Why Fergo had to go - the iron law of arithmetic

Deputy Premier and Treasurer Michael Ferguson had no choice but to resign as Infrastructure Minister in the wake of the Spirits of Tasmania debacle.

As former Liberal Prime Minister John Howard might have said “politics is governed by the iron law of arithmetic.”

Or with apologies to Clinton adviser Jim Carville, “It’s the math, stupid.”

With 10 Labor, five Greens, the now sole remaining Jacqui Lambi Network member Andrew Jenner, and independents David O’Byrne and Kristie Johnston all gunning for him, Mr Ferguson was staring down the barrel of a successful no confidence motion against him.

To have such a motion pass the Parliament just two days before he was set to hand down his budget on September 12 would have imperilled the entire Rockliff Government.

Never mind the nonsense of some senior Government Ministers who should have known better claiming that a no confidence motion could somehow just be wished away and ignored; it was an event to be avoided at all costs. And so, with the mathematical writing on the wall, Mr Ferguson’s resignation was the right call.

In doing so, Mr Ferguson has also headed-off a broader no confidence motion against him in his role as Treasurer and Deputy Premier, and lives to fight another day.

This is not to suggest that Mr Ferguson is entirely blameless. No doubt, the fault for the extraordinary failure to deliver the critical infrastructure needed to dock the new Spirits in Devonport lies almost entirely with the board and management of the TT-Line. But under our Westminster System of Government, the Minister is ultimately responsible.

If Mr Ferguson had a failing, it was to take on trust and face-value assurances and statements provided to him by the TT-Line and the broader bureaucracy. This, sadly, is a tendency shared by most Government Ministers who would be much better served by getting out of their office, breaking the bureaucratic bubble and talking directly to Tasmanians at the coal-face.

Having staved off the immediate threat to his ministerial career, Mr Ferguson now faces the unenviable task of delivering and selling the state budget, delivered in a time of a sharply slowing economy and ballooning government spending.

As laid bare by Saul Eslake in his recent report, Tasmania is on track to record $16 billion of net debt by 2035, one of the worst in the nation. And with a record budget deficit of $1.6 billion delivered just last year (including over $600 million set aside for payments arising from the Commission of Inquiry), the problem is not just a hypothetical one for future, it is here and now.

To be fair to Mr Ferguson, he has largely inherited Tasmania’s parlous budget situation, which took a sharp turn for the worse during COVID when the doors to the State’s Treasury were flung open and cash was shovelled out to all and sundry under then Premier and Treasurer Peter Gutwein.

Like most governments the world over, the now Rockliff Government has found that once started, turning government spending off is well-nigh politically impossible.

Indeed, even Saul Eslake has acknowledged the political difficulties of reducing government spending, instead suggesting the anti-Liberal and politically naïve solution of raising taxes. 

Payroll tax on small business, higher mining royalties, higher car registrations (during a cost of living crisis, no less) are all part of the Eslake solution to fixing our budget - none of which are realistic or politically palatable options for the Liberal Government.

That being said, there is one potential part-solution canvassed in Mr Eslake’s report which I do think is worthy of further consideration, and it’s one that I have canvassed before – the unfunded superannuation liability.

For those playing along at home, then Treasurer and later Premier Tony Rundle established a savings scheme (the Superannuation Provision Account) to set aside money for this debt in the early 1990s, but the Labor and then Labor-Green Governments of David Bartlett and Lara Giddings raided the piggy bank and spent the entire then $1.5 billion-plus in savings fund propping up the budget in the post global financial crisis years.

With a total liability of over $7 billion and a yearly payment approaching $450 million per year, this superannuation liability for retired public servants is now the biggest single drag on the Tasmanian Government budget.

In his report, Mr Eslake recommends terminating this scheme for those still on it, preserving their entitlements up to the closing date, and then transferring them to the same defined contribution arrangements as had applied to the rest of the public sector since 1999. According to some estimates, this could save up to $3 billion.

There are other options. Previously, I’ve suggested refinancing the debt as a potential solution, but the opportunity of super low interest rates has now passed us by.  However, the sale of assets (such as the embattled TT-Line, or the Motor Accidents Insurance Board) to offset some of the liability remains.

Are of these potential solutions to the superannuation debt politically difficult? Yes. Are they more politically palatable than sacking nurses, or raising taxes? I would suggest, yes.

But I won’t be holding my breath for someone to tackle it.

• Brad Stansfield is a partner at Font PR and Font Publishing, owner of this newspaper.