Would Abbott trim Tassie's green shoots?

Are Tasmanians about to be dealt the cruelest of blows? Just as that state’s struggling economy begins to show the green shoots of recovery, the September federal election could send it spiralling back down the hole from which it is just emerging.

In essence, Tasmania is least well positioned to benefit from a Coalition victory on the national stage. While its fortunes have been mixed under the Rudd and Gillard governments, the traditionally Labor-leaning state could be in the wrong place at the wrong time under an Abbott government.

First, the green shoots. In recent months there have been a string of them for the state whose population is, roughly speaking, a third private-sector workers, a third government employees and a third welfare recipients of one kind or another. What’s needed is for those ratios to be dramatically altered in favour of productive private-sector workers.

The run of good data started with unusually buoyant retail sales for Christmas 2012. This year, the most recent retail data hit a 10-month high, and car sales have jumped over 20 per cent year-on-year in the state.

On top of that, business confidence is at a two-year high and should only improve thanks to the early signs of an Australian dollar correction – Tasmanians have struggled to export internationally not only because of freight issues (everything for international export travels via Melbourne), but because of the dollar price set by the exports of Western Australia, Northern Territory and Queensland. The falling dollar is a chance to reverse that trend.

Tasmania has been capital-starved in recent times, meaning fewer jobs and a steady exodus of younger Tasmanians. The years 2011 and 2012 saw the largest net outflows of interstate migrants in the 15-19 and 20-24 age groups, according to Phil Bayley, chief economist at the Tasmanian Chamber of Commerce and Industry.

The current record-low interest rate environment would seem to be the ideal opportunity for firms to invest in some of the key local growth industries. Leaving aside the contentious forestry industry, there is a huge need for investment in industries such as food processing, irrigated agriculture, fine wine, a new generation of spirit distillers and niches such as apiculture (beekeeping).

Development minister David O’Byrne told me this week that the state’s recently launched Economic Development Plan puts a strong emphasis on high value-added goods and less on bulk commodities. Indeed, the forestry deal brokered by Canberra came with a $120 million fund to help accelerate some of these industries.

‘Brand Tasmania’ has helped apiarists command strong prices in China; O’Byrne says Tasmanian wines are averaging $20 per litre against mainland prices of $3 or $4; one Tasmanian distiller has been flying over to advise the Scots on whiskey production (Robbie Burns will be  turning in his grave); and some of the state’s berry farmers have shipped record tonnages despite the high dollar.

So as the Australian dollar falls, and rates are low, surely the jobs and investment will follow and tempt home all those errant youngsters?

Well perhaps not.

The federal Coalition’s promise to ‘develop the north’ (In praise of Abbott’s great leap northward, February 7) had some Business Spectator readers asking why we shouldn’t focus on unfinished projects further south, such as the Murray-Darling basin, which has a long way to go in water-saving infrastructure, or the basket-case Apple Isle which already has well over double the population of the Northern Territory (at around 510,000 and 230,000 respectively).

Well for one thing, there’s little to be gained by the Coalition targeting Tasmanian seats. The state only has five federal seats. Of those, independent Andrew Wilkie’s seat could fall to Labor, but not to the Liberals. Two other seats, Braddon and Bass, are on 7 per cent margins, so could be turned. However, it would take a lot of campaigning resources that could be much more profitably deployed in other states.

The Coalition is expected, on current polling, to pick up one senate seat in Tasmania (as it edges from its current 34 seats to the 39 it needs to repeal the carbon tax), but it won’t be able to win a second.

So without much in the way of electoral gains on offer, there’s a growing feeling that the state would get little attention and a lot less money from an Abbott government.

One big issue is GST revenues. Tasmanian premier Lara Giddings accused Tony Abbott on Thursday of plotting to accede to Western Australian Premier Colin Barnett’s demands for per-capita distributions of GST, which would rip millions out of the Tasmanian budget. 

Current GST distributions, according to the Tasmanian government, take into account the economies of scale that the more populous states enjoy. Giddings said: “Secret back-room plans by the Liberals clearly have one item on the agenda – steal Tasmania's GST.”

Another source of anxiety is Tasmania’s NBN. The state’s all-fibre network is due, says Communications Minister Stephen Conroy, to be finished by 2015, if existing contracts are completed. Conroy's office released new data on the progress towards this goal on May 5. 

Malcolm Turnbull’s office begs to differ, however. They claim that at current completion rates, it will take 80 years for the whole state to be connected.

The Turnbull NBN plan that would come in under an Abbott government promises to "honour" contracts. However, both federal Labor and their Tasmanian counterparts in the Labor/Greens state government fear this means contracts will be paid out, with fibre-to-the-node being used to complete the Tasmanian build.

Whether that matters depends, essentially, on whether you think an all-fibre consumer base is important.

The state government, like federal Labor, argues that new business opportunities and public-sector efficiencies will evolve when 93 per cent of internet users have uncongested, super-fast broadband.

O’Byrne has long argued that having at least one state connected to an all-fibre network would provide a giant research lab for companies from around the world to test applications, and for local businesses to develop and potentially export all-fibre know-how – similar to the thinking behind Google’s attempt to make Austin, Texas an all-fibre city.

However, if Conroy and O’Byrne’s view proved to be correct, it would also be an embarrassment to the Coalition as other voters asked “why can’t we get what Tasmanian’s have?” For that reason alone, it looks extremely unlikely the Tassie all-fibre network would be completed by the Coalition.

Put together, all those factors paint a bleak picture for Tasmania if, as polls suggest, the Gillard government is swept from power – less GST, no all-fibre NBN, and a federal government looking north, not south, for places to spend on infrastructure and other forms of economic development.

Tasmania, home to some of the world’s great wilderness, may find itself in a political wilderness – at least, that is, until the March 2014 state election, when Tasmanians might find extra reasons to vote in a conservative government of their own.