THE latest economic update from the Federal Government shows that Tasmania must continue to rein in spending.

Tasmania’s peak employer body, the Tasmanian Chamber of Commerce and Industry (TCCI), says the federal mid-year economic and fiscal outlook backs up the need for tight fiscal discipline over the Tasmanian Budget.

The TCCI says while economic conditions have improved from the depths of the global financial crisis, it is not sufficient to take the brakes off spending.

TCCI chief economist Richard Dowling said the mid-year outlook showed that expected GST payments to Tasmania would be up by $36million in 2009-10 and $161m across the four years to 2012-13.

“Despite the better than expected economic conditions, it is clear that Budget revenues have not significantly improved,” Mr Dowling said.

“The need for strict fiscal controls remains a priority. The forecast for higher receipts should not be a signal for politicians to increase pork barrelling leading into the State election.”

Mr Dowling said that Tasmania had some severe fiscal challenges which would be hastened by a rapidly ageing population.

“The worst outcome would be to see further spending commitments allocated to recurrent expenditure.

“The Government will have enough difficulties meeting the higher costs of current health services without apportioning spending to new activities or easing up on its proposed Budget savings strategies.

“The evidence is clear that a healthy budget drives business confidence. Therefore as the economy recovers the Budget should be returned to surplus as early as possible. Increased tax receipts can assist with accelerating this task.

“The increase in GST receipts is an opportunity for the Government to get back on track to meeting the responsible fiscal targets it set out in the recent State Budget.”

Mr Dowling said the final Commonwealth Budget outcome for 2008-09 also sounded a warning for the State Government to achieve real costs savings.

“ In cash terms, the outcome was $5.0 billion better than estimated at the time of the 2009-10 Budget, with total cash receipts $2.8 billion higher than expected and total cash payments1 $2.2 billion lower than expected.

“But more relevant for State Governments is that fact that GST revenue was $504 million (1.2 per cent) lower than estimated at the time of the Budget.”

Mr Dowling said much had been made recently of the fact that the national and state economy had not succumbed to general expectations of a deep recession.

“This has led to the false conclusion that the pressure is off the State Budget as far as cost savings are concerned because revenues should be up.

“However, the final Federal Budget outcome for 2008-09 and the subsequent mid-year outlook show that the pressure to achieve costs savings has not eased in the slightest.

“In any event, the need for fiscal restraint in Tasmania’s budget holds true regardless of the economic circumstances.  We face a demographic time-bomb where the cost of government will exceed the value of total Tasmanian economic activity by 2050, unless efficiencies are found,” Mr Dowling said.