Tasmania's $1.47 Billion Public Service Efficiency Drive
"Any savings should be reinvested into patient services." – Dr. Michael Lumsden-Steel, Australian Medical Association
The Tasmanian state budget, presented by Treasurer Eric Abetz on Thursday, outlines $1.47 billion in required "operational efficiencies" across the public service over four years. The Department of Health, the largest government department, must identify $702.61 million in savings, including $131.45 million in the 2026-27 financial year alone.
Health Expenditure and Inflation
Health Department expenditure is projected to rise from $3.66 billion in 2026-27 to $3.87 billion by 2029-30—an increase of 7.8%. Treasury forecasts inflation of 11% over the same period. The Australian Medical Association estimates annual health sector inflation at 4-8% and demand growth at 6% per year.
The budget includes $265 million more in new state health spending over the 2026-27 to 2028-29 period compared to the previous Interim Budget. The federal government is set to contribute an additional $527 million over the same period under the National Health Reform Agreement.
Strategies for Achieving Savings
According to the budget document, the department plans to achieve savings through:
- Improved cost recovery via fees and charges
- Enhanced vacancy management with reduced locum and agency costs
- A revised executive structure with fewer leadership roles
- Consolidation of office space, communications, and staff travel
Rising Locum Nurse Expenditure
"The savings targets show a complete disconnect from existing challenges." – Emily Shepherd, ANMF
Tasmania's spending on locum nurses has increased substantially. Data from a right to information request shows the government spent approximately $105 million on locum nurses in the 2024-25 financial year—representing about 5% of the health budget. This compares to $14.5 million (1% of the health budget) in 2020-21, a 600% increase over five years.
Locum staff are short-term health workers often employed at higher wages to fill staffing gaps.
Hospital Staffing Concerns
The Australian Nursing and Midwifery Federation (ANMF) reported concerns regarding staffing levels at the Launceston General Hospital (LGH). According to the ANMF, on one night the emergency department had 25 nurses rostered against a requirement of 28 for safe operation, while managing 64 admitted patients.
Reported issues included a "double-bunked" bed, patients in an airlock zone, and patients in corridors. The average length of stay for some patients reportedly exceeded 40 hours. The ANMF stated there are 35 full-time nursing vacancies at LGH.
Stakeholder Statements
Dr. Michael Lumsden-Steel (Australian Medical Association) described the expenditure targets as not reflecting spending realities. He stated that any savings should be reinvested into patient services and suggested some federal funds may be diverted to improve the state budget position.
Emily Shepherd (ANMF) said the savings targets show a "complete disconnect" from existing challenges and would increase workloads for nurses and midwives. She attributed the locum spending situation to a deficit in nurses and midwives and criticized slow recruitment processes for permanent positions.
Health Minister Bridget Archer stated there are "no cuts to health" and the budget shows continued funding growth. She acknowledged the need to increase the permanent workforce but said locum and agency workers would be used "as required." She noted the government has recruited thousands of healthcare professionals over the past 12 years.
Treasurer Eric Abetz confirmed the Health Department is part of the efficiency program.
Labor health spokesperson Sarah Lovell called for Minister Archer to correct her statement, asserting cuts are in the budget. She stated that increasing reliance on locum nurses indicates a failure in recruitment and retention, and suggested these funds could be invested in permanent staff.
Teagan Nalder (clinical nurse manager) cited pay disparity as a barrier to returning to Tasmania after moving to the Northern Territory.
Christie Russell-Jarvie (senior agency midwife) expressed a desire to return to Tasmania from South Australia but noted deteriorating working conditions and lower wages for Tasmanian midwives compared to other states.
Wage Negotiations
The nurses and midwives' enterprise agreement expires on June 30, 2026. Doctors signed a one-year agreement last year. The budget expects agencies to absorb wage increases above 2.5% through savings or adjustments.
Hospital Expansion Project
The government announced the assignment of contractor Hansen Yuncken for the $130 million expansion of the Royal Hobart Hospital's Emergency Department.
The project is expected to increase treatment points from 80 to approximately 120 and double capacity for CT and X-ray services, while introducing ultrasound and dedicated zones for various patient groups.
Broader Financial Context
Potential net debt could reach $146 billion by 2040. – Department of Treasury and Finance
A recent report from Tasmania's Department of Treasury and Finance warned of a potential rapid deterioration of the state's finances, projecting net debt could reach $146 billion by 2040.