From the Bowen Bridge into Hobart, the view keeps changing. Where the old rail yards at Macquarie Point once sat empty and salt-stained, cranes now rise over the footprint of a 23,000-seat stadium whose price tag has climbed from an original $715 million to a figure described in parliament as $1.13 billion by 2026 (approx.). A few kilometres up the Derwent, a pensioner in Glenorchy opens a rates notice and a power bill on the same afternoon, both higher than last year's, with no obvious link between the two. But the link exists in the state's own account books: Tasmania's government-owned power, water and network businesses are carrying more debt than at almost any point in their history, at the moment the general government sector's own net debt is heading toward a figure that, as recently as 2019, nobody in Hobart's Treasury building thought was on the cards.
This is the story of how a state that entered the pandemic with close to no debt arrived, seven years later, at downgrades from both major credit rating agencies within a fortnight of each other, a structural deficit its own Treasury says still needs "substantial ongoing action" to fix, and a stadium bill still growing before a single seat has been bolted down.
What the government did: borrowing through the pandemic, and past it
Tasmania's Liberal Party has governed continuously since 2014, through three premiers — Will Hodgman, Peter Gutwein and, since April 2022, Jeremy Rockliff — so there is no meaningful sense in which today's debt was inherited from a different side of politics. What can fairly be separated is the pandemic-era borrowing, largely unavoidable and common to every state, from the discretionary choices made once the emergency had passed. Through 2020 and 2021 the state funded business support, public health measures and a hospital system under pressure as revenue fell and costs spiked — a pattern every jurisdiction repeated. Alongside that, the government committed to genuine infrastructure needs of an island state: replacing the ageing Bass Strait ferries, and a multi-year hospital redevelopment program. Then, in 2023, the Rockliff government signed Tasmania up to become the eighteenth AFL club, the Tasmania Devils, entering the competition in 2028 on a licence condition requiring a new roofed stadium at Macquarie Point, originally costed at around $715 million (Tasmanian Government, 2023, approx.).
On the repair side, the government introduced a new Fiscal Strategy in the 2023-24 Budget and Budget Efficiency Dividends — mandated agency savings targets — in the 2023-24 and 2024-25 Budgets. Those measures did not stop the deterioration. A no-confidence motion, brought partly over the lack of transparency around the stadium project and passed on 5 June 2025, forced a snap election on 19 July 2025; Rockliff's Liberals were returned with an increased primary vote but again fell short of a majority, forming a second minority government (Parliament of Tasmania, House of Assembly, Hansard, 2025). Ten months later, the 2026-27 Budget, handed down by Treasurer Eric Abetz on 21 May 2026, announced roughly $1.4 billion in savings and around 1,700 fewer public sector jobs, aiming to bring the return to surplus forward from 2029-30 to 2027-28 (2026-27 Budget Paper No. 1, Department of Treasury and Finance, May-2026, approx.).
The strongest case
A small island state absorbed a global shock, and it is now the one taking the harder decisions
Put the government's position at its strongest, and it holds up in several places. Tasmania entered the pandemic from an unusually clean starting position — net debt close to zero in 2019, better than every mainland state, after a decade of repair from the state's own 1990s debt crisis. Every Australian jurisdiction borrowed heavily through 2020 and 2021 to keep businesses afloat and hospitals staffed; Tasmania was not an outlier there. Being a small island economy also carries real, unavoidable costs a mainland state would not face. Bass Strait is not a bridge; the ferries that cross it are lifeline infrastructure, and replacing an ageing fleet is not discretionary spending in the way a stadium is. Hydro Tasmania's role in the National Electricity Market, and TasNetworks' need to build transmission capacity to export that power, are genuine, long-lived assets rather than consumption spending. GST equalisation, which delivers Tasmania a larger per-capita share of the national pool than its population alone would justify, exists because the Commonwealth Grants Commission recognises small states carry higher per-person costs to deliver the same services — the system working as designed, not a loophole being exploited.
Finally, credit for the AFL bid: a licensed team is a genuine, one-off opportunity, with broadcast revenue and visitor spending attached, put to a parliamentary vote rather than decided unilaterally. And on the numbers, this government is not ignoring its deficit — the Fiscal Strategy, the Efficiency Dividends, and the 2026-27 Budget's $1.4 billion savings package and brought-forward surplus target are real, difficult decisions a minority government did not have to take.
The evidence: what the primary record shows
General government net debt — what the state owes after netting off financial assets — stood at $5,048.3 million as at 30 June 2025, up $1,712.1 million on the year before (Treasurer's Annual Financial Report 2024-25). The 2026-27 Budget, handed down in May 2026, put net debt at roughly $6.8 billion (approx.) for 30 June 2026, climbing to a peak of around $9.98 billion by 30 June 2029 — close to 20 per cent of gross state product — before easing only slightly to about $9.47 billion the year after (2026-27 Budget Paper No. 1, May-2026, approx.). As recently as 30 June 2019, the equivalent figure was close to zero.
The general government figure is only part of the picture. Tasmania's government business enterprises — the state-owned corporations running power, poles-and-wires, and water and sewerage — sit outside the headline number but carry their own, growing borrowings. Hydro Tasmania's net debt rose 28 per cent to $1,023 million in 2024-25, with finance expenses of $82.5 million against an underlying profit that collapsed 96 per cent, from $193.7 million to $7.5 million, as drought cut into generation (Hydro Tasmania Annual Report 2024-25). TasNetworks revised the cost of its North-West Transmission Developments project from $800 million to $1.5 billion in November 2025 (Parliament of Tasmania, House of Assembly, GBE Scrutiny, 25-Nov-2025). TasWater is in better shape — net profit rose to about $39 million, up from $32.6 million — but residential customers on hardship debt plans rose 9.4 per cent, with average debt up from $1,512 to $1,641 (Tasmanian Economic Regulator, Annual Report 2024-25, approx.).
Then there is the stadium. Macquarie Point's cost has moved from an original $715 million (2022) to $945 million (Tasmanian Government, Nov-2025) to a figure described in parliament as $1.13 billion (approx.) by 2026 — before siteworks, road upgrades, a TasNetworks substation and borrowing costs are added. An independent planning assessment reported in November 2025 put the project's likely lifetime debt contribution, once financing and running costs are included, at a further $1.86 billion (approx.) over its first decade of operation.
Independent assessors have reached their own verdict. S&P Global Ratings downgraded Tasmania from AA+ — held since 2004 — to AA in November 2025, its first downgrade of the state since 1993, citing "very weak" budget metrics, strong growth in operating expenditure, and the risk of stadium cost overruns (S&P Global Ratings, Research Update, Nov-2025). Moody's Ratings followed days later, cutting Tasmania from Aa2 to Aa3 on 25 November 2025, noting net debt had risen from about 66 per cent of operating revenue in June 2019 to more than 130 per cent by June 2025, and could reach around 180 per cent by 2028-29 without further action (Moody's Ratings, rating action, 25-Nov-2025, approx.).
The critique: a trajectory this government chose, not just one it survived
The steelman case is genuine as far as it goes, and pandemic-era borrowing should not be laid at this government's door in the same way as what came after. But the state's own numbers show the pandemic explains the starting point of the climb, not its ongoing steepness. Net debt did not stabilise once the health emergency passed; by the government's own 2025-26 and 2026-27 Budget papers, it was still projected to almost double again between 2025 and 2029, years after COVID-era support had ended. A large and growing share of that trajectory is recurrent spending — health, disability and public sector wage costs growing faster than revenue — which the Fiscal Sustainability Report 2026, published by Treasury on 27 February 2026, describes as requiring "additional and substantial ongoing action" beyond what has already been legislated (Fiscal Sustainability Report 2026, Department of Treasury and Finance, 27-Feb-2026).
The stadium sits apart from the pandemic story entirely. It was a discretionary decision made in 2023, well after the emergency, its cost has grown by more than 50 per cent since, and it contributed directly to the collapse of Rockliff's first minority government: two Liberal MPs, Lara Alexander and John Tucker, left the party citing a lack of transparency on the project, ahead of the no-confidence motion that forced the snap election. A government can reasonably claim credit for building something no previous Tasmanian government delivered; it is harder to claim the cost growth was unforeseeable when the state's own ratings agencies were warning about exactly this risk before the 2025 election was even called.
The government businesses complicate the picture further, because their debt sits partly outside the figure that dominates political debate, even though the state ultimately stands behind it. Hydro Tasmania's finances show how exposed that structure is to a single bad year of rainfall — a 96 per cent profit collapse driven by drought, in an enterprise now paying more in interest than it earned in underlying profit. TasNetworks' blowout shows the same infrastructure-cost pressure repeating inside the corporatised sector, just off the page voters see first.
A pandemic explains why Tasmania started borrowing. It does not explain why, five years on, the borrowing is still accelerating.
None of this makes Tasmania uniquely reckless among Australian states — several run comparable or larger deficits. What is specific here is the combination of a small revenue base heavily dependent on a GST formula it does not control, with 41.8 per cent of general government revenue coming from GST in 2023-24 (Budget Paper No. 1, Ch.5, 2023-24), and a debt trajectory rising faster, from a lower base, than almost anywhere else in the country. That combination is what turned two credit downgrades in a single fortnight from a risk into a fact.
The risk to the future
A structural gap, a volatile revenue base, and three enterprises exposed to their own shocks
Moody's own scenario — net debt approaching 180 per cent of operating revenue by 2028-29 without further correction — is not a worst-case prediction; it is what happens if the current trajectory simply continues. The 2026-27 Budget has moved to head that off, with $1.4 billion in flagged savings, around 1,700 fewer jobs, and a surplus target brought forward to 2027-28. But S&P's own commentary warned the "dramatic turnaround" faces "high execution risk", noting the state's history of savings programs that did not fully materialise. If growth or GST relativities disappoint, or the stadium's cost keeps climbing before a single game is played, the gap between plan and outcome could widen rather than close.
The exposure is not confined to the balance sheet that makes the headlines. Hydro Tasmania's finances show a business one dry year away from a profit collapse it cannot fully absorb without adding to its own $1 billion-plus in debt; TasNetworks has already had to roughly double the cost of a single transmission project. Every dollar the government businesses cannot cover from their own revenue becomes, sooner or later, a claim on Tasmanian households through utility bills, or on the state's books through capital injections and guarantees.
For an island state that depends on a GST formula set in Canberra for more than 40 per cent of its revenue, less room to move is not abstract. It is the room needed to fund the next health pressure point, natural disaster or downturn — without raising taxes on a population smaller than many mainland cities, or borrowing at a cost that climbs every time a ratings agency looks at the trend line and concludes the plan has not yet been tested against reality.