighed down by Victoria during that state’s ‘second wage’. The recovering more slowly and by less in total, than the Australian average, even though the latter was weighed down by Google indicators show mobility in Tasmania tracking more closely in line with the Victoria during that state’s ‘second wage’. The Google indicators show mobility in Tasmania tracking more closely in line national average, and exceeding it between mid-July and mid-October: although it with the national average, and exceeding it between mid-July and mid-October: although it should be noted that during should be noted that during this period the corresponding measure for Victoria was this period the corresponding measure for Victoria was consistently tracking 20-30 points below the national average, consistently tracking 20-30 points below the national average, so that the indicator for so that the indicator for have Tasmania would have been the corresponding averagefor for Australia excluding Victoria, if Tasmania would been below thebelow corresponding average Australia excluding itVictoria, were possible calculate one. if ittowere possible to calculate one. Chart 1.4a: Apple mobility indicators, Tasmania and Australia

120

7-day moving average (13 January = 100)

110 100

10 Australia

Chart 1.4b: Google mobility indicators, Tasmania and Australia 7-day moving average (deviation from 14 February)

0 Tasmania

-10

-20

-30

60 50

Tasmania

-40 -50

-60

-70

31 Dec 31 Mar 30 Jun 30 Sep 31 Dec

Australia

31 Dec 31 Mar

30 Jun

30 Sep 31 Dec

Note: The Apple mobility indicators are averages of the separately reported indexes for driving, transit and walking; the Google mobility indicators are averages of separately reported indexes for time in workplaces, time spent in transit, and time spent in retail or recreation. Sources: Apple, Mobility Trends Reports; Google, Covid-19 Community Mobility Reports.

T C C I TA S M A N I A R E P O R T 2 0 2 0

Tasmania’s relatively good performance in managing the virus probably also owes something to our island status, which made measures such as border closures easier to implement than in jurisdictions which share sub-national or national land borders with their neighbours.

Chapter 1: With some obvious exceptions – such as the UK and Ireland, or, closer to home, TASMANIA’S EXPERIENCE OF COVID-19

Indonesia and the Philippines – islands, whether independent nations or constituents of larger nations – have typically managed to achieve better outcomes (lower case numbers and fewer deaths as proportions of their populations) than other nations or Tasmania’s relatively good performance in managing the virus probably also owes something to our island status, states, provinces etc.

which made measures such as border closures easier to implement than in jurisdictions which share sub-national or

Tasmania’s performance in managing the virus also compares well with that of most other islands – about the same as the two islands to whom we are perhaps most similar, With some obvious exceptions – such as the UK and Ireland, or, closer to home, better Indonesia and the – islands, Canada’s Newfoundland and Prince Edward Island; rather than thePhilippines islands of whether independent nations or constituents of larger nations – have typically to achieve better outcomes the Mediterranean or the North Atlantic; but not as good asmanaged the islands of the South (lower case(Charts numbers1.5 andand fewer1.6). deaths as proportions of their populations) than other nations or states, provinces etc. Pacific national land borders with their neighbours.

Tasmania’s performance in managing the virus also compares well with that of most other islands – about the same as

It’s important to note that Tasmania’s experience could have been much worse than it turned out to be, had the Tasmanian Government and Tasmanian people made than the islands of the Mediterranean or the North Atlantic; but not as good as the islands of the South Pacific (Charts different choices.

the two islands to whom we are perhaps most similar, Canada’s Newfoundland and Prince Edward Island; rather better 1.5 and 1.6).

Chart 1.5: Confirmed Covid-19 cases per 100,000 – island nations, states and provinces Cases per 100,000 population

2,750 2,500 2,250 2,000 1,750 1,500 1,250 1,000 750 500 250 0

Note: Data up to 6 December 2020. Sources: Our World in Data; Johns Hopkins University Coronavirus Resource Center; Public Health Scotland; World Health Organization Western Pacific Region; Worldometer.

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 1: TASMANIA’S EXPERIENCE OF COVID-19

Chart 1.6: Covid-19 related deaths per 100,000 – island nations, states and provinces 100 90 80 70 60 50 40 30 20 10 0

Deaths per 100,000 population

Tonga Vanuatu Samoa Solomon Islands Taiwan Fiji New Caledonia Greenland New Zealand Tasmania Prince Edward Is. Newfoundland Sicily Sardinia Sri Lanka Orkney Hokkaido Indonesia Hebrides Shetland Philippines Falklands Maui Hawaii (island) Singapore Cyprus Faroe Islands Ireland Iceland Malta Gotland (Sweden) United Kingdom Note: Data up to 6 December 2020. Sources: Our World in Data; Johns Hopkins University Coronavirus Resource Center; Public Health Scotland; World Health Organization Western Pacific Region; Worldometer.

Modelling undertaken at theexperience University of have Tasmania suggested, the absence of the It’s important to note that Tasmania’s could been much worse than in it turned out to be, had actions of the sort and that were actually taken, the choices. number Tasmanian Government Tasmanian people made different

of infections could have peaked at over 125,000 (23% of Tasmania’s population), with over 53,000 people Modelling undertaken at the University of Tasmania suggested, in the absence of actions of the sort that were actually requiring hospitalization and, of them, almost 21,000 requiring ICU treatment, and more taken, the number of infections could have peaked at over 125,000 (23% of Tasmania’s population), with over 53,000 than 5,900 deaths (University of Tasmania 2020: 10). people requiring hospitalization and, of them, almost 21,000 requiring ICU treatment, and more than 5,900 deaths

There really is no trade-off between measures aimed at containing the spread of the virus and ‘the economy’ (or, as it has sometimes been portrayed, between ‘lives’ and There really is no trade-off between measures aimed at containing the spread of the virus and ‘the economy’ (or, as it ‘livelihoods’). (University of Tasmania 2020: 10).

has sometimes been portrayed, between ‘lives’ and ‘livelihoods’). If the virus starts spreading rapidly, a majority of the

If the virus starts spreading rapidly, a majority of the population will voluntary abstain from doing things that public health restrictions would otherwise legally constrain them them from doing. This has been demonstrated in Sweden, where the government has chosen not to impose severe from doing.This has been demonstrated in Sweden, where the government has chosen restrictions on the movement and gathering of people but people have nonetheless observed ‘social distancing’ not to impose severe restrictions on the movement and gathering of people but people behaviours voluntarily, and where epidemiological outcomes have been worse but economic outcomes no better than have nonetheless observed ‘social distancing’ behaviours voluntarily, and where inepidemiological neighbouring countries which have have imposed more stringent restrictions (Edmond et al 2020).no It isbetter also apparent outcomes been worse but economic outcomes than from in ABS surveys indicating that Australians will continue to avoid what they perceive to be ‘risky’ activities (such as catching neighbouring countries which have imposed more stringent restrictions (Edmond et al public transport or planes, or attending large gatherings) even after they are allowed to do so, until a vaccine arrives or 2020). population will voluntarily abstain from doing things that public health restrictions would otherwise legally constrain

becomes widely available (which may be 12 months after arrival) (ABS 2020a).

It is also apparent from ABS surveys indicating that Australians will continue to avoid what they perceive to be ‘risky’ activities (such as catching public transport or planes, or attending large gatherings) even after they are allowed to do so, until a vaccine arrives or becomes widely available (which may be 12 months after arrival) (ABS 2020a).

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Chapter 1: TASMANIA’S EXPERIENCE OF COVID-19 The International Monetary Fund’s most recent World Economic Outlook notes that “the importance of social distancing as a contributor to the downturn suggests that lifting lockdowns is unlikely to rapidly bring economic activity back to potential if health risks remain … economies will continue to operate below potential while health risks persist, even if lockdowns are lifted” (IMF 2020: 66). That’s why keeping the virus at bay, until an effective vaccine becomes widely available, will be crucial to Tasmania’s economic recovery – as it will be to economic recovery everywhere else in Australia and around the world. It continues to be of vital importance that people comply with public health regulations – including any stricter ones which the Government may need to re-impose in the event of any renewed outbreaks. It would also be helpful to maintaining public compliance with public health regulations if the Government were to make public, all of the public health advice on which the regulations and restrictions it imposes is based – so that the public can understand the reasons why they can’t do various things, and to allay any suspicions that some restrictions might be based on anything other than public health advice. There really is no reason why the public health advice to governments shouldn’t be made publicly available, in full. It’s not for governments to decide whether people might be ‘scared’ if they knew the ‘worst case scenarios’ that they (governments) have had to contemplate. Unlike the rationale for not making public the advice from security agencies on which counter-terrorism decisions are based (ie, that making such advice public would signal to would-be terrorists what security agencies know about them, and possibly how they came to know it), it’s not as if coronaviruses are sitting around watching the regular media briefings by public health officers, and based on what they see and hear from them, adapting their plans as to which parts of the community to infect next accordingly. On the contrary, knowing that the restrictions which governments have imposed are solely based on public health advice – rather than, as was the case with the night-time curfews imposed in Victoria during its ‘second wave’, being imposed in order to make it easier for the police to impose fines on people (Rooney and Rose) – would help to ensure high rates of compliance. Since there’s no apparent reason to think the same thing has occurred in Tasmania, there should be no reason for the Government to fear any embarrassment that might accrue from making all of the health advice publicly available. Likewise, where Tasmania maintains restrictions on certain activities which differ from those in other states or territories with similar health circumstances (such as Tasmania’s so-called ‘vertical drinking’ ban), there should be an obligation on the Government to explain clearly the reasons for those differences.

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 2 TASMANIAâ€™S ECONOMY BEFORE THE ONSET OF COVID-19

Chapter Chapter 2: 2: Tasmania’s economy before the onset of Covid-19 TASMANIA’S ECONOMY BEFORE THE ONSET OF COVID-19

Tasmania’s economy was travelling well, both by comparison with its own performance earlier in the decade and with the contemporaneous performance of other states and territories’ economies, in the years immediately prior to the onset of the pandemic.

Tasmania’s economy was travelling well, both by comparison with its own performance earlier in the decade and with

Over the two years to 2018-19, Tasmania’s real gross state in product at anprior average the contemporaneous performance of other states and territories’ economies, the years grew immediately to the annual of 3.2%, onset of therate pandemic.

the strongest multi-year performance since the years immediately before the global financial crisis, well above the national average for the same period Over the two years to 2018-19, Tasmania’s real gross state product (GSP) grew at an average annual rate of 3.2%, of 2.5% per annum, and better than any other jurisdiction except Victoria and the the strongest multi-year performance since the years immediately before the global financial crisis, well above the Australian Capital Territory (Chart 2.1). Per capita, Tasmania’s growth rate of 2.1% per national average for the same period of 2.5% per annum, and better than any other jurisdiction except Victoria and annum over the two years to 2018-19 was the fastest of any state or territory, and more the Australian Capital Territory (Chart 2.1). Per capita, Tasmania’s growth rate of 2.1% per annum over the two years to than double the national average of 0.9% per annum. 2018-19 was the fastest of any state or territory, and more than double the national average of 0.9% per annum.

Measured real GSP growth in 2019-20 was adversely affected by the onset of the pandemic in the last three and a half months of the most recent financial year: but months of the most recent financial year: but even so, Tasmania’s growth rate of 0.3% was better than that of any even so, Tasmania’s growth rate of 0.3% was better than that of any other state except other state except Western Australia, and compares with a contraction in the national economy of 0.2%. Western Australia, and compares with a contraction in the national economy of 0.2%.

Measured real GSP growth in 2019-20 was adversely affected by the onset of the pandemic in the last three and a half

Chart 2.1: Growth in real gross state product (GSP), states and territories 6

Real % change from previous financial year

5 4 3 2 1 0 -1 -2 -3

NSW

Vic 2015-16

Qld

SA 2016-17

WA 2017-18

Tas 2018-19

ACT

2019-20

Note: The Northern Territory’s growth rate in 2019-20 was inflated by a 40% increase in mining output, which was in turn largely attributable to the transition to full production of the Ichthys LNG plant. Excluding mining, the Northern Territory’s real GSP declined by 4.2% in 2019-20. Source: ABS (2020f).

Other dimensions of economic performance also show Tasmania doing well in the period before the onset of Covid-19.

Other dimensions of economic performance also show Tasmania doing well in the period before the onset of Covid-19. Over the three years to the March quarter of this year, employment in Tasmania grew at an average annual rate of

Over the three years to the March quarter of this year, employment in Tasmania grew at an average annual rate of 2.4%, only 0.1 percentage point below the national Northern Territory and the Australian Capital Territory (Chart 2.2) – although only 43% of that growth was in full-time average, and ahead of South Australia, Western Australia, the Northern Territory and employment, by far the lowest proportion of any state or territory. the Australian Capital Territory (Chart 2.2) – although only 43% of that growth was in fulltime employment, by far the lowest proportion of any state or territory. 2.4%, only 0.1 percentage point below the national average, and ahead of South Australia, Western Australia, the

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 2: TASMANIA’S ECONOMY BEFORE THE ONSET OF COVID-19 2

Chart 2.2: Employment growth, March quarter 2017 to March quarter 2020, states and territories 4

% per annum National average

3 2 1

$16.4K

0 -1 -2 -3

NSW

Vic

Qld

Tas

ACT

Source: ABS (2020e).

Tasmania’s unemployment rate fell by 0.5 percentage points over this period, only marginally less than the national average, and by March this year had fallen to 4.9%, average, and by March this year had fallen to 4.9%, the lowest it had been in 11 years, and lower than in any other the lowest it had been in eleven years, and lower than in any other jurisdiction except jurisdiction except New South Wales and the Australian Capital Territory. New South Wales and the Australian Capital Territory. Tasmania’s unemployment rate fell by 0.5 percentage points over this period, only marginally less than the national

More importantly, this occurred in the context of a rising labour force participation rate – in other words, it wasn’t due,

More importantly, this occurred in the context of a rising labour force participation rate – in other words, it wasn’t due, either in whole or in part, to people ‘dropping out’ of the population who were in work rose by 1.8 percentage points over the three years to the first quarter of 2020, more than labour force – so that the proportion of Tasmania’s working age population who were in in any other state or territory except New South Wales, and more than the national average of 1.5 percentage points work rose by 1.8 percentage points over the three years to the first quarter of 2020, (although it remained the lowest of any state or territory, and 4.2 percentage points below the national average). more than in any other state or territory except New South Wales, and more than the Tasmania’s strong growth inpoints the years leading up to pandemic the was in no small a result nationalrelatively average ofemployment 1.5 percentage (although it the remained lowest ofpart any ofstate a generally buoyant business environment duringpoints this period, in turnthe generating high average). levels of business confidence. or territory, and 4.2 percentage below national

either in whole or in part, to people ‘dropping out’ of the labour force – so that the proportion of Tasmania’s working age

OnTasmania’s average over the three years to February 2020, ‘business conditions’, as years measured by the National Australia Bank’s relatively strong employment growth in the leading up to the

well regarded monthly business survey, wereaadjudged favourable inbuoyant Tasmania than in any environment other state or territory, pandemic was in no small part result ofmore a generally business and considerably more favourably the national average (Chart during this period, in turn than generating high levels of 2.3a). business

confidence.

AsOn a result, ‘business confidence’ in Tasmania, though lower than in South Australiaconditions’, or Western Australia during this average over the three years to February 2020, ‘business as measured period, wasNational higher thanAustralia in any otherBank’s state or territory and well above the national average (Chart were 2.3b). by the well regarded monthly business survey,

adjudged more favourable in Tasmania than in any other state or territory, and considerably more favourably than the national average (Chart 2.3a). As a result, ‘business confidence’ in Tasmania, though lower than in South Australia or Western Australia during this period, was higher than in any other state or territory and well above the national average (Chart 2.3b).

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Chapter 2: TASMANIA’S ECONOMY BEFORE THE ONSET OF COVID-19 3 3

Chart Chart 2.3a: 2.3a: ‘Business ‘Business conditions’, conditions’, 3 3 years years to February 2020, states to February 2020, states 18 Net 18 Net balance balance (%) (%)

Chart Chart 2.3b: 2.3b: ‘Business ‘Business confidence’, confidence’, 3 3 years years to February 2020, states to February 2020, states 9 9 Net Net balance balance (%) (%)

16 16

8 8

14 14

7 7

National National average average

12 12 10 10

5 5

8 8

4 4

6 6

3 3

4 4

2 2

1 1

0 0

NSW NSW

Vic Vic

Qld Qld

SA SA

National National average average

6 6

WA WA

Tas Tas

0 0

NSW NSW

Vic Vic

Qld Qld

SA SA

WA WA

Tas Tas

Source: Source: National National Australia Australia Bank Bank (2020). (2020).

In similar vein, retail sales grew more strongly in Tasmania than in any other state or territory over three years to the quarter of this (Chart 2.4a); while, in territory overofthe the years to while, the March March quarter ofnationally, this year yearmotor (Chart 2.4a); in a a the March quarter thisthree year (Chart 2.4a); in a declining market vehicle saleswhile, fell by less in declining market nationally, motor vehicle sales fell by less in Tasmania over the same declining market nationally, motor vehicle sales fell by less in Tasmania over the same Tasmania over the same period than in any other jurisdiction except the Australian Capital Territory (Chart 2.4b). period than than in in any any other other jurisdiction jurisdiction except except the the Australian Australian Capital Capital Territory Territory (Chart (Chart 2.4b). 2.4b). period similar retail sales grew more strongly ininTasmania than in anyover other stateyears or to In In similar vein,vein, retail sales grew more strongly in Tasmania than any other state or territory the three

Chart Chart 2.4a: 2.4a: Growth Growth in in retail retail sales, sales, 3 3 years years to to March March quarter quarter 2020 2020 6 6 % % per per annum annum 5 5 National National average average

4 4 3 3

Chart Chart 2.4b: 2.4b: Growth Growth in in motor motor vehicle vehicle sales, sales, 3 3 years years to to March March quarter quarter 2020 2020 8 8 % % per per annum annum 6 6 4 4 2 2 0 0 -2 -2 -4 -4 -6 -6

2 2 1 1

-8 -8 -10 -10

0 0

-12 -12 NSW Qld SA SA WA WA Tas Tas NT NT ACT ACT NSW Vic Vic Qld

National National average average

NSW Vic Qld Qld SA SA WA WA Tas Tas NT NT ACT ACT NSW Vic

Sources: Sources: ABS ABS (2020l); (2020l); Federal Federal Chamber Chamber of of Automotive Automotive Industries Industries (2020). (2020).

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 2: 4 TASMANIA’S ECONOMY BEFORE THE ONSET OF COVID-19 Tasmania’s construction sector had been doing particularly well prior to the onset of Covid-19. Dwelling commencements in the well year ended March 2020 were 45% higher Tasmania’s construction sector had been doing particularly prior to the onset of Covid-19. Dwelling than they had been threeMarch years2020 earlier: the only jurisdictions where residential commencements in the year ended were 45% higherother than they had been three years earlier: the only other building commencements were higher in the year to March than they had been jurisdictions where residential building commencements were higher in the year to March than they had been three three years previously were South Australia and the Australian Capital Territory, and there by years previously were South Australia and the Australian Capital Territory, and there by only 1% and 3%, respectively; only 1% and 3%, respectively; the national total was down by 22% (Chart 2.5a). the national total was down by 22% (Chart 2.5a). Reflecting that, valuework of housing work done in Tasmania during ended Reflecting that, the realthe valuereal of housing done in Tasmania during the year ended March wasthe 33%year higher than it March 33%years higher than it had been the three years to March 2017, whereas over had been inwas the three to March 2017, whereas overin the same period the value of residential building work done the same period the value of nationally declined by 8% (Chart 2.5b). (Chart 2.5b).

residential building work done nationally declined by 8%

Chart 2.5a: Growth in residential building Chart 2.5b: Growth in real value of commencements, year ended March 2017 residential construction work, year ended to year ended March 2020 March 2017 to year ended March 2020 40 % change 50 % change 40

10 0

-10

-20

-30 National average

-40 -50

NSW Vic Qld SA WA Tas NT ACT

-30 -40

National average

NSW Vic Qld SA WA Tas NT ACT

Source: ABS (2020d).

The picture for commercial construction more mixed. The volume of non-residential The picture for commercial construction is more mixed. is The volume of non-residential building work done in Tasmania work done in was Tasmania in thethan year ended March substantially 2020 was only 6% the higher than in building the year ended March 2020 only 6% higher three years previously, less than increases three inyears previously, substantially thanand thewell increases in New South recorded New South Wales, Victoria and Southless Australia, below the recorded national average of 21% (Chart 2.6a).

Wales, and South below theconstruction, national average 21%offset (Chart This largely Victoria reflects declines over thisAustralia, period in theand valuewell of shop and office which haveof partly strong 2.6a). This largelyofreflects over this period in the value of shop and office growth in construction industrial declines premises (warehouses and factories), entertainment and recreational facilities, construction, schools and hotels. which

have partly offset strong growth in construction of industrial premises (warehouses and factories), entertainment and recreational facilities, schools On the other hand, the volume of engineering construction work done in Tasmania in the year to March was 24% and hotels. higher than it had been three years previously, a figure exceeded only in Victoria and (marginally) New South Wales,

On the other volume engineering construction done in Tasmania in and compared withhand, a declinethe in the nationalof average of 3%, driven by large falls inwork the ‘resources states’ of Western

the year to March 24% higher had By been three years previously, a figure Australia, Queensland and was the Northern Territorythan (Chartit 2.6b). far the biggest contributor to this growth has been

exceeded only ingeneration Victoriaand and (marginally) New South Wales, andby compared private sector electricity transmission (in particular wind farms), followed public sector with watera storage decline in the and supply work.

national average of 3%, driven by large falls in the ‘resources states’ of Western Australia, Queensland and the Northern Territory (Chart 2.6b). By far the biggest

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 2: contributor to this growth has been private THE sector ONSET electricity OF generation and TASMANIA’S ECONOMY BEFORE COVID-19

transmission (in particular wind farms), followed by public sector water storage and supply work.

Chart 2.6a: Growth in real value of nonresidential work, year ended March 2017 to year ended March 2020 50 % change 40

National average

30 20

Chart 2.6b: Growth in real value of engineering construction work, year ended March 2017 to year ended March 2020 45 % change 30 15 0

-15

-30

-10

National average

-45

-20 -30

-60

-40

-75

-50

-90

NSW Vic Qld SA WA Tas NT ACT

NSW Vic Qld SA WA Tas

NT ACT

Source: ABS (2020d and b).

Tasmania’s residential property market was the strongest-performing of any state or territory over the three years to March 2020 – both in Hobart (by comparison with other March 2020 – both in Hobart (by comparison with other capital cities) and elsewhere in Tasmania (by comparison capital cities) and elsewhere in Tasmania (by comparison with non-metropolitan with non-metropolitan regions of other states and territories). In March, house prices in Hobart were higher, on average, regions of other states and territories). In March, house prices in Hobart were higher, on than those in Adelaide or Perth, and only 5% less than in Brisbane – all three of which are much bigger cities than average, than those in Adelaide or Perth, and only 5% less than in Brisbane – all three of Hobart (Chart 2.7a); while house prices in regional Tasmania were 10% and 28% higher than those in regional South which are much bigger cities than Hobart; while house prices in regional Tasmania were Australia and Western Australia, respectively (Chart 2.7b). 10% and 28% higher than those in regional South Australia and Western Australia, respectively. Tasmania’s residential property market was the strongest-performing of any state or territory over the three years to

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 2: TASMANIA’S ECONOMY BEFORE THE ONSET OF COVID-19 6

Chart 2.7a: Change in capital city residential Chart 2.7b: Change in regional residential property prices, 3 years to March 2020 property prices, 3 years to March 2020 25 25 % change % change 20

Average of eight capital cities

15 10

-5

-10

-15

-20

-20 SYD MEL BNE ADL PER HBA DRW CBR

Average of all non-capital city regions

NSW Vic Qld

Tas

Note: percentage changes are in hedonic home value indices which adjusts for differences in the attributes of properties transacted from month to month. Source: CoreLogic (2020).

The volume of residential property transactions had held upthan better in Tasmania The volume of residential property transactions had held up better in Tasmania anywhere else exceptthan the

anywhere else except the by Australian Capital Territory, declining by with 6.3%a 14.6% over decline the year Australian Capital Territory, declining 6.3% over the year ended March 2020, compared the twelve nationally.

months ended March 2020, compared with a 14.6% decline nationally.

While strength of the Tasmanian property market was a boon for home-owners While the the strength of the Tasmanian property market was a boon for home-owners and investors, there were

and

investors, there were downsides, both forthose would-be first-time buyers downsides, both for would-be first-time buyers and for unable to purchase their own and homefor andthose instead having totopurchase (orunable choosing) rent.

their own home and instead having (or choosing) to rent.

The number of housing loans to buyers first-home buyers rose bymonths 24% between the The number of housing loans to first-home in Tasmania rosein byTasmania 24% between the 12 ended March twelve months ended March 2017 months ended March well 2017 and the 12 months ended March 2020, welland belowthe the twelve national average increase of 33%: and 2020, the share of total

belowloans the national of 33%:in and share of total mortgage taken out byaverage first-home increase buyers in Tasmania the 12the months to March was, mortgage at 18.7%, lowerloans than in any taken by first-home in Tasmania the twelve months to March at(ABS other stateout or territory except Newbuyers South Wales and South in Australia, and below the national averagewas, of 20% 18.7%, 2020h).

lower than in any other state or territory except New South Wales and South Australia, and below the national average of 20% (ABS 2020h).

Residential rents rose by 21.5% in Hobart over the three years to March 2020, far and away the largest increase of any

Residential rents eight rosetimes by 21.5% in Hobart the three to March far and capital city and almost the average of 2.7% over for all capital cities years (Chart 2.8a); while in2020, regional Tasmania

away the increase ofsame anyperiod, capital city and almost times residential rentslargest rose by 13.3% over the more than in the regionaleight areas of every the otheraverage state – andof for that 2.7%more for all capital cities (Chart 2.8a); while regional residential rents matter than in any other state or territory’s capital cityin (Chart 2.8b). Tasmania By March 2020, houses cost more rose to rentby in 13.3% the same the regional areas of every other state – and Hobart; in over comparison, that is period, 30% moremore than inthan Perth,in 25% more than in Adelaide, 16½% more than in Brisbane, and for that matter more than inwith any(respectively) other state or six, territory’s capital city people (Chart 12½% more than in Melbourne – cities nine, 11 and 22 times as many as2.8b). Hobart.

By March 2020, houses cost more to rent in Hobart; in comparison, that is 30% more than in By 2019, considering household incomes, Hobart had become the “least affordable capital city in Australia”, and Perth, 25% more than in Adelaide, 16½% more than in Brisbane, and 12½% more than in regional Tasmania “the least affordable of rest of state areas” for renters (SGS 2019: 42 and 44). Melbourne – cities with (respectively) nine, six, eleven and twenty-two times as many people as Hobart.

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Chapter 2: TASMANIA’S BEFORE THE ONSET OFinCOVID-19 By 2019, Hobart ECONOMY had become the “least affordable capital city Australia”, and

regional Tasmania “the least affordable of rest of state areas” for renters (SGS 2019: 42 and 44).

Chart 2.8a: Change in capital city residential Chart 2.8b: Change in regional residential rents, 3 years to March 2020 rents, 3 years to March 2020 25 14 % change % change 20

Average of eight capital cities

10 8

-5

-10

SYD MEL BNE ADL PER HBA DRW CBR

Average of all non-capital city regions

NSW Vic Qld

WA Tas

Source: CoreLogic (2020).

As both a contributor to and a consequence of many of the developments discussed thus far in this chapter, Tasmania experienced a significant acceleration in population experienced a significant acceleration in population growth in the years leading up to the onset of the pandemic. Over growth in the years leading up to the onset of the pandemic. Over the two years to the two years to March 2020, Tasmania’s population grew at an average annual rate of 1.2%, the fastest in almost thirty March 2020, Tasmania’s population grew at an average annual rate of 1.2%, the fastest years (Chart 2.9). in almost thirty years (Chart 2.9). As both a contributor to and a consequence of many of the developments discussed thus far in this chapter, Tasmania

Chart 2.9: Population growth, Tasmania and Australia, 1990-2020

T C C I TA S M A N I A R E P O R T 2 0 2 0

-5

-10

SYD MEL BNE ADL PER HBA DRW CBR

NSW Vic Qld

WA Tas

Source: CoreLogic (2020).

As both a contributor to and a consequence of many of the developments discussed

Chapter 2: chapter, Tasmania experienced a significant acceleration in population thus far in this TASMANIA’S ECONOMY BEFORE COVID-19 growth in the years leading up to the onsetTHE of theONSET pandemic.OF Over the two years to

March 2020, Tasmania’s population grew at an average annual rate of 1.2%, the fastest in almost thirty years (Chart 2.9). 8

Chart 2.9: Population growth, Tasmania and Australia, 1990-2020 2.5

% change from year earlier

2.0

Australia

1.5 1.0 Tasmania

0.5 0.0 -0.5

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Source: ABS (2020b).

The substantial pick-up in Tasmania’s population growth rate reflects the turn-around in migration flows across Bass Strait, which began in 2015 and peaked in 2018; and a Strait, which began in 2015 and peaked in 2018; and a significant acceleration in overseas migration to Tasmania which significant acceleration in overseas migration to Tasmania which began in 2016 and began in 2016 and had yet to peak when Covid-19 struck at the end of the March quarter of this year (Chart 2.10a). had yet to peak when Covid-19 struck at the end of the March quarter of this year The turnaround in people movements across Bass Strait reflects both a modest decline in the number of Tasmanians (Chart 2.10a). The substantial pick-up in Tasmania’s population growth rate reflects the turn-around in migration flows across Bass

moving to the mainland (from a peak of over 13,000, or over 2½% of the state’s total population, in the year to June

The turnaround in people movements across Bass Strait reflects both a modest decline in the number of Tasmanians moving to the mainland (from a peak of over 13,000, or and a larger pick-up in the number of people moving from the mainland to Tasmania, from around 11,000 in the year over 2½% of the state’s total population, in the year to June 2012, to an average of ended June 2015 to over 14,000 in each of 2018 and 2019 (Chart 2.10b). about 12,000 per annum, or about 2 ¼% of Tasmania’s population, over the past three Ofyears), particularand importance in this context in was thenumber change in the age profilemoving of people from movements between Tasmania a larger pick-up the of people the mainland to and the mainland. While more than 5,000 in Tasmanians their 20s June and 30s continued to leave Tasmania for theof Tasmania, from around 11,000 the yearinended 2015 to over 14,000 in each mainland every2019 year between and 2019, the number of people in the same age range moving to Tasmania from 2018 and (Chart2012 2.10b). 2012, to an average of about 12,000 per annum, or about 2 ¼% of Tasmania’s population, over the past three years),

the mainland increased from just over 4,500 in 2014 to over 5,900 in 2018 and 2019.

Of particular importance in this context was the change in the age profile of people movements between Tasmania and the mainland. While more than 5,000 Tasmanians in their 20s and 30s continued to leave Tasmania for the mainland every year between 2012 and 2019, the number of people in the same age range moving to Tasmania from the mainland increased from just over 4,500 in 2014 to over 5,900 in 2018 and 2019.

Chart 2.10a: Sources of growth in Tasmania’s population

Chart 2.10b: People movements across Bass Strait

T C C I TA S M A N I A R E P O R T 2 0 2 0

about 12,000 per annum, or about 2 ¼% of Tasmania’s population, over the past three years), and a larger pick-up in the number of people moving from the mainland to Tasmania, from around 11,000 in the year ended June 2015 to over 14,000 in each of 2018 and 2019 (Chart 2.10b). Of particular importance in this context was the change in the age profile of people

Chapter movements2: between Tasmania and the mainland. While more than 5,000 Tasmanians in their 20s and 30s continued toBEFORE leave Tasmania the mainland every year between TASMANIA’S ECONOMY THE for ONSET OF COVID-19

2012 and 2019, the number of people in the same age range moving to Tasmania from the mainland increased from just over 4,500 in 2014 to over 5,900 in 2018 and 2019.

Chart 2.10a: Sources of growth in Tasmania’s9 Chart 2.10b: People movements across population Bass Strait 5

'000s (4-qtr moving total)

Overseas migration

Natural increase

From mainland to Tasmania

2 1

From Tasmania to mainland

-1

Interstate migration

-2 -3

'000s (4-qtr moving total)

10 9

11 12 13 14 15 16 17 18 19 20

Source: ABS (2020b).

There also a significant number of people their 40s moving There waswas also a significant increase inincrease the numberin ofthe people in their 40s moving to in Tasmania, from a low of to 1,230 in Tasmania, from a low 1,230 in 2015 to an 2015 to an average of 1,655 perof annum in 2018 and 2019. 2019.

average of 1,655 per annum in 2018 and

These can be seen as an expression of confidence on the part of people at the beginnings of their working lives, and in

These can seeninas expression of the prime of theirbe careers, thean future of Tasmania.

confidence on the part of people at the beginnings of their working lives, and in the prime of their careers, in the future of The pick-up in overseas migration to Tasmania made an even more important contribution to the acceleration in Tasmania.

Tasmania’s population growth rate during the pre-Covid period. 3,165 overseas migrants settled in Tasmania in 2018,

The pick-up migration to numbers Tasmania made an even more important and another 3,600ininoverseas 2019, more than double the in each year between 2010 and 2015, and the highest totals contribution since at least 1971. to

the acceleration in Tasmania’s population growth rate during the preCovid period. 3,165 overseas migrants settled in Tasmania in 2018, and another 3,600 in Unaffected by population trends, Tasmania’s international exports also grew strongly during the period leading up to 2019, more than double the numbers in each year between 2010 and 2015, and the the onset of Covid-19. Overseas merchandise exports in the 12 months ended March 2020 were 39% higher than three highest totals since at least 1971. years previously, a larger increase than for any other jurisdiction except for Western Australia and the Northern Territory

Unaffected by boosted population trends, Tasmania’s international also grew strongly (whose exports were by the commencement of production at the giantexports Ichthys LNG plant) (Chart 2.11a). Two

during the period leading up to thetoonset Covid-19. merchandise exports thirds of that growth was attributable to exports China,of which more thanOverseas doubled over this interval, as did exportsin to the while twelve months ended March 2020 were 39% higher years previously, Korea, exports to the US grew by more than 60%. On the other hand, than exportsthree to Taiwan, Tasmania’s fourtha most larger increase thanfell forbyany other jurisdiction for Western the for a important overseas market, nearly 17%, while exports toexcept ASEAN countries (which Australia until 2017-18and accounted Northern exports were by the commencement larger share ofTerritory Tasmania’s(whose merchandise exports than boosted China)only grew by 12% over this period.

of production at the giant Ichthys LNG plant) (Chart 2.11a). Two thirds of that growth was attributable to exports to China, which more than doubled over this interval, as did exports to Korea, while exports to the US grew by more than 60%. On the other hand, exports to Taiwan, Tasmania’s fourth most important overseas market, fell by nearly 17%, while exports to ASEAN countries (which until 2017-18 accounted for a larger share of Tasmania’s merchandise exports than China)only grew by 12% over this period.

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 2: TASMANIA’S ECONOMY BEFORE THE ONSET OF COVID-19 10

Chart 2.11a: Growth in overseas goods exports, three years to twelve months ended March 2020, states and territories 80 % change 162%

70 60 50

60 50

National average

10 0

Chart 2.11b: Growth in overseas exports of services, year ended March 2017 to year ended March 2020, states and territories 70 % change

NSW Vic Qld

WA Tas

NSW Vic Qld SA WA Tas NT ACT

Sources: ABS (2020k and 2020g).

It is also worth noting that most of this growth in merchandise exports occurred in the first two years of this period: Tasmania’s merchandise exports in the twelve months Tasmania’s merchandise exports in the 12 months ended March were actually almost 5% lower than they had been in ended March were actually almost 5% lower than they had been in the preceding the preceding 12 months, cf. growth in the national total of almost 10%. twelve months, cf. growth in the national total of almost 10%. It is also worth noting that most of this growth in merchandise exports occurred in the first two years of this period:

Tasmania’s international exports of services grew by 63% over the three years to the 12 months ended March 2020,

Tasmania’s international exports of services grew by 63% over the three years to the twelve months ended March 2020, by far the fastest of any state or territory, and nearly period of 27% (Chart 2.11b). two-and-a-half times the national average growth rate over this period of 27% (Chart A detailed 2.11b).breakdown of services exports at the state and territory level is only available on a financial or calendar year by far the fastest of any state or territory, and nearly two-and-a-half times the national average growth rate over this

basis.

A detailed breakdown of services exports at the state and territory level is only

Over the three years calendar 2019, Tasmania’s exports of ‘education-related travel services’ increased by 148%, available on atofinancial or calendar year basis. compared with the national average of 56%. This was, admittedly, from a very low base – from 1.1% of the national

Over thetothree total in 2016 1.7% inyears 2019.

to calendar 2019, Tasmania’s exports of ‘education-related travel services’ increased by 148%, compared with the national average of 56%. This was, Tasmania’s exports of ‘other personal travel services’ – spending by overseas visitors – rose by 24% over the three years admittedly, from a very low base – from 1.1% of the national total in 2016 to 1.7% in to2019. calendar 2019, more than treble the national average growth rate of 7%, and lifting Tasmania’s share of the national total from 1.7% to 2.0%, a figure only just below our population share of 2.1%.

Tasmania’s exports of ‘other personal travel services’ – spending by overseas visitors – rose by 24% over the three years to calendar 2019, more than treble the national it declined by 1.6% between calendar 2018 and calendar 2019 (ie, before the onset of the pandemic). average growth rate of 7%, and lifting Tasmania’s share of the national total from 1.7% to 2.0%, a figure only just below our population share of 2.1%.

Again, however, it is important to note that growth in spending by overseas visitors in Tasmania peaked in 2018, and that

Again, however, it is important to note that growth in spending by overseas visitors in Tasmania peaked in 2018, and that it declined by 1.6% between calendar 2018 and calendar 2019 (ie, before the onset of the pandemic). T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 2: 11 TASMANIA’S ECONOMY BEFORE THE ONSET OF COVID-19 Chart 2.12a: Interstate and international visitors to Tasmania

Chart 2.12b: Total spending by visitors to Tasmania

1,500

2.6

1,250

'000s

Overseas Interstate

$bn

2.4 2.2

1,000

2.0

750

1.8 1.6

500

1.4

250

1.2

1.0 10 11 12 13 14 15 16 17 18 19 20* Financial years ended 30 June

10 11 12 13 14 15 16 17 18 19 20* Financial years ended 30 June

* Year ended March 2020. Source: Tourism Tasmania (2020).

This is confirmed by figures compiled by Tourism Tasmania. These show that after very strong growth between financial years 2012-13 through 2014-15, and again in 2016-17, years 2012-13 through 2014-15, and again in 2016-17, the total number of visitors to Tasmania peaked at 1.32 million in the total number of visitors to Tasmania peaked at 1.32 million in 2018-19, and then 2018-19, and then declined by 0.9% in the 12 months ended March 2020 (Chart 2.12a). This reflected a 15.3% fall in declined by 0.9% in the twelve months ended March 2020 (Chart 2.12a). This reflected a the number of international visitors to Tasmania in this period compared with the 12 months ended June 2019, which 15.3% fall in the number of international visitors to Tasmania in this period compared more than offset a 0.6% increase in the (much larger) number of interstate visitors (which was however the smallest with the twelve months ended June 2019, which more than offset a 0.6% increase in the increase since 2011-12). (much larger) number of interstate visitors (which was however the smallest increase Consistent with these trends, the number of visitor nights spent in Tasmania, which had grown at an average annual since 2011-12).

This is confirmed by figures compiled by Tourism Tasmania. These show that after very strong growth between financial

rate of almost 8½% between 2012-13 and 2016-17, fell by 3.1% in the 12 months ended March 2020 by comparison

Consistent with these trends, the number of visitor nights spent in Tasmania, which had grown at an average annual rate of almost 8½% between 2012-13 and 2016-17, fell by Tasmania, which had grown at an average annual rate of 14½% over the four years to 2016-17, thereafter began growing 3.1% in the twelve months ended March 2020 by comparison with the 2018-19 financial at a steadily slower pace, increasing by only 0.8% between the 12 months ended June 2019 and the 12 months ended year – and was actually lower than it had been in 2017-18. And total spending by March 2020 (Chart 2.12b). visitors to Tasmania, which had grown at an average annual rate of 14½% over the four In years other words, tourism –thereafter which had been a major driver of overall Tasmania during the middle to 2016-17, began growing at a economic steadily growth slowerin pace, increasing by only 0.8% the twelve months ended June 2019 and the twelve months ended part of the pastbetween decade, increasing its (direct and indirect) share of Tasmania’s gross state product from 4.4% in March 2020 2.12b). 2010-11 to 5.7% in (Chart 2016-17, and its share of total employment from 11.7% to 16.4% over the same period – had already with the 2018-19 financial year – and was actually lower than it had been in 2017-18. And total spending by visitors to

appeared to have peaked before the onset of Covid-19, and the dramatic shock which it would then pose to this sector

In other words, tourism – which had been a major driver of overall economic growth in Tasmania during the middle part of the past decade, increasing its (direct and indirect) In share most other respects, however, Tasmania’s economy was faring better than it hadto done at any time since and the middle of Tasmania’s gross state product from 4.4% in 2010-11 5.7% in 2016-17, its share offirst total employment from 11.7% to most 16.4% over theand same period had already years of the decade of this century, and better than other states territories, when– Covid-19 arrived. appeared to have peaked before the onset of Covid-19, and the dramatic shock which it would then pose to this sector of Tasmania’s economy, in particular. of Tasmania’s economy, in particular.

T C C I TA S M A N I A R E P O R T 2 0 2 0

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Chapter 3 TASMANIAâ€™S ECONOMY DURING COVID-19

Chapter 3: TASMANIA’S ECONOMY DURING COVID-19 As noted in Chapter 1, Tasmania’s experience of Covid-19 has, apart from the outbreak at the North-West Regional Hospital in April, been one of the least severe not only in Australia but across the world. That success has nonetheless come at a considerable economic cost. Tasmanian state final demand – the sum of spending by households, businesses and governments in Tasmania, which is sometimes used as a proxy for quarterly GSP (given that GSP is only published on a financial year basis), even though state final demand excludes both interstate and international trade and thus typically accounts for only 85% of Tasmania’s GSP – fell by 8.0% in the June quarter of 2020, more than in any other state or territory except New South Wales and Victoria and more than the national average of 7.5%. It then rebounded by 5.5%, less than in four of the other seven states and territories, and more than the national average of 4.5% only because the national average was dragged down by the further 1.0% decline in Victoria (without which the national average would have been up 6.4%, ie, almost a percentage point more than in Tasmania). Over the June and September quarters combined, Tasmania’s state final demand fell by 2.9%, more than any other state or territory except Victoria, where state final demand fell by 9.5%, dragging the average for all states and territories down by 3.4%. Excluding Victoria, state final demand declined by an average of 1.3% - less than half of the decline experienced in Tasmania. Tasmania’s state final demand had also contracted by 1.1% in the December quarter of 2019 (the only other state which experienced negative growth in state final demand in that quarter was Victoria). As such, and despite the rebound in the September quarter, Tasmanian state final demand was still 3.2% below its pre-recession peak (in the September quarter of last year) – a much smaller decline than in Victoria, where it was down by 9.8%, and a marginally smaller decline than in New South Wales, where it was down by 3.8% (from a pre-recession peak in the December quarter of 2019). The decline in Tasmania was larger than for any of the other states and territories, and larger than the average for all states and territories other than Victoria of 1.8% (Chart 3.1). Tasmania’s labour market experience since the onset of Covid-19 has also been more severe than that of any other state or territory except Victoria and, by some measures, the Northern Territory. According to the ABS monthly labour force survey, between March and May just over 19,100 Tasmanians lost their jobs, a decline of 7.4%. Together with Victoria, which experienced a similar decline in total employment, this was larger than for any other state or territory except Queensland, where employment fell by 8% during the first two months after the onset of the pandemic, and more than the national average of 6.7%. Between April and May, 12,100 Tasmanians either regained their old jobs or found new ones – representing 63% of the number who had lost them between March and May. This is a smaller proportion than in any other state or territory except Victoria and the Northern Territory, and less than the national average of 74% (Chart 3.2a).

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 3: TASMANIA’S ECONOMY DURING COVID-19 2

Chart 3.1: Change in real state final demand from pre-Covid peak (in 2019) through September quarter 2020, states and territories 2

% per annum

0 -2

Average of all states & territories excluding Victoria

-4 -6 -8 -10

NSW

Vic

Qld

Tas

ACT

Note: 2019 ‘pre-Covid’ peaks in state final demand were in the September quarter of 2019 in Victoria and Tasmania, and in the December quarter for other states and territories. State final demand actually peaked in South Australia in the December quarter of 2018, and the September quarter 2019 level of state final demand was 1.4% below that peak; state final demand in the Northern Territory actually peaked in the December quarter of 2012 (ie, almost eight years ago), and between then and the September quarter of 2020 fell by 28.2%. Source: ABS (2020e).

As a result, employment in Tasmania in October (the most recent month for which data from the labour force survey is available, at the time of writing) was 2.7% lower available, at the time of was 2.7% than inof March the largest net decline of any state territory except than in March – writing) the largest netlower decline any–state or territory except the or Northern theTerritory Northern Territory Victoria(down (down 4.1%), andand a considerably larger decline thandecline the national (down(down 5.0%)5.0%) andand Victoria 4.1%), a considerably larger average 1.7%national (Chart 3.2b). thanofthe average of 1.7% (Chart 3.2b).

As a result, employment in Tasmania in October (the most recent month for which data from the labour force survey is

More positively, almost 35% of the jobsof regained or created in Tasmania since the in lowTasmania point for total employment More positively, almost 35% the jobs regained or created since the in

May, have been for full-time more than in any in other state or territory except for South Australia (42%) and the Australian low point total– employment May have been full-time – more than in any other

state or territory and except Capital Territory(43%), doublefor theSouth nationalAustralia average of (42%) 17%.

and the Australian Capital Territory(43%), and double the national average of 17%.

Thus, although total hours worked (which is arguably a better indicator of the demand for labour than the number of

Thus, although totalbyhours worked (which arguably a than better indicator people employed) dropped more in Tasmania betweenisMarch and May in any other stateof orthe territory (11.2%

demand than the number people dropped by more in been compared withfor the labour national average of 6.6%), moreof than 80% ofemployed) that initial decline in hours worked has since Tasmania between March and May than in any other state or territory (11.2% compared with the national average of 6.6%), more than 80% of that initial decline of 63%. in hours worked has since been reversed, a larger proportion than any other state or territory except Queensland, and well above the national average of 63%.

reversed, a larger proportion than any other state or territory except Queensland, and well above the national average

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 3: TASMANIA’S ECONOMY DURING COVID-19 3

Chart 3.2a: Proportion of jobs lost between March and May regained between June and October, states and territories 200 % of jobs initially lost

Chart 3.2b: Net change in employment between March and October, states and territories 6 4

150

National average

% change Change at lowest point Net change, Mar-Oct

0 -2

100

-4 -6

-8 -10

-12 -14

-50

-16 NSW Vic Qld SA WA Tas NT ACT

NSW Vic Qld SA WA Tas NT ACT Aus

Note: The negative figure for the NT in Chart 3.2a reflects the fact that employment in the Territory has continued to decline since May. This is also the reason for the apparent absence of a ‘lowest point’ for the Territory in Chart 3.2b. Source: ABS (2020e).

Hence, hours worked ininTasmania in2.6% October were 2.6%compared less than inthe March, Hence, totaltotal hours worked in Tasmania October were less than in March, with national average with the national average ofHowever, 3.8% fewer hoursaverage worked October in ofcompared 3.8% fewer hours worked in October than in March. the national wasindragged downthan by a 9.0% March. However, the national average was dragged down by a 9.0% decline in Victoria: excluding Victoria, hours worked were down a net 1.9% between March decline than in Tasmania. and October, a smaller decline than in Tasmania.

decline in Victoria: excluding Victoria, hours worked were down a net 1.9% between March and October, a smaller

Young Tasmanians appear to have had a particularly difficult experience in regaining, or finding, employment during

YoungBetween Tasmanians appear to have particularly difficult experience in Covid-19. March and May, almost 7,300 had younga Tasmanians (aged 15-24) lost their jobs, a decline of 18.6%.

regaining, or finding, employment during Covid-19. Between and May, This was exceeded only by New South Wales, where employment of young peopleMarch fell by 20%, and greater than the

almost 7,300 young Tasmanians (aged 15-24) lost their jobs, a decline of 18.6%. This was exceeded only by New South Wales, where employment of young people fell their jobs or found other ones – a smaller percentage than in any other state or territory except Victoria, and well below by 20%, and greater than the national average decline of 16.6%. Since then, only the national average of 58% (or 83% excluding Victoria). about 3,900 (or 47%) of those young Tasmanians have regained their jobs or found Thus, employment young Tasmanians is,than as of October, 8.7% belowor itsterritory pre-pandemic level,Victoria, the worst other ones – aamong smaller percentage in any still other state except outcome for young people any state or territory apart from (or Victoria, compares poorly with the national average and well below theinnational average of 58% 83%and excluding Victoria). national average decline of 16.6%. Since then, only about 3,900 (or 47%) of those young Tasmanians have regained

of 6.6% (or 2.8% excluding Victoria) (Chart 3.3). The situation has been particularly grim for young Tasmanians

Thus, employment among young Tasmanians is, as of October, still 8.7% below its pre-pandemic level, the worst outcome for young people in any state or territory (although the employment situation for people in this cohort was worse not just in Victoria but also New South Wales apart from Victoria, and compares poorly with the national average of 6.6% (or 2.8% and Western Australia – although in South Australia the net decline was only 0.3%). excluding Victoria) (Chart 3.3). The situation has been particularly grim for young Tasmanians not attending full-time education, among whom employment in October was 12.2% below its pre-pandemic level (although the employment situation for people in this cohort was worse not just in Victoria but also New South Wales and Western Australia – although in South Australia the net decline was only 3 0.3%). 4 | T C C I TA S M A N I A R E P O R T 2 0 2 0 not attending full-time education, among whom employment in October was 12.2% below its pre-pandemic level

Chapter 3: 4 TASMANIA’S ECONOMY DURING COVID-19 Chart 3.3: Net change in employment of 15-24 yearolds between March and October, states and territories 5

% change

0 -5 -10 -15 -20 -25

Net change, Mar-Oct Change at lowest point

NSW

Vic

Qld

Tas

ACT

Aus

Ex-Vic

Note: In Victoria, employment of 15-24 year olds declined further between May and October. In Queensland, South Australia and the Northern Territory, employment of 15-24 year olds was slightly higher in October than it had been in March. Source: ABS (2020e).

contrast, employment of 15-24 year old Tasmanians who were was in full-time ByBy contrast, employment of 15-24 year old Tasmanians who were in full-time education down only 2.6% in

education was down only 2.6% in October by comparison with the level in March – although together with Queensland and (inevitably) Victoria, Tasmania was the only Tasmania was the only state in which the number of young people in full-time education who also had a job hadn’t state in which the number of young people in full-time education who also had a regained its pre-pandemic level (the national figure was up 0.5%, or 7.3% excluding Victoria). job hadn’t regained its pre-pandemic level (the national figure was up 0.5%, or 7.3% Anexcluding alternative source of data on employment has been provided since the onset of Covid-19 by the weekly payroll Victoria). October by comparison with the level in March – although together with Queensland and (inevitably) Victoria,

jobs series published by the ABS using data derived from the Australian Taxation Office’s Single Touch Payroll system,

An alternative source of data on employment has been provided since the onset of Covid-19 by the weekly payroll jobs series published by the ABS using data derived and salaries. This data is conceptually different from that provided in the monthly labour force survey: it counts the from the Australian Taxation Office’s Single Touch Payroll system, which is used by number of jobs (rather than the number of people with jobs) and hence double-counts part-time workers with two or the vast majority of employers to make PAYG income tax deductions from their more jobs (who represent about 6% of the work force), and it doesn’t count employers or the self-employed. Unlike the employees’ wages and salaries. This data is conceptually different from that monthly labour force survey data, it isn’t adjusted for normal seasonal variations (because it hasn’t been running long provided in the monthly labour force survey: it counts the number of jobs (rather enough to determine what ‘normal seasonal variations’ actually are). than the number of people with jobs) and hence double-counts part-time workers The weekly jobs data a similar pictureabout of the employment in Tasmania the onset of with twopayroll or more jobspaints (who represent 6% of thesituation work force), andsince it doesn’t Covid-19, in absolute by comparison with the rest Australia, to that depicted the monthly countboth employers orterms the and self-employed. Unlike theofmonthly labour force by survey data,labour force survey. it isn’t adjusted for normal seasonal variations (because it hasn’t been running long enough to determine what ‘normal seasonal variations’ actually are). which is used by the vast majority of employers to make PAYG income tax deductions from their employees’ wages

The weekly payroll jobs data paints a similar picture of the employment situation in Tasmania since the onset of Covid-19, both in absolute terms and by comparison with the rest of Australia, to that depicted by the monthly labour force survey. T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 3: TASMANIA’S ECONOMY DURING COVID-19 5

Chart 3.4a: Weekly payroll jobs index, Tasmania and Australia 102 Week ended Mar 14 = 100

100

Chart 3.4b: Net change in payroll employment, mid-March to end-November 2

Net change at trough Net change since w/e 14 Mar

Australia

-2 -4

Tasmania

-6

-8

90 31-Dec 31-Mar 30-Jun 30-Sep 31-Dec Week ended

-10

NSW Vic Qld SA WA Tas NT ACT Aus

Source: ABS (2020m).

The number of payroll jobs in Tasmania initially fell by 8.5%, between mid-March and mid-April, in line with the national average: but since then, up to the end of national average: but since then, up to the end of November, payroll employment in Tasmania has recovered by only November, payroll employment in Tasmania has recovered by only 4.8%, less than 4.8%, less than anywhere else except the Australian Capital Territory and Victoria, and less than the national average of anywhere else except the Australian Capital Territory and Victoria, and less than the 6.1% (Charts 3.4a and 3.4b). national average of 6.1% (Charts 3.4a and 3.4b). The number of payroll jobs in Tasmania initially fell by 8.5%, between mid-March and mid-April, in line with the

The payroll jobs data indicate that, in Tasmania as elsewhere, women’s jobs were initially much more adversely

The payroll jobs data indicate that, in Tasmania as elsewhere, women’s jobs were initially much more adversely affected than men’s, with the number of payroll jobs pandemic as against a 6.5% decline in the number of payroll jobs held by men (Chart 3.5a). Since then, however, held by women falling by 10.7% over the first five weeks of the pandemic as against female payroll employment in Tasmania has recovered by 7.8%, whereas male employment has risen by only 0.8% - so a 6.5% decline in the number of payroll jobs held by men (Chart 3.5a). Since then, that, on net between mid-March and end-November, the number of payroll jobs held by men is down by 5.8% while however, female payroll employment in Tasmania has recovered by 7.8%, whereas the number held by women is down by 3.7% (Chart 3.5b). The corresponding national averages are 6.0% and 1.7% male employment has risen by only 0.8% - so that, on net between mid-March and respectively: so, while the experience of Tasmanian men has been similar to their counterparts on the mainland, the end-November, the number of payroll jobs held by men is down by 5.8% while the experience of Tasmanian women has been noticeably worse (except for Victoria). number held by women is down by 3.7% (Chart 3.5b). The corresponding national The different labour experience men and women during the the pandemic partly reflects the fact that women averages aremarket 6.0% and 1.7%ofrespectively: so, while experience of Tasmanian aremen disproportionately sectors which were subject health restrictionsthe (such as accommodation and has been employed similar toin their counterparts on to the mainland, experience of Tasmanian women has been noticeably worse forFederal Victoria). food services, or arts and recreation). However, it also reflects the (except fact that the Government’s JobKeeper affected than men’s, with the number of payroll jobs held by women falling by 10.7% over the first five weeks of the

payment, initially set at $1,500 per fortnight, covered over 80% of women’s average wages as against only 58% of

The different labour market experience of men and women during the pandemic partly reflects the fact that women are disproportionately employed in sectors which for employers to bring back more women to work using JobKeeper than men. were subject to health restrictions (such as accommodation and food services, or arts and recreation). However, it also reflects the fact that the Federal Government’s JobKeeper payment, initially set at $1,500 per fortnight, covered over 80% of women’s average wages as against only 58% of men’s (since Tasmanian women’s average earnings are 28½% lower than men’s, so it would have made financial 36 | T C C I TA S M A N I A R E P O R T 2 0 2 0 sense for employers to bring back more women to work using JobKeeper than men.

men’s (since Tasmanian women’s average earnings are 28½% lower than men’s, so it would have made financial sense

Chapter 3: TASMANIA’S ECONOMY DURING COVID-19 6

Chart 3.5a: Payroll jobs index by gender, Tasmania 102 Week ended Mar 14 = 100

100

Women

0 -10

Men

92 90 88 28-Feb

Chart 3.5b: Net change in payroll employment, by age & gender, Tasmania

-20 Change at trough Net change since 14 Mar

-30 28-May

28-Aug

28-Nov

Week ended

-40

F < 20 20- 30- 40- 50- 60- ≥ 70 29 39 49 59 69

Source: ABS (2020m).

Similar observations to the labour market experience of of different age Similar observations apply toapply the labour market experience of different age cohorts Tasmanians, as cohorts indicated by

ofweekly Tasmanians, indicated bystage the of weekly payroll series. In the initial stage of the payroll jobsas series. In the initial the pandemic, jobjobs losses were much greater among teenagers and the adults pandemic, jobother losses much greater among have teenagers and young adults young than among agewere groups: but teenagers, in particular, been much more successful in regaining than among age groups: teenagers, in particular, been much jobs, or finding newother ones, than any other agebut group. Indeed, by end-November thehave number of payroll jobsmore held by

successful in regaining jobs, or finding new ones, than any other age group. Indeed, by end-November the number of payroll jobs held by teenagers was 12% higher Proportionately, the largest jobto losses now among those aged 70 or over (who account for less than 4% than it has been prior themid-March onset ofare the pandemic. teenagers was 12% higher than it has been prior to the onset of the pandemic.

of total employment), for whom the number of payroll jobs has dropped by more than 20%. Among other age groups

Proportionately, the largest job mid-March are now among those aged 70inor the net decline in payroll employment fromlosses mid-March to end-November ranges between 4.3% for people their 40s over account less60s than 4%3.5b). of total and 50s,(who to 8.8% for peoplefor in their (Chart

employment), for whom the number of payroll jobs has dropped by more than 20%. Among other age groups the net The important role played by JobKeeper in supporting women’s and young people’s return to work raises the risk that decline in payroll employment from mid-March to end-November ranges between these groups could be more adversely affected the stepping down in the of 60s payments under the scheme and/ 4.3% for people in their 40s and 50s,byto 8.8% for people inlevel their (Chart 3.5b). or by the scheduled termination of the scheme at the end of March 2021. However, the initial step-down in the level of

The important by JobKeeper in rate supporting women’s youngpart-time people’s JobKeeper payments,role and played the introduction of a new lower for employees who had and been working before return to work the risk that these groups could more adversely byyoung the pandemic, at theraises end of September, does not appear to have had abe disproportionate impactaffected on women or

the stepping down in the level of payments under the scheme and/or by the scheduled termination of the scheme at the end of March 2021. However, the initial It’s also worth noting that Tasmanian businesses and not-for-profits have accounted for only 1.6-1.7% of organisations step-down in the level of JobKeeper payments, and the introduction of a new lower receiving JobKeeper payments, according to Treasury (2020) – less thanbefore Tasmania’s share of total rate for employees who had been working part-time the2.1% pandemic, atemployment. the end of September, does not appear to have had a disproportionate impact on women or young people. people.

It’s also worth noting that Tasmanian businesses and not-for-profits have accounted for only 1.6-1.7% of organisations receiving JobKeeper payments, according to T C C I TA S M A N I A R E P O R T 2 0 2 0 | Treasury (2020) – less than Tasmania’s 2.1% share of total employment.

Chapter 3: TASMANIA’S ECONOMY DURING COVID-19 Figures cited by Federal Treasurer Josh Frydenberg indicate that 54,000 Tasmanians were being supported by JobKeeper payments in the week ended 14 September (Crowe 2020). That represented 21.5% of the total number of employed people in Tasmania in September, according to the ABS monthly labour force survey – a smaller proportion than in any other state (though not the two territories), and well below the national average of 28.6% (or 26.7% excluding Victoria). This probably reflects the fact that a larger proportion (17.8% in 2019-20) of Tasmania’s workforce is employed in the public sector than of that of any other state (though not the two territories; the national average is 12.6%) – public sector entities not being eligible for JobKeeper payments. However, it may also mean that aggregate employment in Tasmania may be less affected by the eventual termination of the JobKeeper program than in other states. The weekly payroll jobs data also confirm that, in the initial stages of the pandemic, job losses were concentrated in the accommodation and food services, and arts and recreation services sectors, which were hardest hit by health restrictions. Employment in these sectors in Tasmania fell by more than 30% between mid-March and the latter part of April. These sectors also disproportionately employ women and young people. However, employment in these sectors also recovered more swiftly following the introduction of the Federal Government’s JobKeeper program and then after restrictions were partially eased from early June onwards – although as of end-November, the numbers of payroll jobs in these two sectors were still 12% and 10%, respectively, below their pre-pandemic levels (Chart 3.6). Proportionately, the largest loss of payroll jobs in Tasmania since mid-March has been in the agriculture, forestry and fishing sector, where payroll employment has fallen by 14.6% up to the end of November – compared with a decline of 6.5% in the number of payroll jobs in this sector nationally. Some of this difference may be attributable to seasonal factors, since (as noted earlier) the weekly payroll series is not adjusted for normal seasonal variations, and the seasonal pattern of employment in Tasmanian agriculture is different from that on the mainland. Since this sector accounts for a much larger share of total employment in Tasmania (6.5% in 2019-20) than in any other state or territory (the national average is 2.8%) the much larger decline in payroll employment in agriculture, forestry and fishing is probably a major reason for the larger net decline in total employment in Tasmania since the onset of the pandemic than in most other parts of Australia. Other sectors experiencing relatively large net losses in employment in Tasmania since the onset of the pandemic include information, media and telecommunications services, down 12.6%; mining, down 11.6%; and finance and insurance, down 8.9%. These are, however, relatively small employers in Tasmania, accounting for just 4.3% of total employment in 2019-20, compared with 8.9% of total employment nationally.

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 3: TASMANIA’S ECONOMY DURING COVID-19 8

Chart 3.6: Net change in payroll employment between mid-March and midNovember, by industry, Tasmania Agriculture, forestry & fishing Mining Manufacturing Electricity, gas & water supply Construction Wholesale trade Retail trade Accomodation & food services Transport, postal & warehousing Information, media & telecoms Finance & insurance Rental, hiring & real estate Professional, scientific & tech svces Administration & support services Public administration & saferty Education & training Health care & social assistance Art & recreation Other services Total

Net change since 14th March Net change at trough

-40

-35

-30

-25

-20

-15

-10

-5

Source: ABS (2020m).

The least affected sectors of the Tasmanian economy in terms of net job losses since mid-March have been, not surprisingly, health care and social assistance, and surprisingly, health care and social assistance, and public administration and safety, where the number of payroll public administration and safety, where the number of payroll jobs has actually risen jobs has actually risen the onset of the pandemic by 0.9% and 1.8%, respectively. Perhaps more surprisingly, payroll the onset of the pandemic by 0.9% and 1.8%, respectively. Perhaps more surprisingly, employment in retail trade in Tasmania was, as of end-November, unchanged from pre-pandemic levels – despite payroll employment in retail trade in Tasmania was, as of end-November, having initially fallen by 9%. unchanged from pre-pandemic levels – despite having initially fallen by 9%. The least affected sectors of the Tasmanian economy in terms of net job losses since mid-March have been, not

One notable difference between Tasmania’s labour market experience during the Covid-19 recession and previous

One notable difference between Tasmania’s labour market experience during the Covid-19 recession and previous recessions is that Tasmanians who have lost their that they typically have during previous recessions. jobs haven’t dropped out and stayed out of the workforce, in the way that they Although this have was theduring initial reaction to therecessions. job losses which occurred during the first phase of the pandemic – typically previous

recessions is that Tasmanians who have lost their jobs haven’t dropped out and stayed out of the workforce, in the way

Tasmania’s labour force participation rate dropped by 3.7 percentage points between March and May – that decline

Although this was the initial reaction to the job losses which occurred during the first phase of the pandemic – Tasmania’s labour force participation rate dropped by 3.7 alternative ones, or continuing actively to look for work, so that by October, Tasmania’s participation rate was 0.3 of a percentage points between March and May – that decline has since been more percentage point higher than in March. than fully reversed, with those Tasmanians who did lose their jobs either recovering Bythem, contrast, as of October, the national labour force participation rate was 0.1 of percentage point by below its finding alternative ones, or continuing actively tostill look fora work, so that pre-pandemic level, largely asparticipation a result of the 1.4 rate percentage decline in Victoria’s participation rate (and with October, Tasmania’s was point 0.3 of a percentage point higher than in large movements in the Northen Territory’s and Australian Capital Territory’s participation rates offsetting each March.

has since been more than fully reversed, with those Tasmanians who did lose their jobs either recovering them, finding

other (Chart 3.7a).

By contrast, as of October, the national labour force participation rate was still 0.1 of a percentage point below its pre-pandemic level, largely as a result of the 1.4 percentage point decline in Victoria’s participation rate (and with large movements in the Northen Territory’s and Australian Capital Territory’s participation rates offsetting each other (Chart 3.7a). T C C I TA S M A N I A R E P O R T 2 0 2 0 |

Chapter 3: TASMANIA’S ECONOMY DURING9 COVID-19 The downside of this is that Tasmania’s measured unemployment rate has risen by

The of this ispoints that Tasmania’s measuredmore unemployment risen state by 3.3 percentage points 3.3downside percentage since March, than in rate anyhas other or territory, to since 8.2%March, more than in any other state or territory, 8.2% instate October, than(Chart in any other state or territory (Chart 3.7b). in October, higher than in anytoother or higher territory 3.7b).

Chart 3.7a: Changes in labour force participation rates, March-October 2020 4

% pt change March to October

Chart 3.7b: Unemployment rates, March and October 2020 9 % Change March-October 2020

-1

-2

-3

-4

March 2020

NSW Vic Qld SA WA Tas NT ACT Aus

Source: ABS (2020e).

If all states’ and territories’ participation rates had remained unchanged at their March levels, then Tasmania’s unemployment rate would have been 7.8% in unemployment rate would have been 7.8% in October, still above the corresponding national average of 7.1%, but lower October, still above the corresponding national average of 7.1%, but lower than in than in either Victoria (9.4%) or the Northern Territory (10.1%). either Victoria (9.4%) or the Northern Territory (10.1%). If all states’ and territories’ participation rates had remained unchanged at their March levels, then Tasmania’s

Business confidence didn’t fall nearly as much in Tasmania as in the other states during the first phase of the pandemic

Business confidence didn’t fall nearly as much in Tasmania as in the other states during the first phase of the pandemic – despite the fact that, as a result of the to the size of its population than any other state or territory until the onset of the ‘second wave’ in Victoria (Chart outbreak at the NWGH, Tasmania had more cases and deaths relative to the size of 3.8a). However, nor did business confidence rebound as strongly in Tasmania as it did in the other states – so that its population than any other state or territory until the onset of the ‘second wave’ in as of October, the latest month for which data were available at the time of writing, confidence among Tasmanian Victoria (Chart 3.8a). However, nor did business confidence rebound as strongly in businesses was marginally further below its long-run average than in any other state except South Australia. Tasmania as it did in the other states – so that as of October, the latest month for Confidence among Tasmanian consumers declined the same extent as it did nationally during the first few weeks which data were available at the timetoof writing, confidence among Tasmanian ofbusinesses the pandemic, and marginally has since recovered almost – though not quite –average as much asthan in other By November, was further below its long-run in states. any other state consumer confidence in most other states was above its long-run average – with the exception of Western Australia, except South Australia. – despite the fact that, as a result of the outbreak at the NWRH, Tasmania had more cases and deaths relative

where the long-run average is inflated by the earlier mining boom: in Tasmania, however, consumer confidence in

Confidence among Tasmanian consumers declined to the same extent as it did nationally during the first few weeks of the pandemic, and has since recovered almost – though not quite – as much as in other states. By November, consumer confidence in most other states was above its long-run average – with the exception of Western Australia, where the long-run average is inflated by the earlier mining boom: in Tasmania, however, consumer confidence in November was only back to its long-run average (Chart 3.8b).

November was only back to its long-run average (Chart 3.8b).

present middling 4 Indicators 0 | Tof C Cconsumer I TA S M A spending NIA REPO R T 2 0a 20

picture of Tasmania’s recovery from the earlier depths of the Covid-19 recession. In April, when restrictions across

Chapter 3: TASMANIA’S ECONOMY DURING COVID-19 10 Indicators of consumer spending present a middling picture of Tasmania’s recovery from the earlier depths of the Covid-19 recession. In April, when restrictions across the whole of Australia were at their strictest, retail sales in

the whole of Australia were at their strictest, retail sales in Tasmania were 7.2% below their 2019 average level (remembering that retail sales had been inflated by ‘panic at the end of March)at –a smaller than in – either New South Wales or Victoria but larger thanSouth in the other states buying’ the enddecline of March) a smaller decline than in either New Wales or and territories. Victoria but larger than in the other states and territories. Tasmania were 7.2% below their 2019 average level (remembering that retail sales had been inflated by ‘panic buying’

Chart 3.8a: Business confidence during the Covid-19 recession 2 1

Chart 3.8b: Consumer confidence during the Covid-19 recession

Standard deviations from 30-year average

Tasmania

Standard deviations from 30-year average

Australia

-1

Tasmania

-2

Australia

-3

-1

-4 -5

-2

-6 -7 -8

-3 J

F M A M J

J A S O N D

F M A M J

J A S O N D

Sources: National Australia Bank (2020); Westpac (2020).

From that level, retail sales in Tasmania rebounded through October by exactly the same margin, 22½%, as the average for the rest of Australia excluding Victoria – to for the rest of Australia excluding Victoria – to be 13.7% above their 2019 average, slightly better than the ex-Victoria be 13.7% above their 2019 average, slightly better than the ex-Victoria national national average of 12.4% (Chart 3.9a). average of 12.4% (Chart 3.9a).

From that level, retail sales in Tasmania rebounded through October by exactly the same margin, 22½%, as the average

New motor vehicle sales have been much weaker in Tasmania than in any other state or territory (apart from Victoria).

New motor vehicle sales have been much weaker in Tasmania than in any other state or territory (apart from Victoria). Between March and May, vehicle sales fell by the national average fall of 15% (Chart 3.9b). 29% in Tasmania, the largest decline of any jurisdiction, and nearly double the national average fall of 15% (Chart 3.9b). Between March and May, vehicle sales fell by 29% in Tasmania, the largest decline of any jurisdiction, and nearly double

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 3: TASMANIA’S ECONOMY DURING COVID-19 11

Chart 3.9a: Retail sales during the Covid-19 Chart 3.9b: New motor vehicle sales during recession the Covid-19 recession 120

2019 =100

Tasmania

115 110

Rest of Australia

105

120

2019 =100

110

Rest of Australia

100 90 80

100

Victoria

70 60

D J F M A M J J A S O N D

Tasmania Victoria D J F M A M J J A S O N D

Note: Original new motor vehicle sales data as published have been seasonally adjusted via Refinitiv Datastream. Sources: ABS (2020l); Federal Chamber of Automotive Industries (2020).

Spurred by Federal Government investment incentives (as well as dealer initiatives), sales recovered over the following three months, in Tasmania by 13% (marginally three months, in Tasmania by 13% (marginally below the ex-Victoria national average of 16%), but then plunged to a below the ex-Victoria national average of 16%), but then plunged to a record low in record low in September. September.

Spurred by Federal Government investment incentives (as well as dealer initiatives), sales recovered over the following

Though they subsequently recovered, the level of new motor vehicle sales in Tasmania in November was nonetheless

Though they subsequently recovered, levelwhere of new motor vehicle sales in their 2019 21% below the 2019 average level: apart from South the Australia, November sales were 3¼% below

Tasmania in November was nonetheless 21% below the 2019 average level: apart from South Australia, where November sales were 3¼% below their 2019 average, in The level of housing activity, and the residential propertyVictoria) market more generally, proven to be2019 much more resilient every other state and territory (including they werehave above their inaverage. Tasmania than had been feared during the early stages of the pandemic – as has also been the case across other average, in every other state and territory (including Victoria) they were above their 2019 average.

parts of Australia.

The level of housing activity, and the residential property market more generally, have proven to be much more resilient in Tasmania than had been feared during prompt an increased number of ‘forced sales’, which, in the absence of demand from recently-arrived migrants given the early stages of the pandemic – as has also been the case across other parts of the closure of Australia’s international borders, could in turn lead to potentially large falls in property prices. At the Australia.

It had been widely anticipated that the combination of rising unemployment and high levels of mortgage debt would

same time, pervasive uncertainty about the outlook for property prices combined, again, with the absence of demand

It had been anticipated that the combination of rising and from migrants andwidely the completion of projects under way when the pandemic beganunemployment was widely expected to result in a highinlevels of mortgage plunge new residential building debt activity.would

prompt an increased number of ‘forced sales’, which, in the absence of demand from recently-arrived migrants given the closure of Australia’s international borders, could in turn lead to potentially large falls in property prices. At the same time, pervasive uncertainty about the outlook for property prices combined, again, with the absence of demand from migrants and the completion of projects under way when the pandemic began was widely expected to result in a plunge in new residential building activity.

Instead, a combination of the Federal Government’s JobKeeper program and other supports for employers (which significantly reduced the loss of jobs), the Reserve 42 | T C C I TA S M A N I A R E P O R T 2 0 2 0 Bank’s reductions in interest rates and repeated assurances that interest rates would remain at record lows for at least three years, the mortgage repayment deferral

Chapter 3: TASMANIA’S ECONOMY DURING12COVID-19 substantial cash incentives from both the Federal and state governments for first

Instead, of the Federal Government’s JobKeeper program and other supports for employers (which homea combination buyers, have prevented wide-spread ‘forced sales’, and underpinned

significantly loss of jobs), the with Reserve Bank’s reductionsof in Melbourne interest rates and repeated demandreduced – withthe the result that, the exception (and to aassurances much that interest would remain at record lows forproperty at least three years, haven’t the mortgage repayment arrangements lesserrates extent Sydney), residential prices fallen at all,deferral but instead

offered mortgage lenders (with the support of regulators), and substantial cash incentives from both the Federal havebycontinued to rise. and State Governments for first home buyers, have prevented wide-spread ‘forced sales’, and underpinned demand –

First home buyers, in particular, appear to have sensed an opportunity to enter the market without facing the competition from investors and immigrants that had haven’t fallen at all, but instead have continued to rise. effectively squeezed them out for most of the preceding three decades.

with the result that, with the exception of Melbourne (and to a much lesser extent Sydney), residential property prices

First home buyers, in particular, appear to have sensed an opportunity to enter the market without facing the

This has been especially apparent in Tasmania.

competition from investors and immigrants that had effectively squeezed them out for most of the preceding three decades. Apart

from a brief dip in March, property prices in Hobart have risen every month this year, and by November were 5.4% higher than in December 2019 – a larger increase This has been especially apparent in Tasmania. than for any other capital city except for Canberra and Darwin (and in Darwin’s Apart from a brief dip in March, property prices in Hobart have risen every month this year, and by November were case that was after a decline of almost 32% from a peak in May 2014) (Chart 3.10a). 5.4% higher than in December 2019 – property a larger increase thanbarely for any other city except forby Canberra In other areas of Tasmania, prices tookcapital a breath, rising 9.6% and Darwin (and in Darwin’s case that was after a decline almost 32% from acompared peak in May 2014) 3.10a). In other between December last year andofthis November, with(Chart an average of areas of5.4% Tasmania, property prices barely took a breath, rising by 9.6% between December last year and this November, for regional Australia as a whole (Chart 3.10b). compared with an average of 5.4% for regional Australia as a whole (Chart 3.10b).

Chart 3.10a: Capital city property prices during the Covid-19 recession

Chart 3.10b: Regional areas property prices during the Covid-19 recession

106

112 Dec 2019 =100

Dec 2019 =100

Hobart

105

110

104

108

103

106

102

104

101 100 99 98

Regional Tasmania

102 8 capital cities average

100 98

D J F M A M J J A S O N D

Regional Australia

D J F M A M J J A S O N D

Note: ‘Regional Tasmania’ means areas outside Greater Hobart; ‘Regional Australia’ means the areas outside the greater metropolitan areas of each state. Source: CoreLogic (2020).

In contrast to the years immediately prior to the onset of Covid-19, as described in Chapter 2, the continued buoyancy of Tasmania’s residential property markets didn’t spill over into an ongoing escalation in rents. On the contrary, average rents in Hobart dropped by 3.4% between December last year and this November, compared with the all-capitals average of 0.3%; while in regional Tasmania rents rose by 3.0%, less than the average increaseTof 3.7% for regional Australia as a whole C C I TA S M A N I A R E P O R T 2 0 2 0 | (Chart 3.11a).

Chapter 3: TASMANIA’S ECONOMY DURING COVID-19 In contrast to the years immediately prior to the onset of Covid-19, as described in Chapter 2, the continued buoyancy of Tasmania’s residential property markets didn’t spill over into an ongoing escalation in rents. On the contrary, average rents in Hobart dropped by 3.4% between December last year and this November, compared with the all-capitals average of 0.3%; while in regional Tasmania rents rose by 3.0%, less than the average increase of 3.7% for regional

Australia as a whole (Chart 3.11a).

Chart 3.11a: Capital city rents during the Covid-19 recession

Chart 3.11b: Capital city vacancy rates during the Covid-19 recession

490

3.0

480 470 460

$ per week (rolling 3month average)

430

8 capital cities average

2.5

8 capital cities average

450 440

2.0 1.5 1.0

Hobart

D J F M A M J J A S O N D

Hobart

0.5 0.0

D J F M A M J J A S O N D

Sources: CoreLogic (202on 0); SQM Research (2020).

The decline in Hobart rents appears to be at least in part the reversion to longer-term rental of properties that had previously been converted to short-stay previously been converted to short-stay accommodation for tourists, following the closure of both Australia’s and accommodation for tourists, following the closure of both Australia’s and Tasmania’s Tasmania’s borders after the onset of Covid-19 (Buckle et al 2020: 39-40). Hobart’s rental vacancy rate rose from 0.5% borders after the onset of Covid-19 (Buckle et al 2020: 39-40). Hobart’s rental at the end of 2019 to a five-year high of 1.4% in April, although it has since come back down to 0.6% in October (Chart vacancy rate rose from 0.5% at the end of 2019 to a five-year high of 1.4% in April, 3.11b). although it has since come back down to 0.6% in October (Chart 3.11b). The decline in Hobart rents appears to be at least in part the reversion to longer-term rental of properties that had

Hobart continues to be the least affordable capital city for average income rental households, and the only capital city

Hobart continues to be the least affordable capital city for average income rental households, and the only capital city where median rents exceed 30% of average affordable for renters of any “rest of state” in Australia. household incomes (SGS 2020). Similarly, regional Tasmania is the least affordable for After declining by almost betweenin February and May, mortgage lending to property purchasers in Tasmania rose renters of any “rest22% of state” Australia.

where median rents exceed 30% of average household incomes (SGS 2020). Similarly, regional Tasmania is the least

by 65% over the following six months. Impressive as this looks, there were even bigger increases in Western Australia,

After declining by almost 22% between February and May, mortgage lending to property purchasers in Tasmania rose by 65% over the following six months. Lending to first-time buyers in Tasmania has been especially strong, rising to 120% above its Australia, average 2019 level by Impressive as this looks, there were even bigger increases in Western October – a larger increase than in any other state or territory. In October, 29% of all housing Queensland and (from a very low base) the Northern Territory (Chart finance 3.12a).commitments Queensland and (from a very low base) the Northern Territory (Chart 3.12a).

in Tasmania were to first home buyers, the highest percentage since 2009 (during the financial crisis) – although the

Lending to first-time buyers in Tasmania has been especially strong, rising to 120% above its average 2019 level by October – a larger increase than in any other state or territory. In October, 29% of all housing finance commitments in Tasmania were to first home buyers, the highest percentage since 2009 (during the financial crisis) – although the share was even higher in Victoria, Queensland, Western Australia and 44 | T C C I TA S M A N I A R E P O R T 2 0 2 0 the Northern Territory. share was even higher in Victoria, Queensland, Western Australia and the Northern Territory.

The return of first-home buyers to the housing market has helped to offset the

Chapter 3: TASMANIA’S ECONOMY DURING COVID-19 The return of first-home buyers to the housing market has helped to offset the negative impact of the absence of immigrants, who have constituted a significant part of the underlying demand for new housing over the past two decades. As a result, residential building approvals by local governments – a leading indicator of new housing construction activity – have held up better than initially expected over the past eight months. Residential building

approvals in Tasmania have broadly kept up with the rest of Australia during this period (Chart 3.12b).

Chart 3.12a: Housing finance commitments during the Covid-19 recession

Chart 3.12b: Residential building approvals during the Covid-19 recession

150

2019 =100

Rest of Australia

140

Tasmania

130

140 130

120

110

110 Victoria

100

2019 =100

100

D J F M A M J J A S O N D

Rest of Australia

Victoria Tasmania D J F M A M J J A S O N D

Note: Housing finance commitments exclude re-financings. Source: ABS (2020j) and (2020n).

In summary, the analysis of this Chapter suggests that, notwithstanding the momentum which the Tasmanian economy was experiencing prior to the onset of economy was experiencing prior to the onset of Covid-19, the economic downturn has in most respects (and in Covid-19, the economic downturn has in most respects (and in particular with particular with regard to employment) been more severe in Tasmania than it has been in the rest of Australia – with regard to employment) been more severe in Tasmania than it has been in the rest of the obvious exception of Victoria, in part because of Tasmania’s greater dependence on sectors which were more Australia – with the obvious exception of Victoria, in part because of Tasmania’s significantly impacted either byon thesectors pandemicwhich or by government-imposed restrictions.impacted either by greater dependence were more significantly or bythat government-imposed Asthe the pandemic next Chapter shows, is despite the fact that therestrictions. Tasmanian Government has provided more support, relative In summary, the analysis of this Chapter suggests that, notwithstanding the momentum which the Tasmanian

to the size of Tasmania’s economy, to households and businesses than the government of any other state or territory.

As the next Chapter shows, that is despite the fact that the Tasmanian Government has provided support, relative to the of Tasmania’s economy, to This underscores themore unavoidable reality that a small, and size narrowly-based, economy such as Tasmania’s, is almost households and businesses thanthan thea government of any other state or territory. always more vulnerable to external shocks large, diversified one.

That’s to dispute that Tasmania’s experience wouldthat have a been worseand had the State Governmenteconomy not been wellThis not underscores the unavoidable reality small, narrowly-based,

such as Tasmania’s, is challenges almost always vulnerable externalbecause shocksitsthan a position prepared to meet some of the to whichmore it has had to respond:to in particular, financial

large, diversified was in better shape thanone. that of other states and territories (with the possible exception of New South Wales) on the eve of the pandemic.

That’s not to dispute that Tasmania’s experience would have been worse had the

It State should also serve to remind Tasmanians that the recoveryto path will not be anof easy one – an issue which is explored at Government not been well-prepared meet some the challenges to which greater Chapter 5. it haslength hadinto respond:

in particular, because its financial position was in better shape than that of other states and territories (with the possible exception of New South Wales) on the eve of the pandemic. T C C I TA S M A N I A R E P O R T 2 0 2 0

But it should also serve to remind Tasmanians that the recovery path will not be an easy one – an issue which is explored at greater length in Chapter 5.

Chapter 4 THE ROLE OF GOVERNMENTS AND COMMUNITY ORGANISATIONS

Chapter 4: THE ROLE OF GOVERNMENTS AND COMMUNITY ORGANISATIONS Governments have played an enormously important role in supporting individuals, households and businesses through the Covid-19 pandemic and the economic dislocation associated with it – in Tasmania no less than in any other part of Australia, or indeed throughout the world. That’s as it should be, given that the economic dislocation is in large part the result of directives by governments implemented, for the most part in accordance with public health advice, in order to contain the spread of the virus – although, as noted in Chapter 1, it’s likely that people would have curtailed many of their normal activities anyway, even had governments not imposed the restrictions which they did. There was almost a moral obligation on governments to offer support and assistance to individuals and businesses who had been obliged to ‘make sacrifices’ in the interests of the community as a whole – over and above the assistance which governments normally provide (through publicly-funded ‘social safety nets’ and in other ways) during recessions. Governments across Australia – national, state and territory, and local – have certainly recognised, and acted upon, that obligation. The International Monetary Fund estimates that Australian governments have done more, by way of additional spending or revenue foregone (as a percentage of GDP) to support households and businesses during the pandemic than the governments of all but five other ‘advanced’ economies (IMF 2020a: 2). The support provided by the Federal Government to employment in Tasmania through JobKeeper has already been noted earlier in this report. In total, the Federal Government’s responses to Covid-19, combined with the ‘automatic’ impact of the economic downturn on its tax revenues, has seen its budget deficit blow out to $94 billion in the 2019-20 fiscal year, and to an expected $214 billion in 2020-21 – equivalent to 11% of GDP, the largest such deficit since World War II – while its net debt is projected to increase from $491 billion (24.8% of GDP) as at the end of June 2020 to $966 billion (43.8% of GDP) by June 2024 (Australian Government 2020: 3-6). The Tasmanian Government has provided more fiscal support, relative to the size of Tasmania’s economy, to households, businesses and community organisations since the onset of Covid-19 than the government of any other state or territory (Chart 4.1). In particular, the Tasmanian Government has been more generous in providing income support to people who ‘fell through the cracks’ in some of the criteria for Federal Government support programs – such as international students stranded in Australia when borders were closed, or casual employees who had been working insufficient hours during February this year to qualify for support through JobKeeper. The Tasmanian Government’s capacity to provide this support was facilitated by its relatively strong position, compared with that of other states and territories, prior to the onset of the pandemic.

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 4: THE ROLE OF GOVERNMENTS AND COMMUNITY ORGANISATIONS 2

Chart 4.1: State and territory Covid-19 support and response measures as a proportion of gross state product 4.0 3.5

% of forecast 2019-20 gross state product Average of all states & territories

3.0 2.5 2.0 1.5 1.0 0.5 0.0

NSW

Vic

Qld

Tas

ACT

Source: Australian Treasury (2020).

As a result of this support, and of the impact of the recession on some of its principal revenue sources (in particular, its share of GST revenues, state taxation revenues and share of GST revenues, state taxation revenues and GBE dividends), the State Government incurred a cash deficit in the GBE dividends), the State Government incurred a cash deficit in the 2019-20 fiscal 2019-20 fiscal year for the first time since 2012-13. In this year’s State Budget the Government projected that its cash year for the first time since 2012-13. In this year’s State Budget the Government deficit would widen to $1.8 billion in the current financial year – equivalent to about 5¾% of gross state product (much projected that its cash deficit would widen to $1.8 billion in the current financial year larger than in any year since at least the mid-1990s, and possibly since at least World War II) – and would remain in – equivalent to about 5¾% of gross state product (much larger than in any year deficit through at least the end of theand current forward estimates 2023-24 (Chart since at least thetomid-1990s, possibly since atperiod leastinWorld War II) –4.2a). and would remain deficit atresulted least to theTasmanian end of the current forward estimates These large in cash deficitsthrough have in turn in the ‘general government’ sector becoming aperiod net debtor for infirst 2023-24 (Chart 4.2a). the time since 2003-04, with net debt projected to increase to just over $4 billion, or about 11½% of GSP, by June As a result of this support, and of the impact of the recession on some of its principal revenue sources (in particular, its

2024 (Chart 4.2b).

These large cash deficits have in turn resulted in the Tasmanian ‘general government’ sectorappropriate becoming a netondebtor the firstGovernment. time sinceAs2003-04, with net a This is, however, an entirely response the partfor of the State the IMF - traditionally debtofprojected to increase to“the justmassive over $4 billion, orundertaken about 11½% of start GSP,ofby Junehas saved bastion ‘fiscal orthodoxy’ - has noted, fiscal support since the Covid-19 2024 (Chart 4.2b). lives and livelihoods” (IMF 2020b: 1). The IMF’s advice to governments is that they “should ensure that lifelines are not withdrawn too quickly” and that “improvements in the ability of social protection systems to reach, target, and

This is, however, an entirely appropriate response on the part of the State Government. As the IMF - traditionally a bastion of ‘fiscal orthodoxy’ - has noted, under control, with the arrival and wide distribution of vaccines, the IMF counsels that “governments will need to “the massive fiscal support undertaken since the start of Covid-19 has saved lives foster recovery while(IMF addressing the1). legacies the crisis—including elevated private and public debt“should levels, high andthe livelihoods” 2020b: The of IMF’s advice to governments is that they unemployment, and rising inequality and poverty”. ensure that lifelines are not withdrawn too quickly” and that “improvements in the ability of social protection systems to reach, target, and deliver benefits to vulnerable people should be preserved” (2020b: xii). Even after the pandemic has been brought under control, with the arrival and wide distribution of vaccines, the IMF counsels that “governments will need to foster the recovery while addressing the T C C I and TA Spublic M A N I debt A REP O R T high 2020 | 49 legacies of the crisis—including elevated private levels, unemployment, and rising inequality and poverty”. deliver benefits to vulnerable people should be preserved” (2020b: xii). Even after the pandemic has been brought

Chapter 4: THE ROLE OF GOVERNMENTS AND COMMUNITY ORGANISATIONS 3

Chart 4.2a: Tasmanian ‘general government’ cash balance 0.5

$bn

0.0

Chart 4.2b: Tasmanian ‘general government’ net debt Forward estimates

-1.5 -2.0

$bn

Increase since 2019-20 Budget

4 3

-0.5 -1.0

2 Excludes one-off payment of $730mn from Federal Government for transfer of Mersey General Hospital

1 0 -1 -2

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Financial years ended 30th June

Note: ‘General government’ refers to departments and agencies funded wholly or largely through taxation revenue and grants, and excludes public enterprises. Source: Tasmanian Government (2020).

Similarly, the Organisation for Co-operation Economic and Co-operation and Development (OECD) – Similarly, the Organisation for Economic Development (OECD) – which, like the IMF, has traditionally which, like for theitsIMF, has traditionally not been noted formost its enthusiastic support of that not been noted enthusiastic support of government activism – has recently advised governments government activism – has most recently governments support “fiscal support needs to be maintained over the next fewadvised years”, although “its size and that nature“fiscal should adapt to the

needssituation”. to be maintained the fewearly years”, “its size and nature changing It cautions thatover “opting for next a full and expiry although of special programmes in 2021 should be avoided,

adapt to the measures”, changing situation”. It cautions that to “opting for a full and early orshould offset with other targeted and that “consolidation” (ie, seeking return budgets to surplus and pay down expiry of undermine special programmes in and 2021 should be avoided, or offset debt) “could growth excessively, may not bring fiscal savings” (2020: 45). with

other targeted measures”, and that “consolidation” (ie, seeking to return budgets to While this sort of advice is primarily directed towards national governments, the Governor of the Reserve Bank has surplus and pay down debt) “could undermine growth excessively, and may not specifically noted that “states and territories can borrow at record low [interest] rates and have an important role to bring fiscal savings” (2020: 45). play in the national fiscal response” (Lowe 2020).

While this sort of advice is primarily directed towards national governments, the Governor of the Reserve Bank has specifically noted that “states and territories can over the next three and a half years. Because interest rates on government debt are at record lows – and the Reserve borrow at record low [interest] rates and have an important role to play in the Bank has pledged to keep them there for at least three years – the Government will be spending less on interest as a national fiscal response” (Lowe 2020). There is, in particular, no need for alarm at the level of debt which the Tasmanian Government is expecting to incur

proportion of its total revenue this financial year and for at least the next three years than it did in the early years of this

Thereoris, in particular, no need century during the 1990s (Chart 4.3a).

for alarm at the level of debt which the Tasmanian Government is expecting to incur over the next three and a half years. Because Moreover, the level of debt which the Tasmanian Government is expecting to incur over the next three and a half years interest rates on government debt are at record lows – and the Reserve Bank has – including that of its government-owned enterprises - will nonetheless be lower, relative to the size of the state’s pledged to keep them there for at least three years – the Government will be economy, than for any other state or territory except New South Wales and Western Australia (Chart 4.3b). spending less on interest as a proportion of its total revenue this financial year and for at least the next three years than it did in the early years of this century or during the 1990s (Chart 4.3a). Moreover, the level of debt which the Tasmanian Government is expecting to incur over the next three and a halfyears – including that of its government-owned enterprises - will nonetheless be lower, relative to the size of the state’s economy, 50 | T C C I TA S M A N I A R E P O R T 2 0 2 0 than for any other state or territory except New South Wales and Western Australia (Chart 4.3b).

Chapter 4: THE ROLE OF GOVERNMENTS AND COMMUNITY ORGANISATIONS

Chart 4.3a: Tasmanian ‘general government’ interest expense as a proportion of total revenue 12 10

Chart 4.3b: Total non-financial public sector net debt as a proportion of GSP, states and territories, June 2020 and June 2024

% of total 'operating' revenue

50 40

8 6

2020-21 2022-23

Forward estimates

2 0 -2

% of GSP 2019-20 2021-22 2023-24

20 10

Financial years ended

30th

June

NSW Vic Qld SA WA Tas NT ACT

Note: ‘General government’ refers to departments and agencies funded wholly or largely through taxation revenue and grants, and excludes public enterprises. The ‘non-financial public sector’ includes public non-financial corporations (such as Hydro Tasmania and Aurora) but excludes public financial corporations such as TasCorp and the MAIB). Estimates of Tasmania’s GSP for 2022-23 and 2023-24 are derived by assuming it grows at the same rate as forecast by the Australian Treasury for nominal GDP. Sources: Tasmanian Government (2020 and previous); other state and territory 2020-21 Budget Papers and the ACT’s Pre-Election Budget Update.

As has been emphasized at length in previous editions of the Tasmania Report, in addition to its (relatively low) net debt, the Tasmanian state public sector carries a debt, the Tasmanian state public sector carries a much larger unfunded superannuation liability than any other state or much larger unfunded superannuation liability than any other state or territory – territory – which is the main reason why Tasmania has a lower credit rating than its otherwise favourable credit metrics which is the main reason why Tasmania has a lower credit rating than its otherwise would appear to warrant. favourable credit metrics would appear to warrant. As has been emphasised at length in previous editions of the Tasmania Report, in addition to its (relatively low) net

However, that liability does not need to be ‘rolled over’ at regular intervals in the way that debt must be, and the annual

However, that liability does not need to be ‘rolled over’ at regular intervals in the way that debt must be, and the annual servicing costs associated with it are term bond yield used to determine the ‘present value’ of future liabilities have an outsized influence on its actuarially unaffected by fluctuations in interest rates (although movements in the long-term assessed value which appears on the Government’s balance sheet each year). bond yield used to determine the ‘present value’ of future liabilities have an outsized If influence it were not foron theits size of that liability – which, precisely becauseappears it is ‘unfunded’, that the Government will actuarially assessed value which on means the Government’s divert 4.6% ofsheet its casheach revenues to paying pensions and lump sums to retired public sector employees and their balance year). servicing costs associated with it are unaffected by fluctuations in interest rates (although movements in the long-

surviving partners in 2020-21, a proportion which will peak at 4.9% in 2028-29 before gradually declining over the

If it were not for the size of that liability – which, precisely because it is ‘unfunded’, means that the Government will divert 4.6% of its cash revenues to paying pensions order to fund productive infrastructure investment, or facilitate productivity- and resilience-enhancing state tax reform, and lump sums to retired public sector employees and their surviving partners in without risking its credit rating. 2020-21, a proportion which will peak at 4.9% in 2028-29 before gradually declining The onlythe way ensuing that this liability can be reduced (other than by running budget2020: surpluses, which would not be appropriate over five decades (Tasmanian Government 130) – the inGovernment current circumstances) is through major saleseven – something appears to be zero political would be able to asset borrow more for in which orderthere to fund productive appetite, now or in the foreseeable future. infrastructure investment, or facilitate productivity- and resilience-enhancing state tax reform, without risking its credit rating. ensuing five decades (Tasmanian Government 2020: 130) – the Government would be able to borrow even more in

T C C I TA S M A N I A R E P O R T 2 0 2 0

But the only way that this liability can be reduced (other than by running budget surpluses, which would not be appropriate in current circumstances) is through major asset sales – something for which there appears to be zero political appetite, now or in the foreseeable future. Almost all of the deterioration in the Government’s financial position over the past

Chapter 4: has been the result of conscious ‘policy decisions’ (ie, to reduce twelve months revenues or, more commonly, to increaseAND spending), rather than ‘parameter THE ROLE OF GOVERNMENTS COMMUNITY ORGANISATIONS variations’ (the result of changes in economic or other assumptions used to construct forward estimates of revenue or expenses).

Almost all of the deterioration in the Government’s financial position over the past 12 months has result of In particular, state taxation revenues have been surprisingly impervious tobeen thethe onset

conscious ‘policy decisions’ (ie, tothe reduce revenues or,Government, more commonly, to increase rather than ‘parameter of recession. And while Tasmanian like otherspending), state and territory

variations’ (the resulthas of changes economic oraffected other assumptions used to construct forward estimates of of revenue or governments, been inadversely by downward revisions to estimates expenses). revenue

from the GST, in Tasmania’s case that’s been partly offset by an increase in Tasmania’s share of the GST pool, and (particularly) by increases in other grants from In particular, state taxation revenues have been surprisingly impervious to the onset of recession. And while the the Commonwealth. Local governments have also played an important role in Tasmanian Government, like other state and territory governments, has been adversely affected by downward revisions assisting their communities deal with the consequences of Covid-19. to estimates of revenue from the GST, in Tasmania’s case that’s been partly offset by an increase in Tasmania’s share

ofNearly the GST all pool, by increases in other grants from the Commonwealth. Local governments ofand the(particularly) Government’s ‘policy decisions’ were on the spending side of thehave also played an important rolethose, in assisting theirthan communities deal ($834mn with the consequences of Covid-19. budget – and of more one-third over the four years

to 2023-24) constituted its Covid-19 ‘Response and Recovery’ Plan (Chart 4.4a). A further $590 Nearly all of the Government’s ‘policy decisions’ were on the spending side of the budget – and of those, more than million (one-quarter of the total) represented additional funding for the Tasmanian one-third ($834mn over the four years to 2023-24) constituted its Covid-19 ‘Response and Recovery’ Plan (Chart 4.4a). Health Service, while the decision to abandon previously required ‘efficiency A further $590 million (one-quarter of the total) represented additional funding for the Tasmanian Health Service, dividends’ (a very wise decision: efficiency dividends are a very lazy way of while the decision to abandon previously required ‘efficiency dividends’ (a very wise decision: efficiency dividends are a reducing expenditure) added $400 million to projected deficits. very lazy way of reducing expenditure) added $400 million to projected deficits.

Perhaps surprisingly, given the rhetorical emphasis which the Government has placed on infrastructure spending as a key element of its economic recovery key element of its economic recovery agenda, ‘capital expenditure policy decisions’ taken between the 2019-20 and agenda, ‘capital expenditure policy decisions’ taken between the 2019-20 and 2020-21 Budgets amounted to only $140 million over the four years to 2023-24 – equivalent to 3.9% of the spend 2020-21 Budgets amounted to only $140 million over the four years to 2023-24 – previously budgeted. equivalent to 3.9% of the spend previously budgeted.

Perhaps surprisingly, given the rhetorical emphasis which the Government has placed on infrastructure spending as a

Chart 4.4a: ‘Bottom line’ impact of 2020-21 Budget ‘policy decisions’ 1,000 900 800 700

$mn

Other 'capital' expenses Other 'operating' expenses 'Efficiency dividends' removal Additional THS funding Covid response & recovery

Chart 4.4b: Projected ‘general government’ capital expenses, states and territories 6 % of GSP 5

2020-21 2022-23

2021-22 2023-24

600 3

500 400

300 200

100 0

2020-21 2021-22 2022-23 2023-24

NSW Vic Qld SA WA Tas

NT ACT

Note: ‘Bottom line’ refers to the fiscal balance (the accrual accounting equivalent of the cash balance). ‘General government’ comprises departments and agencies funded primarily by taxation revenue or grants. Estimates of GSP for Tasmania in 2022-23 and 2023-24 derived as for Chart 4.3b. Sources: Tasmanian Government (2020); other state and territory 2020-21 Budget Papers and the ACT’s Pre-Election Budget Update.

That may reflect judgements about the capacity to deliver on an even larger infrastructure investment program than was already in train. Tasmanian ‘general 52 | T C C I TA S M A N I A R E P O R T 2 0 2 0 government’ capital expenditures (‘purchases of new fixed assets’) are forecast to represent almost 3½% of GSP in 2020-21 – compared with an average of 1½% of GSP over the past two decades, and well above the previous peak of 3% of GSP in 2010-

Chapter 4: THE ROLE OF GOVERNMENTS AND COMMUNITY ORGANISATIONS That may reflect judgements about the capacity to deliver on an even larger infrastructure investment program than was already in train. Tasmanian ‘general government’ capital expenditures (‘purchases of new fixed assets’) are forecast to represent almost 3½% of GSP in 2020-21 – compared with an average of 1½% of GSP over the past two decades, and well above the previous peak of 3% of GSP in 2010-11. Over the four years to 2023-24, Tasmanian ‘general government’ capital expenditures are projected to represent an average of about 2¾% of GSP. This is in line with the average for all states and territories – less than New South Wales and especially Victoria, but larger than Queensland and especially Western Australia (Chart 4.4b). While well-targeted infrastructure investments deliver lasting economic and/or social benefits, and can have large ‘multiplier’ effects on economic activity and employment, it does have some limitations in that regard. In particular, 85% of the jobs in ‘heavy engineering and civil construction’ are held by men – more even than in mining (where men account for 83% of total employment). Given that the Covid-19 recession has had a much greater impact on women’s employment than previous recessions (because of its much greater impact on services sectors, where the majority of women are employed), and that women’s employment could be at greater risk from the termination of JobKeeper at the end of March next year, the Government may need to consider other ways of more directly creating jobs for women. Local governments have also played an important role in Tasmania’s response to Covid-19. Most councils have extended rate relief to property-owners experiencing financial difficulties, and curbed increases in rates; many have waived interest and penalties for late payments, and reduced or waived rents and fees for the use of council-owned facilities by community organisations. Many councils have also provided additional grants to community groups and not-for-profits, and in some cases to small businesses, to assist with difficulties arising from Covid-19 (LGAT 2020). These measures are likely to have imposed additional strain on many councils’ finances. As the Interim Report of the Premier’s Economic and Social Recovery Advisory Council (PESRAC) noted in July, “local government has an important role to play in the recovery journey”, and “a partnership approach will be required with the State Government to avoid duplication and the development of competing measures” (PESRAC 2020: 39). Community organisations have also played a critical role in assisting individuals and families to cope with the economic and social consequences of Covid-19. Tasmanian community organisations employ more than 10,000 workers and the services of tens of thousands of volunteers to support the needs of around 120,000 Tasmanians (around 22% of Tasmania’s population) who live in vulnerable circumstances (TasCOSS 2020: 2). Like governments, community organisations have experienced significant increases in demand for the services which they provide – including in many cases from people who have until now not had any need of those services – whilst having to overcome increased difficulty in providing them (as a result of health restrictions), diminished access to volunteers (again as a result of health restrictions), and reduced income from donations and from social enterprises. Community organisations have often been called upon to ‘fill the gaps’ in government programs, for people who have found themselves ineligible for government assistance programs, or who lack the resources to make full use of them – for example because they lack access to the internet, or have insufficient digital skills and capabilities.

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 4: THE ROLE OF GOVERNMENTS AND COMMUNITY ORGANISATIONS Like most businesses, community organisations have had to develop new methods of delivering services whilst also finding ways of reducing costs in response to diminished revenues. Many community organisations anticipate that demand for their services will remain elevated even as the pandemic is brought under control through the widespread distribution of vaccines, and as economic recovery proceeds – especially if government support mechanisms are wound down abruptly or prematurely, and as result of the longerterm consequences of the changes wrought by the pandemic for some people’s employment prospects and incomegenerating potential. PESRAC’s Interim Report was rather vague on the role of community organisations in the recovery phase from Covid-19, confining itself to recommending a “quick review” of “how additional funding for mental health, family violence and emergency food relief has been used and outcomes delivered”, and that “monitoring and rapid contingency planning” should be undertaken to ascertain “if further additional funding is needed” in these areas (PESRAC 2020: 63). Given the probable lasting impact of the Covid-19 on the growth rate of wages and other incomes, and hence on revenues from donations and other philanthropic activity, it seems likely that community organisations will need a greater commitment from governments to longer-term funding – if not necessarily to higher levels of funding – in order to meet on-going demands for their services in the post-Covid world.

T C C I TA S M A N I A R E P O R T 2 0 2 0

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Chapter 5 THE TASMANIAN ECONOMY IN THE POST-COVID WORLD

Chapter 5: THE TASMANIAN ECONOMY IN THE POST-COVID WORLD Chapter 2 showed that Tasmania’s economy had been performing strongly in the two-three years immediately prior to the onset of the pandemic in March, by comparison both with its own earlier experience and with the performance of other states’ and territories’ economies during the same period. However, as set out in Chapter 3, this relatively strong pre-pandemic performance was not sufficient to prevent Tasmania’s economy from experiencing a more severe downturn, in most respects, than the rest of Australia (the obvious exception of Victoria, with its ‘second wave’, aside) – despite the fact that, as shown in Chapter 4, the Tasmanian Government provided more extensive support to households and businesses than the government of any other state or territory, relative to the size of Tasmania’s economy. It should therefore come as no surprise that this Chapter questions the assumption that Tasmania will emerge from the Covid-19 recession more rapidly than the rest of Australia, taken as a whole. While it would undoubtedly be nice to think that this would be the case – and optimism is always easier to ‘sell’ and to defend than pessimism – history counsels caution when embracing such claims. Tasmania has experienced three recessions over the past four decades – in the early 1980s, in the early 1990s, and from just after the onset of the global financial crisis in 2008 through until after the collapse of the forestry industry a few years later. The first two of these recessions coincided with nation-wide, indeed global, recessions: the third Tasmania experienced largely on its own, even though some of its causes were global in origin. As this author has written previously (Eslake 2008: 2-3), the widely-used ‘definition’ of a recession as two or more consecutive quarters of ‘negative growth’ in real GDP is misleading and inaccurate. By way of illustration, had the bushfires in Victoria, New South Wales and South Australia in late December 2019 and early January this year not occurred, Australia’s real GDP would probably not have contracted (as it did by 0.3%) in the March quarter 2020. We would then have had a single quarter of negative growth in the June quarter, followed by a return to positive growth in the September quarter. So, even though the 7.0% decline in real GDP was the largest ever recorded, sufficient to cause real GDP for 2020 as a whole to shrink by more than in any calendar year since the 1930s, even if growth in the December quarter turns out to be similar to the 3.3% recorded in the September quarter, by this definition Australia would not have had a ‘recession’. As a teenager might say, “yeah, right”. In any event, measures of real gross product are not available for states and territories on a quarterly basis. A better way of identifying and delineating recessions – and one which makes far more sense to people who are not economists or statisticians – can be gained by examining indicators for the labour market, in particular employment and unemployment. Chart 5.1 does this for Tasmania and for mainland Australia, for the three recessionary periods in the last 40 years described above. In each case, employment is indexed to its peak prior to the onset of recession, while the unemployment rate is expressed in its usual form as a percentage of the civilian labour force.

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 5: THE TASMANIAN ECONOMY IN THE POST-COVID WORLD Tasmania went into the recession of the early 1980s in unambiguously worse shape than the mainland: this recession took a heavy toll on the manufacturing industry, on which Tasmania was then significantly more reliant than Australia as a whole. Tasmania’s economy was also adversely affected by the lengthy dispute over the proposed construction of the Gordon-below-Franklin dam. In contrast, Tasmania went into the recession of the early 1990s, and the recession which followed the onset of the global financial crisis in 2008, with employment growing more rapidly than it was on the mainland. Although Tasmania’s unemployment rate was higher than that of the mainland ahead of the early 1990s recession, the gap between Tasmania’s unemployment rate and the mainland’s had been narrowing over the 18 months prior to the onset of that recession. Tasmania’s unemployment rate was actually lower than the mainland’s on the eve of the global financial crisis, and for more than 12 months afterwards. However, during all three recessions, the unemployment rate rose by more, to a higher level, and took longer to come down to its pre-recession level in Tasmania than it did on the mainland; and employment fell by more, and took longer to regain its pre-recession peak level, in Tasmania than it did on the mainland. In particular, it took seven years and eight months longer for the level of employment in Tasmania to regain its previous peak after the global financial crisis than was the case on the mainland. In other words, the history of the last three recessions suggests that whether Tasmania’s economy was doing better or worse than the rest of Australia’s beforehand has no bearing on how well Tasmania’s economy has fared during or after the recession. And there is absolutely no compelling reason to think that things will be any different this time around. The fundamental problem is that Tasmania’s economy is much more narrowly-based than the mainland’s. Five sectors – agriculture, forestry and fishing; retail trade; accommodation and food services; public administration and defence; and health care and social assistance – accounted for 38% of Tasmania’s gross product and 48% of Tasmania’s employment in 2019-20, as against 22% of gross product and 36% of employment for Australia as a whole.

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 5: THE TASMANIAN ECONOMY IN THE POST-COVID WORLD 3

Chart 5.1: Employment and unemployment during recessions, Tasmania and mainland Australia 110 108

Pre-recession peak in employment = 100

106

Mainland

102

100 98

9 months

106

Pre-recession peak in employment = 100

Mainland

19 months

100 96

Tasmania

100 95 90

% of labour force

Tasmania

10 9 Mainland

7 6 5

Pre-recession peak in employment = 100

Mainland

110 105

115

102

120

104

Mainland

7 5

Tasmania

108

Tasmania

104

% of labour force

4 9 8

89 90 91 92 93 94 95 96 % of labour force

Tasmania

7 7 years & 8 months

Tasmania 08 09 10 11 12 13 14 15 16 17

6 5

Mainland

4 3

08 09 10 11 12 13 14 15 16 17

Note: Employment (in right hand charts) and unemployment (left hand charts) are both expressed in trend terms. Shaded intervals denote quarters of negative growth in Australian real GDP. Pink arrows denote the interval between when mainland employment returns to its pre-recession peak, and when Tasmanian employment returns to its pre-recession peak. Source: ABS (2020e and i).

T C C I TA S M A N I A R E P O R T 2 0 2 0

While the relative importance of these five sectors has changed over time, both in Tasmania and nationally, Tasmania’s disproportionate dependence on them, as a whole, hasn’t Chapter 5:(Charts 5.2a and b). Indeed, Tasmania’s dependence on these five sectors as generators of ‘value added’ creators of jobs has increased over the THE TASMANIAN ECONOMY INand THE POST-COVID WORLD past three decades – whereas at the national level these five sectors are no larger (in aggregate) as a share of economic activity or employment than they were thirty years ago.

While the relative importance of these five sectors has changed over time, both in Tasmania and nationally, Tasmania’s

The less diversified structure that of most of disproportionate dependence on them,of asTasmania’s a whole, hasn’teconomy (Charts 5.2acompared and b). Indeed,with Tasmania’s dependence

larger mainland states’, andadded’ Australia’s as a of whole, largely over a function of decades onthe these five sectors as generators of ‘value and creators jobs hasisincreased the past three small its ‘factor endowments’. – Tasmania’s whereas at the relatively national level thesepopulation five sectors areand no larger (in aggregate) as a share of economic activity or employment than they were thirty years ago.

Tasmania’s population is simply too small – and in particular Tasmania does not have The less diversified structure of Tasmania’s economy a compared with that of larger mainland states’, and a large metropolitan area – to support large number ofmost jobsofinthesectors such as financial services; professional, scientific and technical services; oritsadministration Australia’s as a whole, is largely a function of Tasmania’s relatively small population and ‘factor endowments’. and support services sectors – which in 2019-20 accounted for 17.6% of all Tasmania’s population is simply too small – and in particular Tasmania does not have a large metropolitan area – to employment nationally but only 10.4% in Tasmania. support a large number of jobs in sectors such as financial services; professional, scientific and technical services; or

administration and support servicesthe sectors – which in 2019-20 accounted for 17.6% resources of all employment nationally but Tasmania does not have endowment of mineral or energy for the only 10.4% sector in Tasmania. mining to provide

over 11% of gross product which it does for Australia as a whole, compared with just under 4% in Tasmania. Tasmania does have significant Tasmania does not have the endowment of mineral or energy resources for the mining sector to provide over 11% of renewable energy resources but they are inherently capital-intensive.

gross product which it does for Australia as a whole, compared with just under 4% in Tasmania. Tasmania does have significant renewable but theycomparative are inherently capital-intensive. Tasmania does energy haveresources a significant advantage

in agriculture – as evidenced by the fact that labour productivity (output per hour worked) in Tasmania does have a significant comparative advantage in agriculture – as evidenced by the fact that labour Tasmanian agriculture is almost double the national average (it is one of only five productivity (output per hour worked) in Tasmanian agriculture is almost double the national average (it is one of only sectors in which Tasmanian labour productivity is above the national average, and five sectors in which Tasmanian labour productivity is above the national average, and by a much bigger margin than by a much bigger margin than any of the other four) – and that median Tasmanian any of the other four) – and that median Tasmanian agricultural land values are more than double the national average agricultural land values are more than double the national average (Rural Bank (Rural Bank 2020). 2020). Chart 5.2a: ‘Five sectors’ as a share of GDP/GSP, Tasmania and Australia 40 % of GDP/GSP Tasmania

Chart 5.2b: ‘Five sectors’ as a share of total employment, Tasmania and Australia

38 34

% of total employment

Tasmania

44 42 40

32 30 28 26 Australia

24 22 20

50 48

Financial years ended 30th June

20 5

38 36 34 32 30

Australia

Financial years ended 30th June

Note: The ‘five sectors’ are agriculture, forestry and fishing; retail trade; accommodation and food services; public administration and safety; and health care and social assistance. Sources: ABS (2020f and e).

Tasmania’s agricultural sector is particularly vulnerable to the recent and on-going deterioration in Australia’s political and trading relationship with China, as discussed| T C C I TA S M A N I A R E P O R T 2 0 2 0 in more detail in Chapter 6. Similarly, Tasmania’s tourism industry – which, spread across a number of sectors

Chapter 5: THE TASMANIAN ECONOMY IN THE POST-COVID WORLD Tasmania’s agricultural sector is particularly vulnerable to the recent and on-going deterioration in Australia’s political and trading relationship with China, as discussed in more detail in Chapter 6. Similarly, Tasmania’s tourism industry – which, spread across a number of sectors which are either part of it or contribute to it – accounts directly or indirectly for 11% of Tasmania’s GSP and 17½% of Tasmania’s employment, compared with 6½% and 8%, respectively, for Australia as a whole – will be adversely affected by the extended closure of Australia’s borders to international visitors, and by the likely reluctance even after the re-opening of international borders of as many people to travel long distances. It will be facing heightened competition from every other state and territory for domestic tourists. Retailing – which accounts for almost 10% of all jobs in Tasmania compared with 7% nationally – is facing profound challenges from the impact of Covid-19, which has accelerated the trend towards online shopping, with potentially adverse consequences for smaller retailers and for employment in the retail sector. Especially in Tasmania, retailing is exposed to tourism. While the health and social assistance sector is likely to continue to grow – especially in Tasmania, given our older and more rapidly-ageing population – its growth will almost certainly be subject to funding constraints when governments (and in particular the Federal Government) eventually decide that they need to take active steps to reduce their budget deficits and curtail the rise in public debt. From a different perspective, Tasmania’s persistently under-performing school education system also imposes a drag on Tasmania’s capacity to thrive in the post-Covid economy. The proportion of Tasmanians aged 15-74 who have a bachelor’s degree or higher is still more than 6 percentage points below the national average (although it is now marginally higher than the proportion of South Australians) (Chart 5.3a); while the proportion of Tasmanians who have no qualifications beyond Year 10 of high school is still by far the highest of any state or territory, and almost 9 percentage points above the national average (Chart 5.3b). Almost all of the growth in employment nationally over the past decade has been in occupations calling for skills commensurate with a bachelor’s degree or higher, or an advanced diploma/diploma (Denny 2020: 6). Tasmanians are thus, in general, less well-placed than other Australians to succeed in post-Covid labour markets that place an even greater premium on the possession of relevant skills. As previous Tasmania Reports have argued at length, one of the reasons for Tasmania’s persistently low levels of educational attainment is our substantially below-average retention rates of students from Year 10 to Year 12, which is in turn a product of the separation which Tasmania’s public school system – uniquely in Australia apart from the Australian Capital Territory– has between Years 7 through 10 and the senior secondary years. This separation has long acted as a barrier, especially for students from disadvantaged backgrounds or from families where parents have had limited educational experiences, to the pursuit of a complete secondary education which is typically taken for granted in the rest of Australia.

T C C I TA S M A N I A R E P O R T 2 0 2 0

This separation has long acted as a barrier, especially for students from disadvantaged Chapter 5: backgrounds or from families where parents have had limited educational experiences, to the pursuit of a complete secondary education which THE TASMANIAN ECONOMY IN THE POST-COVID WORLD is typically taken for granted in the rest of Australia.

Chart 5.3a: Proportion of 15-74 year-olds with bachelor’s degree or higher

Chart 5.3b: Proportion of 15-74 year-olds with no qualifications beyond Year 10

% of 15-74 year olds (May 2020)

National average

35 30

National average

20 15

5 0

% of 15-74 year olds (May 2020)

NSW Vic Qld SA WA Tas

NT ACT

NSW Vic Qld SA WA Tas

NT ACT

Source: ABS (2020o).

If the purported offsetting advantages which Tasmania’s college system are as profound as its advocates continually assert, one cannot but wonder why no other assert, one cannot but wonder why no other state has seen fit to emulate it. state has seen fit to emulate it.

If the purported offsetting advantages which Tasmania’s college system are as profound as its advocates continually

The present Government’s policy of providing Year 11 and 12 classes at public high schools has been a very important

The present Government’s policy of providing Year 11 and 12 classes at public high schools has been a very important step in the right direction. Tasmania’s retention decade, to be 7.7 percentage points 12 below the national average in 2019, compared a margin of 13.1 percentage rate from Year 10 to Year has risen from 64.1% to 74.3% overwith the past decade, to points in 2014 (ABS 2020p). be 7.7 percentage points below the national average in 2019, compared with a marginalthough of 13.1Tasmania’s percentage in 2014 (ABS 2020p). However, Year 12 points attainment rate (the proportion of the potential Year 12 population who meet

step in the right direction. Tasmania’s retention rate from Year 10 to Year 12 has risen from 64.1% to 74.3% over the past

the requirements of a Year 12 certificate) improved significantly – by 18 percentage points between However, although Tasmania’s Year 12 attainment rate (the proportion of 2010 the and 2016,

since then theyYear appear have stalled atwho around 60%,the almost 20 percentage of points below12 thecertificate) national average (which potential 12topopulation meet requirements a Year has continued to rise over the past three (Productivity Commission 2020). improved significantly – by 18 years) percentage points between 2010

and 2016, since then they appear to have stalled at around 60%, almost 20 percentage points below the There are also significant failings in other parts of Tasmania’s school education system. national average (which has continued to rise over the past three years) In(Productivity 2019, one in five Tasmanian grade2020). 7 students started the year at or below the National Minimum Standard for reading Commission – statistically significantly lower than for any other state except for South Australia and Western Australia, where

There are also significant failings in other parts of Tasmania’s school education system.

the results are similar. The proportion of Tasmanian grade 7 students who were at or above the National Minimum Standard for reading has declined over the past decade (Tasmanian 100% Literacy Alliance 2020: 2).

In 2019, one in five Tasmanian grade 7 students started the year at or below the National Minimum Standard for reading – statistically significantly lower than for any average in all but seven of 23 indicators for all four stages of learning and development, and rank seventh or eighth other state except for South Australia and Western Australia, where the results are (out of eight) in 12 of those: while of five ‘lifelong learning indicators’, Tasmania ranks last or second-last in all but one similar. The proportion of Tasmanian grade 7 students who were at or above the In similar vein, a recent report from the Mitchell Institute finds that Tasmanians fare worse than the national

(Lamb et al 2020).

T C C I TA S M A N I A R E P O R T 2 0 2 0

National Minimum Standard for reading has declined over the past decade (Tasmanian 100% Literacy Alliance 2020: 2). In similar vein, a recent report from the Mitchell Institute finds that Tasmanians fare worse than the national average in all but seven of 23 indicators for all four stages of learning and development, and rank seventh or eighth (out of eight) in 12 of those: while of five ‘lifelong learning indicators’, Tasmania ranks last or second-last in all but one (Lamb et al 2020). 5: Chapter

THE ECONOMY IN THE POST-COVID WORLD ThereTASMANIAN is also an evident need to enhance the digital skills of both young and older

Tasmanians, as a means to access education, a key workplace or professional skill, a means to access services, and a pathway to social connections.

There is also an evident need to enhance the digital skills of both young and older Tasmanians, as a means to access education, a key workplace or professional skill, a means to access services, and a pathway to social connections.

There is also an evident need to enhance the digital skills of both young and older Tasmanians, as aneed means to access education, key workplace or professional a There is also an evident to enhance the digital skills of bothayoung and older Tasmanians, as a meansskill, to access meansato services, and skill, a pathway social connections. According to the education, keyaccess workplace or professional a means toto access services, and a pathway to social connections. Australian Digital Divide Index compiled for Telstra, Tasmania is the “least digitally According to the Australian Digital Divide Index compiled for Telstra, Tasmania is the “least digitally included” of all of included” ofand allterritories, of Australia’s states and territories, apart from the Northern Territory Australia’s states apart from the Northern Territory (Chart 5.4a), notwithstanding the rapid take-up of (Chart 5.4a), notwithstanding the rapid take-up of digital services after the completion digital services after the completion of the rollout of the NBN in Tasmania in 2017-18 (Chart 5.4b). of the rollout of the NBN in Tasmania in 2017-18 (Chart 5.4b). Chart 5.4a: Digital Inclusion index, states and territories, 2020 68

Index

66 National average

Chart 5.4b: Digital Inclusion index, Tasmania and Australia, 2014-2020 64 Index Australia 62 60 58

54 52

56 54

Tasmania

48 NSW Vic Qld SA WA Tas NT ACT

Source: Thomas, Barraket, Wilson et al (2020). Tasmanians’ access to the internet is not significantly below that of people living in other states and territories – with the conspicuous exception of the North West and West Coast regions where internet access is lower than in any Australian region except for the Eyre Peninsula of South Australia. Rather, Tasmania’s relatively low ranking reflects its low scores on the affordability and ability components of the index. In particular, Tasmania has the lowest score of any state or territory on the ‘attitudes’ dimension of the ‘digital ability’ index (which measures notions of control, enthusiasm, learning and confidence), and the second lowest score (after the Northern Territory) on the ‘basic skills’ dimension (which measures the capacity to use mobile phones, online banking and shopping, and to access community services or information).

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 5: THE TASMANIAN ECONOMY IN THE POST-COVID WORLD In some ways Tasmania’s low ranking on this index is unsurprising, given that Tasmania has an above-average proportion of people aged 65 or over, an above-average proportion of people who have not completed secondary school, an above-average proportion of households in the lowest income quintile – all of which are markers, nationally, for low rates of digital inclusion. It is also notable – and disturbing – that the gap in ‘digital inclusiveness’ between high- and low-income Tasmanian households is wider than in any other state or territory except New South Wales, and has widened over the past six years, as it has done in every other state and territory except New South Wales and Queensland (and by a lot more than in either of those states). There are, to be sure, aspects of the post-Covid world in which Tasmania does have advantages. Tasmania’s success in managing the virus, and its island status, should make it a more attractive destination for Australians considering re-locating to other parts of the country – and, when Australia’s international borders re-open, for people from other parts of the world. In particular, Tasmania may be able to capitalise on the damage Victoria has done to itself as a ‘preferred destination’ for interstate and overseas migrants, through its mis-handling of the ‘first wave’ of Covid-19, which was a major factor in it experiencing, uniquely in Australia, such a devastating ‘second wave’. Tasmania appears well-placed to entice Victorians to consider moving to the other side of Bass Strait, and to attract migrants from other states and territories who might previously have contemplated moving to Victoria. Tasmania may be more attractive to people currently living in large capital cities and who are engaged in jobs or occupations which are now, as a result of the Covid-19 experience, more readily accepted – by both employers and employees – as suitable for ‘working from home’, either in total or at least for a significant part of the working week. Tasmania is probably at some disadvantage relative to mainland regional centres which are, say, one to three hours’ travelling time from a capital city CBD, for employees who may need to spend a day (or part thereof) a week at ‘head office’, given that undertaking that journey by road or rail isn’t an option from a Tasmanian location – but where the requirements to be physically present at an employer’s premises are less demanding, Tasmania is well-placed. Tasmania may also become increasingly attractive as a destination for people seeking to escape the effects of climate change on warmer locations (Duckett, Mackey and Stobart 2020: 20-28) – even though climate change is also affecting temperatures, and (even more importantly) rainfall patterns in Tasmania as well. However, Tasmania is likely to be less successful in attracting migrants from other parts of Australia and other parts of the world for as long as its education and health systems are perceived to be inferior to those in other parts of Australia, or the world. Families with children will be less likely, all else being equal, to choose Tasmania as a place to live if they have reason to be concerned – as they do – that their children will be less likely to obtain an education of the same quality as they could in other parts of Australia. Those families, and arguably even more so people contemplating moving to Tasmania as a retirement destination, will be less likely to do so if they fear – as well they might – that they will be less able to access appropriate hospital or other health care, within an acceptable time-frame, than in other places which they may also be considering.

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 5: THE TASMANIAN ECONOMY IN THE POST-COVID WORLD Tasmania’s hospital system is inefficient: it employs about 20% more staff per patient days than the national average, in part because it has a significantly higher proportion of very small hospitals (with 10 beds or fewer) than any other state or territory. This above-average level of staffing per patient has not resulted in better treatment for Tasmanians: on the contrary, the Launceston General Hospital and the Royal Hobart Hospital have the longest, and third-longest, respectively, emergency department waiting times of any of the 294 public hospitals in Australia, while Tasmanian public hospitals have the highest rate of ‘adverse events’ in Australia (Goddard 2020: 3-6). The principal reason for these failings appears to be a shortage of beds: it has been estimated that Tasmania has at least 200, and perhaps as many as 300, fewer public hospital beds than required to provide services equivalent to those available in the rest of Australia (Jones 2019: 1-14; Goddard 2020: 2). These considerations simply underscore the importance which ought to attach – but which to date hasn’t – to improving Tasmania’s school education and health systems in the interests of those who already live here.

T C C I TA S M A N I A R E P O R T 2 0 2 0

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Chapter 6 UNRESOLVED QUESTIONS

Chapter 6: UNRESOLVED QUESTIONS The principal propositions of this Report so far have been that, although Tasmania’s economy was performing well heading into the onset of the Covid-19 recession, and has done exceptionally well in containing the spread of the virus, its experience during the Covid-19 recession has been more severe, in most respects, than the rest of Australia (Victoria aside); Tasmania’s experience in recessions over the past four decades gives no support to the proposition that it can emerge from the current recession more quickly or more strongly than the rest of Australia; and that although there are some aspects of the post-Covid ‘new normal’ that could work to Tasmania’s advantage, the Covid experience has attenuated some of Tasmania’s long-standing disadvantages, and will also confront Tasmania with some additional headwinds. This Chapter poses some questions to which there are no immediate or incontrovertible answers, but which would appear to be important to any attempt to craft a sustainable recovery from the current recession – and which are therefore worthy of broader discussion in the run-down to the next State election due by March 2022. It’s perhaps important to emphasise that the questions raised in this Chapter don’t purport to be the only ones worth asking – even in the economic sphere, let alone others. Rather, they are questions which seem to emerge from some of the analysis of the preceding Chapters.

Has Tasmania become ‘too dependent’ on tourism? As noted in Chapter 2, tourism has been one of the principal contributors to the improvement in Tasmania’s economic performance over the five years prior to the onset of the pandemic – although there had also been signs that the ‘tourism boom’ may have peaked towards the end of that period. According to the State Tourism Satellite Account compiled by Tourism Research Australia (2020), tourism accounted (directly and indirectly) for 21% of the growth in Tasmania’s gross state product over the five years to 2018-19, and for (an extraordinary) 71% of the increase in total employment over this period – compared with 8½% of the increase in Australia’s GDP and 16¼% of the increase in total Australian employment over the same period. As a result, by 2018-19, tourism accounted (directly and indirectly) for 11.1% of Tasmania’s gross state product and 17.4% of Tasmanian employment – in each case a larger proportion than for any other state or territory, and well above the corresponding national averages of 6.4% and 8.1%, respectively (Charts 6.1a and b). In this context it might almost seem churlish to ask, “have we had too much of a good thing?” However, there are two reasons why such a question is worth asking.

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 6: UNRESOLVED QUESTIONS

Chart 6.1a: Tourism shares of GSP and Chart 6.1b: Tourism shares of Tasmanian employment, states and territories, 2018-19 gross state product and employment 18 % of total (2018-19) 18 % of total Employment 17 16 16 14 15 12 14 10 13 8 12 Gross state product 6 11 4 10 2 9 0 8 NSW Vic Qld SA WA Tas NT ACT Aus 07 08 09 10 11 12 13 14 15 16 17 18 19 Gross state product Employment Financial years ended 30 June Source: Tourism Research Australia (2020). The first is that, as is evident from Chart 6.1b, Chart tourism 6.1b, accounts for a much larger share in Tasmania The first is that, as is evident from tourism accounts forofaemployment much larger than it does gross state product (or ‘value added’). share of of employment in Tasmania than

added’).

it does of gross state product (or ‘value

That means that it is a low productivity industry. As a very crude measure, the Tourism Satellite Accounts imply that gross value addedthat per person in the Tasmanian tourism was $83,338 in 2018-19the – 36% below the That means it is aemployed low productivity industry. Asindustry a very crude measure, Tourism corresponding figure for allimply Tasmanian Moreover, value per added per person employed in tourism Satellite Accounts thatindustries. gross value added person employed inTasmanian the is Tasmanian significantly lower than inindustry any other was state $83,338 or territory’s industry, andbelow 31% below national average for tourism intourism 2018-19 – 36% thethe corresponding tourism-related And labour productivity (thus measured) Tasmanian hasemployed grown at a much figure for allindustries. Tasmanian industries. Moreover, value inadded pertourism person in

slower rate – averaging 0.8% per annum – over the past decade thanother in any state other state or territory, and well below the Tasmanian tourism is significantly lower than in any or territory’s tourism national tourism industry average of 1.3% per annum. industry, and 31% below the national average

for tourism-related industries. And labour productivity (thus measured) in Tasmanian tourism has grown at a much These differences almost certainly reflect the facts that, not only is a larger proportion of jobs in tourism-related slower rate – averaging 0.8% per annum – over the past decade than in any other activities part-time (52% in Tasmania compared with 38% of all Tasmanian jobs in 2018-19, and with 48% of tourismstate or territory, and well below the national tourism industry average of 1.3% per related jobs nationally), but also that Tasmanian tourism is subject to greater seasonal fluctuations than in most annum. other parts of Australia (with the possible exceptions of Far North Queensland and the Northern Territory, and Snowy Mountains ski resorts). These differences

almost certainly reflect the facts that, not only is a larger proportion of jobs in tourism-related activities part-time (52% in Tasmania compared Moreover, because tourism accounts for a much larger share of economic activity and employment in Tasmania than with 38% of all Tasmanian jobs in 2018-19, and with 48% of tourism-related jobs in any other state or territory, it detracts considerably more from overall labour productivity in Tasmania than it does nationally), but also that Tasmanian tourism is subject to greater seasonal in the rest of Australia – and that’s before taking account of the fact that labour productivity in Tasmanian tourism is fluctuations than in most other parts of Australia (with the possible exceptions of Far significantly lower than in tourism on the mainland. North Queensland and the Northern Territory, and Snowy Mountains ski resorts). Moreover, because tourism accounts for a much larger share of economic activity and employment in Tasmania than in any other state or territory, it detracts considerably more from overall labour productivity in Tasmania than it does in the rest of Australia – and that’s before taking account of the fact that labour productivity in Tasmanian tourism is significantly lower than in tourism on the mainland. T C C I TA S M A N I A R E P O R T 2 0 2 0 |

Chapter 6: UNRESOLVED QUESTIONS The second reason for asking whether Tasmania may have become “too reliant” on tourism arises of course from the lasting impact which Covid-19 is likely to have on travel, particularly long-distance international travel (ABS 2020q; Bourko, Geerts and Wang 2020). This couldn’t have been anticipated before the onset of Covid-19: but nor can it now be ignored. Tasmanian tourism is less reliant on international visitors than other states and territories (with the exception of South Australia, which is about the same): around 20% of directly-generated tourism gross value added in Tasmania is attributable to international visitors, compared with the national average of 30% (and 34½% in both New South Wales and Victoria). Nonetheless, the absence of any international visitors until Australia’s borders are re-opened will have a noticeable impact on Tasmania’s tourism industry, and hence on the Tasmanian economy more broadly, particularly given that international visitors to Tasmania on average spend 11% more than interstate visitors. There is likely to be some lingering impact of Covid-19, and the perceived risks of being either trapped interstate or having to self-isolate on return to their home state, on Australians’ willingness even to travel interstate. None of the above is intended to suggest that the Tasmanian Government should be downgrading the role of tourism in its economic development strategies, or reducing its support for tourism marketing activities. Indeed, precisely because most mainland states and territories are more dependent on international visitors, they will likely be competing more vigorously for domestic tourists than ever before: and Tasmania will need to match those efforts. But, clearly, it is unrealistic to expect that tourism can deliver the ‘growth dividend’ for the Tasmanian economy that it had done during the years immediately prior to the onset of Covid-19, or that it had been expected to before Covid-19 struck.

Has Tasmania become ‘too dependent’ on China? While the popular impression may be that Australia’s burgeoning trade with China over the past three decades has been dominated by minerals and energy exports – in which Tasmania has had little role to play – China has become no less important an export market for Tasmania than for other parts of Australia. Indeed, in the 2019-20 financial year, 40% of Tasmania’s international merchandise exports went to China – a higher proportion than for any other state or territory except Western Australia (Chart 6.2a). China’s share of Tasmania’s overseas merchandise exports has quintupled since the global financial crisis (Chart 6.2b). As with tourism, the success which Tasmanian businesses have attained in penetrating China’s markets has been of significant benefit to Tasmania’s economy – so it may at first blush seem churlish to question whether there might be some downside to it.

T C C I TA S M A N I A R E P O R T 2 0 2 0

Chapter 6: UNRESOLVED QUESTIONS

Chart 6.2a: Merchandise exports to China as a pc of total, states & territories, 2019-20

Chart 6.2b: Merchandise exports to China as a pc of total, Tasmania and Australia

50 40

% of total, 2019-20

National average

Australia

35 30 25

20 Tasmania

10 5

10 0

% of total

0 NSW Vic Qld

Tas

Financial years ended 30June

Source: ABS (2020k).

But with the bilateral relationship between Australia Chinasohaving deteriorated But with the bilateral relationship between Australia and China having and deteriorated dramatically over the past three so dramatically over the pastpart three years – and especially during the latter part of market years – and especially during the latter of 2020 – Tasmania’s growing dependence on China as an export 2020 – aTasmania’s growing dependence on China has, all of sudden, turned into a potential point of vulnerability.

as an export market has, all of a sudden, turned into a potential point of vulnerability.

For the time being, China has no significant alternative source for the iron ore which it currently imports from Australia

For the time being,about China no significant alternative source for –the iron country ore which (which in turn represents 56%has of Australia’s total merchandise exports to China) no other has the

it currently imports Australia in turn represents about Australia’s capacity to replace even a from small part of it; and(which unlike many of the other products which56% Chinaof has recently targeted, it totalreally merchandise to of China) – no other cannot go without in exports the absence alternative sources of country supply.

has the capacity to replace even a small part of it; and unlike many of the other products which China has Iron ore and concentrates represented 28½% of Tasmania’s merchandise exports to China in 2019-20 (and China in recently targeted, it cannot really go without in the absence of alternative sources turn accounted for 95% of Tasmania’s total exports of iron ore and concentrates): they are presumably ‘safe’ from of supply. Chinese trade sanctions directed against Australia, at least for the time being.

Iron ore and concentrates represented 28½% of Tasmania’s merchandise exports to China in 2019-20 (and China in turn accounted for 95% of Tasmania’s total exports of against Australia. Of Tasmania’s 24 other most important exports (which accounted for 83% of Tasmania’s total iron ore and concentrates): they are presumably ‘safe’ from Chinese trade merchandise exports in 2019-20), China was the destination for 34%. sanctions directed against Australia, at least for the time being.

But almost everything else which Australia, and Tasmania, exports to China is at risk from China’s current ‘trade war’

The Tasmanian exports most dependent on China are shown in Chart 6.3: the most vulnerable to Chinese trade

But almost everything else which Australia, and Tasmania, exports to China is at risk from China’s current ‘trade war’ against Australia. Of Tasmania’s 24 other most products and preparations, wood products, wool, and paper and paperboard. Some 82% of Tasmania’s ‘confidential’ important exports (which accounted for 83% of Tasmania’s total merchandise merchandise exports also went to China in 2019-20 (and these represented 8% of Tasmania’s total merchandise exports in 2019-20), China was the destination for 34%. sanctions would appear to be precious metal and other non-ferrous ores and concentrates, seafood, other edible

exports) but it is obviously not possible to identify what these products are.

The Tasmanian exports most dependent on China are shown in Chart 6.4: the most vulnerable to Chinese trade sanctions would appear to be precious metal and other non-ferrous ores and concentrates, seafood, other edible products and preparations, wood products, wool, and paper and paperboard. Some 82% of Tasmania’s ‘confidential’ merchandise exports also went to China in 2019-20 (and these represented 8% of Tasmania’s total merchandise exports) but it is obviously not T C C I TA S M A N I A R E P O R T 2 0 2 0 | 73 possible to identify what these products are.

Chapter 6: UNRESOLVED QUESTIONS

Chart 6.3: Major Tasmanian exports to China, 2019-20 Exports to China as a pc of total

120

Crustaceans Precious metal ores (excl. gold

100

Edible products & preparations

Wood

Confidential items

Wool Fish

Other ores & concentrates

Paper &

20 0

Iron ore & concentrates

Zinc

Fruit & nuts

10 15 Pc of total Tasmanian exports

Note: The size of the bubbles indicates the value of exports in 2019-20. Sources: Department of

Foreign Affairs and Trade (2020).

Tasmania’s service to China may also be adversely affected by the relationship with Tasmania’s service exports exports to China may also be adversely affected by the deterioration in the bilateral deterioration inbythe relationship with China, if not reversed China, if not reversed thebilateral time Australia’s international borders are re-opened. Australia’s international borders are re-opened.

by the time

China accounted for 15% of international visitors to Tasmania in 2019 (the same proportion as for Australia as a whole),

China accounted for States 15% of international Tasmania in 2019 (the same about the same as the United (which accounts forvisitors a much to larger share of international visitors to Tasmania

proportion Australia a accounted whole), about the same as thestudent United States (which than for Australiaas asfor a whole). Chinaas also for 34½% of all international enrolments in Tasmania in

accounts for athan much larger international visitors toand Tasmania than for Territory, and 2019 (a larger share for any other share state orof territory except South Australia the Australian Capital Australia as a whole). also accounted for 34½% ofofall international student about seven percentage points China above the national average), including 46% international students at the University in Tasmania in 2019 (a and larger share than any other stateand or students territorycould be ofenrolments Tasmania (Department of Education, Skills Employment 2019).for Both Chinese tourists

except South Australia and the Australian Capital Territory, and about seven percentage points above the national average), including 46% of international they allegedly face in this country, or by outright prohibitions on travel to Australia. students at the University of Tasmania (Department of Education, Skills and Clearly, there is a need for Tasmanian businesses, and educational institutions, to reduce their vulnerability Employment 2019). Both Chinese tourists and students could be dissuaded, or to arbitrary and capricious actions the part of Chinese Government by diversifying marketsGovernment – something which is, prevented, fromon coming tothe Australia, and to Tasmania, bytheir Chinese needless to say, of easier than done,they and would in manyface cases be to accomplish, ‘warnings’ thesaid ‘dangers’ allegedly in difficult this country, or byespecially outrightin a short space ofprohibitions time, without assistance from the Federal and Tasmanian Governments. on travel to both Australia.

dissuaded, or prevented, from coming to Australia, and to Tasmania, by Chinese Government ‘warnings’ of the ‘dangers’

But there ought to be Tasmanian exporters in ASEAN countries, in India (to some extent),to in the UK Clearly, there isopportunities a need forforTasmanian businesses, and educational institutions,

(especially post-Brexit, the UK is to serious about reaching a free-trade actions agreementon with Australia), perhaps with reduceif,their vulnerability arbitrary and capricious the part ofand the the EuropeanGovernment Union, which need be more determinedly pursued, with the assistance of government agencies. Chinese bytodiversifying their markets – something which is, needless to

say, easier said than done, and would in many cases be difficult to accomplish, especially in a short space of time, without assistance from both the Federal and Tasmanian Governments.

But there ought to be opportunities for Tasmanian exporters in ASEAN countries, in India (to some extent), in the UK (especially if, post-Brexit, the UK is serious about 74 | TaCfree-trade C I TA S M Aagreement N I A R E P Owith R T 2Australia), 020 reaching and perhaps with the European Union, which need to be more determinedly pursued, with the assistance of government agencies.

What are the risks associated with our dependence on revenue from the GST?

Chapter 6: The Tasmanian Government derives a larger proportion of its revenues from its share UNRESOLVED QUESTIONS

of the GST than any other state or territory, except the Northern Territory (Chart 6.5). That reflects the Commonwealth Grants Commission’s recurring conclusion that its ‘fiscal capacity’ – its ability to raise revenue from its own resources, its need to What arepublic the risks associated with dependence on of revenue from the GST? provide goods and services to itsour citizens, and the cost providing those services – isGovernment significantly lessa than that of other state and The Tasmanian derives larger proportion of its revenues from territory its share ofgovernments, the GST than any again other state theexcept exception of the Northern Territory. orwith territory, the Northern Territory (Chart 6.4). That reflects the Commonwealth Grants Commission’s recurring conclusion that its ‘fiscal – its ability to raise revenuefactors from its own resources, its need to older-thanprovide public goods That conclusion incapacity’ turn reflects long-standing such as Tasmania’s and services to its citizens, andabove-average the cost of providing incidence those servicesof – isdisability significantly less disease, than that ofbelowother state and average population, and territory governments, the exception of the Northernresidential Territory. average wagesagain andwith salaries, below-average

land values, comparative dearth of mineral resources, smallfactors scalesuch andasmore decentralized population. That conclusion in turn reflects long-standing Tasmania’s older-than-average population, above-

average of disability below-average wages below-average residential Manyincidence of these factors and aredisease, beyond the control of and thesalaries, Tasmanian Government – land values, comparative of mineral resources, small and more decentralized population. although,dearth as successive editions of scale the Tasmania Report have argued,

some of them could be ameliorated over the longer term if the Government were willing toeditions of the Many of these factors are beyond the control of the Tasmanian Government – although, as successive undertake appropriate reforms, for example to Tasmania’s education system. were willing Tasmania Report have argued, some of them could be ameliorated over the longer term if the Government toMany undertake appropriate reforms, for example to Tasmania’s education Tasmanians may think that there is much to be system. said for

a system which allows Tasmania to spend similar amounts, per head of population, on public services, as Many Tasmanians may think that there is much to be said for a system which allows Tasmania to spend similar other states and territories, without having to impose burdens of state taxation amounts, per head of population, on public services, as other states andsimilar territories, without having to impose similar as other states and territories. Certainly, successive Tasmanian Governments have burdens of state taxation as other states and territories. Certainly, successive Tasmanian Governments have had, as an had, as an explicit fiscal strategy objective, raising less revenue from local sources explicit fiscal strategy objective, raising less revenue from local sources than they could have done, had they applied the than they could have done, had they applied the average level of ‘revenue-raising average level of ‘revenue-raising effort’ to the Tasmanian revenue base (Tasmanian Government 2020: 36). effort’ to the Tasmanian revenue base (Tasmanian Government 2020: 36). Comforting though this may be, it leaves Tasmania exposed to two risks.

Comforting though this may be, it leaves Tasmania exposed to two risks.

Chart 6.4: GST revenue as a proportion of total revenue, states & territories, 2019-20 45 40 35 30

% of total 'operating' revenue (2019-20) Average of all states & territories

25 20 15 10 5 0

NSW

Vic

Qld

Tas

ACT

Sources: Australian Government (2020b); Tasmanian Government (2020); and other State and Territory Government 2020-21 Budget Papers.

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Chapter 6: UNRESOLVED QUESTIONS First, the amount of revenue raised by the GST and available to be divided among the states and territories is completely beyond the control of the Tasmanian (or any other state or territory) Government, and instead depends on national growth in consumer spending, and the proportion of that spending which is on items subject to the GST. The Federal Parliamentary Budget Office has recently identified a number of long-term structural trends in consumer spending which, it concludes, mean that revenue from “the GST is likely to continue to grow at a slower rate than GDP” (PBO 2020: 32). Tasmania will inevitably be more adversely affected by this trend than any other jurisdiction except the Northern Territory. Second, there is no guarantee that the methodology long used by the Commonwealth Grants Commission to determine the shares of GST revenue which each state and territory should receive each year, from which Tasmania has long been a major beneficiary, will remain unchanged. Indeed, the Grants Commission’s methodology has come under sustained attack in recent years from Western Australia – which for much of the post-war period was also a beneficiary of ‘horizontal fiscal equalisation’, but which, once its share of GST revenues began to fall sharply as a result of the torrents of mineral royalty revenues accruing to it from the ‘resources boom’, joined with New South Wales and Victoria to demand changes to the system, which would benefit it at the expense of Tasmania (among others). Because Western Australia is considerably more influential than Tasmania in determining the outcome of Federal elections, Western Australia’s assault on the system of ‘horizontal fiscal equalisation’ has carried substantial weight with the Federal Government – as a result of which, and following a report by the Productivity Commission, the Federal Government ordered changes to the framework within which the Grants Commission conducts its annual reviews of GST revenue-sharing relativities (Morrison 2018), which will be phased in from 2021-22. Among other things, these changes require the Grants Commission to recommend GST revenue sharing relativities which raise the ‘fiscal capacity’ of the fiscally weaker states to the stronger of New South Wales or Victoria, rather than to that of the strongest state – which at the height of the mining boom had been Western Australia – and provide that no state’s share of GST revenues can fall below 75% of what it would obtain under an equal-per-capita distribution. When imposing these changes, the Federal Government provided a guarantee that no state or territory would be worse off (in dollar terms) than it would have been had the changes not been made – but this guarantee expires in 2026-27, as a result of which, as noted in this year’s State Budget Papers, “there is a risk to Tasmania’s share of GST revenue from 2027-28” (Tasmanian Government 2020: 17). The obvious way to reduce Tasmania’s vulnerability to shortfalls in revenue from the GST is to strengthen Tasmania’s fiscal capacity, so that it is less dependent on revenue from this source. That’s, equally obviously, an aspiration that can only be achieved over the long term. There are, broadly speaking, two avenues through which that objective might be attained. One is by pursuing sustained improvements in Tasmania’s economic performance, so that Tasmania’s existing revenueraising mechanisms – principally, state taxes and revenue from government business enterprises – generate more revenue without requiring explicit changes to those mechanisms.

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Chapter 6: UNRESOLVED QUESTIONS Such improvements would of course also bring in their wake many other benefits both to government finances and, more importantly, to the broader Tasmanian community. But, as history (both ancient and recent) demonstrates, that’s easier said than done. A second avenue is to pursue reforms to Tasmania’s state taxation system, with a view to enhancing both its efficiency and its fairness or equity – so that for any given level of economic performance, the system generates more revenue whilst imposing less of a burden on the economy than the existing system. The present author has recently written at length on this subject (Eslake 2020), and that discussion is not repeated here. However, it is worth noting that one of the three proposals canvassed in that paper – namely, replacing stamp duty on the transfer of land with a more broadly-based land tax – has been taken up by the New South Wales Government in its most recent Budget. As the New South Wales Treasurer said in his 2020-21 Budget Speech, “for state governments, the reform with the greatest potential to unlock prosperity is tax” (Perrotet 2020: 11). The New South Wales Treasurer characterises his proposal as “the most important state economic reform of the last half century”, one which he claims would “generate 75,000 new jobs and add an extra $3,300 of income for every household in NSW”. An equivalent estimate for Tasmania from similar reforms would be about 4,650 new jobs and an extra $3,300 of income for every household. The New South Wales Government clearly does not regard the challenges posed by Covid-19 and its economic consequences as a reason to cavil at undertaking major reforms. On the contrary, the New South Wales Treasurer argues that “the challenges we face will demand every ounce of effort, ingenuity and imagination our state can muster”, and that the Government of which he is a part has “an obligation to future generations: to leave our state and our nation better than we found it” (Perrotet 2020:12).

If not in feast, then perhaps in famine? Earlier this year the TCCI and TasCOSS – who have been the principal backers of the Tasmania Report since its inception five years ago – joined with a wide range of other Tasmanian peak bodies in committing to a Shared Statement of Intention for engaging with Tasmanians in recovery and rebuilding (Stephenson 2020). In that Statement, the eleven participating peak bodies committed to six principles: • prioritising resilience; • inclusive participation; • community-led change; • place-based solutions; • diversity and co-operation; and • transparency in decision-making.

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Chapter 6: UNRESOLVED QUESTIONS These provide a sound basis for charting a course to the post-Covid ‘new normal’, whatever that may turn out to be. Implicit in those principles is a sense that it is possible to shape that ‘new normal’, rather than passively accepting whatever fate, fortune and powerful external forces may ordain or dictate. Covid-19 and the ensuing recession have accelerated some trends that were already in train – in particular towards increased digitisation of a wide range of activities - and appear likely to attenuate some long-standing problems – in particular, inequalities in access to education and training, secure employment, housing, health care, information and communications technology, as well as in income and wealth. But the crises of 2020 has also created opportunities to address these and other economic and social challenges. In particular, they have resulted in a new appreciation of the potential for governments, employers and employees, community groups and individuals to ‘get things done’ by putting aside partisan differences and working together towards shared goals. They have resulted in a substantial and, in all likelihood, sustained widening in the scope for concerted action in pursuit of common objectives, and a substantial and sustained reduction in the cost of borrowing money in order to finance both short- and longer-term investments. Three years ago, this report concluded by noting that Tasmania had “made some genuine and tangible progress” and that there was, as a result, a “greater sense of optimism about what might be possible” (Eslake 2017: 99). It pleaded with those seeking to shape Tasmania’s future to be “imaginative and bold, rather than cautious or timid”. That plea fell, for the most part, on deaf ears. One can only hope that what was considered neither feasible nor desirable during a period of plenty might instead be both desirable and feasible in much more challenging circumstances.

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Measuring Australiaâ€™s Digital Divide The Australian Digital Inclusion Index 2020

The COVID-19 pandemic has underlined the critical importance of digital inclusion. The Australian Digital Inclusion Index has been developed as a vital information tool to help guide action on digital exclusion and bridging the digital divide. The Index was compiled by researchers at RMIT University, and the Centre for Social Impact at Swinburne University of Technology, in partnership with Telstra and Roy Morgan. Consistent with Telstraâ€™s purpose, we commissioned this research because in a connected world, digital inclusion is essential for everyone. To access the report visit digitalinclusionindex.org.au

References (page 1 of 4) Australian Bureau of Statistics (ABS)(2020a), Household Impacts of COVID-19 Survey, Canberra, 31 August.

– (2020b), National, state and territory population, Canberra, 24 September.

– (2020c), Engineering Construction Activity, Australia, Canberra, 30 September.

– (2020d), Building Activity, Australia, Canberra, 14 October.

– (2020e), Labour Force, Australia, Canberra, 19 November.

– (2020f), Australian National Accounts: State Accounts, 2019-20, Canberra, 20 November.

– (2020g), Balance of Payments and International Investment Position, Australia, Canberra, 1 December.

– (2020h), State economies and the stringency of COVID-19 containment measures, Canberra, 2 December (released as part of ABS (2020i)).

– (2020i), Australian National Accounts: National Income, Expenditure and Product, Canberra, 2 December.

– (2020j), Lending Indicators, Australia, Canberra, 3 December.

– (2020k), International Trade in Goods and Services, Australia, Canberra, 3 December.

– (2020l), Retail Trade, Australia, Canberra, 4 December.

– (2020m), Weekly Payroll Jobs and Wages in Australia, Canberra, 14 November.

– (2020n), Building Approvals, Australia, Canberra, 1 December.

– (2020o), Education and Work, Australia, Canberra, 11 November.

– (2020p), Schools, Canberra, 6 February.

– (2020q), Household Impacts of COVID-19 Survey, October 2020, Canberra, 16 November.

Australian Government (2020a), 2020-21 Budget Paper No. 1: Budget Strategy and Outlook, Canberra, 6 October.

– (2020b), 2020-21 Budget Paper No. 3: Federal Financial Relations, Canberra, 6 October.

Bourko, Seth, Wouter Geerts and Haixia Wang (2020), The travel industry turned upside down: Insights, analysis, and actions for travel executives, McKinsey & Company, 22 September. Buckle, Caitlin, Nicole Gurran et al (2020), Marginal housing during Covid-19, Final Report No. 348, Australian Housing and Urban Research Institute (AHURI), Melbourne, December. Crowe, David (2020), “Budget push to speed up states’ spending”, The Age, 18 September. CoreLogic (2020), Home Property Value Index - Monthly Indices, Sydney, 1 December. Australian Treasury (2020), JobKeeper postcode data, Canberra, 27 November. Denny, Lisa (2020), The future of work in Tasmania: pre-COVID-19 and post COVID-19, Presentation to the Tasmanian Leaders Program, Hobart, July. Department of Education, Skills and Employment (2019), International student data 2019, Canberra, accessed 7 December 2020.

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References (page 2 of 4) Department of Foreign Affairs and Trade (2020), Trade statistical pivot tables, accessed 7 December. Duckett, Stephen, Will Mackey and Anika Stobert, Climate change and health: preparing for the next disaster, Grattan Institute, Melbourne, 6 December. Edmond, Chris, Steven Hamilton, Richard Holden and Bruce Preston (2020), An Open Letter by Australian Economists on Tradeoffs During the COVID-19 Crisis, 19 April. Eslake, Saul (2008), The difference between a recession and a depression, Melbourne, 23 November. Eslake, Saul (2017), The Tasmania Report 2017, Tasmanian Chamber of Commerce and Industry, Hobart, 11 December. Eslake, Saul (2020), Reforming Tasmania’s tax system: some options, The Australia Institute, Hobart, 16 September. Federal Chamber of Automotive Industries (2020), “Green shoots” as FCAI announces new vehicle sales figures for October 2020, Canberra, 5 November. International Monetary Fund (2020a), World Economic Outlook, Washington DC, 14 October.

– (2020b), Fiscal Monitor, Washington DC, 15 October.

Jones, Rodney (2019), “A pragmatic method to compare hospital bed provision between countries and regions: Beds in the States of Australia”, International Journal of Health Planning Management, 5 December. Lamb, Stephen, Shuyan Huo et al (2020), Educational opportunity in Australia 2020: Who succeeds and who misses out?, Centre for International Research on Education Systems, Victoria University, for the Mitchell Institute, Melbourne, 28 October. Local Government Association of Tasmania (2020), Tasmanian Councils’ measures to assist communities during the COVID-19 Pandemic, Hobart, 1 September. Lowe, Phillip (2020), “The Recovery from a Very Uneven Recession”, Reserve Bank of Australia, Sydney, 15 October. Measuring Australia’s Digital Divide (2020), Australian Digital Inclusion Index Morgan-Wicks, Kathrine (2020), COVID-19 North West Regional Hospital Outbreak Interim Report, Department of Health, Hobart, 29 April. Morrison, Hon. Scott, MP, Prime Minister (2018), “Legislating a fairer way to distribute the GST”, Canberra, 18 October. National Australia Bank (2020), Monthly Business Survey: October 2020, Melbourne, 10 November. Newman, Tim (2020), “Comparing Covid-19 with previous pandemics”, Medical News Today, 19 April. Organization for Economic Co-operation and Development (OECD) (2020), Economic Outlook, Volume 2020 Issue 2: Preliminary, Paris, 2 December.

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References (page 3 of 4) Parliamentary Budget Office (2020), Structural Trends in GST, Canberra, 4 September. Perrotet, Hon. Dominic, MP, Treasurer of NSW (2020), Budget Speech 2020-21, Sydney, 17 November. Premier’s Economic and Social Recovery Advisory Council (PESRAC) (2020), Interim Report, Hobart, 15 July. Productivity Commission (2020), Report on Government Services - 4 School Education, Canberra, 4 February. Public Health Online (2020), The History of Pandemics: A Telling Story, accessed 16 November. University of Tasmania (2020), Covid-19 Modelling and Policy Analysis Project Update #3, Hobart, 1 June. Rooney, Kieran and Tamsin Rose (2020), “Confusion continues over who suggested Victoria’s controversial curfew measure”, Herald-Sun, 11 September. Rural Bank (2020), Australian Farmland Values, Bendigo, 6 May. SGS Economics & Planning (2019), Rental Affordability Index, Quarter 2 2019, Canberra, 27 November.

– (2020), Rental Affordability Index, December 2020 - Key findings, Canberra, 1 December.

SQM Research (2020), Residential Vacancy Rates - National, North Sydney, December. Stephenson, Katrina (2020), Shared statement of intent for engaging Tasmanians in recovery and rebuilding, Hobart, 24 August. Tasmanian Council of Social Service (TasCOSS) (2020), Community Services Industry Combined Response, Premier’s Economic and Social Recovery Advisory Council – Stage One Consultation, Hobart, June. Tasmanian Government (2020), The Budget: Budget Paper No 1, Hobart, 12 November. Tasmanian #100percentliteracy Alliance (2020), A Road Map to a Literate Tasmania, Submission to the Premier’s Economic and Social Recovery Advisory Council, Hobart, November. Thomas, Julian, Jo Barraket, Chris Wilson et al, (2020), Measuring Australia’s Digital Divide: The Australian Digital Inclusion Index 2020, RMIT and Swinburne University, Melbourne, for Telstra, October. Tourism Research Australia (2020), State Tourism Satellite Account 2018-19, Canberra. May. Tourism Tasmania (2020), Tourism Snapshot - Year ended March 2020, Hobart, 1 July. Walker, Bret SC (2020), Report of the Special Commission of Inquiry into the Ruby Princess, Sydney, 14 August. Westpac (2020), “Upbeat consumers look forward to a ‘normal’ Christmas”, Sydney, 18 November.

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References (page 4 of 4) Important notice The information contained in this document has been obtained from, and the opinions expressed in it are based upon, sources believed to be reliable, and which where possible are indicated in the text and/or set out under the heading ‘References’. The views expressed in this document accurately reflect the author’s personal views. Neither The Tasmanian Chamber of Commerce and Industry Ltd, Saul Eslake nor Corinna Economic Advisory Pty Ltd make any representation as to its accuracy or completeness and the information should not be relied upon as such. All opinions and estimates contained in this document reflect the author’s judgement on the date of this document and are subject to change without notice. The Tasmanian Chamber of Commerce and Industry Ltd, Saul Eslake and Corinna Economic Advisory Pty Ltd expressly disclaim any responsibility, and shall not be liable, for any loss, damage, claim, liability, proceedings, cost or expense (“Liability”) arising directly or indirectly (and whether in tort (including negligence), contract, equity or otherwise) out of or in connection with the contents of and/or any omissions from this communication except where a Liability is made non-excludable by legislation.

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