Tasmania is set to be Australia’s slowest-growing state economy over the next decade, with growth forecast to slump to 0.8% this financial year, according to Deloitte Access Economics.
The firm’s September Business Outlook says growth will fall from 2.6% in 2025-26 to 0.8% in 2026-27, the lowest forecast of any state or territory.
It blames a slowing labour market, weak population growth and a pullback in public sector activity and forecasts growth will average just 1.5% a year over that period.
The number of Tasmanians in work is forecast to fall by 1.1% this financial year, while population growth is expected to slow to 0.4%.
“With population growth slowing to a trickle, the state will need to rely more heavily on either higher productivity or participation to grow its economy,” the report says.
It says years of overspending propped up the state’s economy and “contributed to the worst budget deterioration in the country”.
The report calls the government’s spending restraint “the right move”, saying the budget is “badly bent but not yet broken”.
Shadow Treasurer Dean Winter said “Tasmania’s economy is broken after 13 years of the Liberals”.
“You cannot sell out traditional industries, sack 1,700 workers, freeze essential services and expect Tasmania’s economy to grow,” he said.
The report says regional Tasmania is the only regional market in Australia less affordable than its capital city and dwelling investment is at its lowest level since 2017.
It expects Tasmanians to cut back further on non-essential spending, but forecasts business investment to grow by 5% this financial year as it rebounds from low levels.
Treasurer Eric Abetz said the report shows Australia’s economy is losing momentum as inflation and interest rates bite.
“The Tasmanian economy is resilient and has continually been the only state to grow on a per capita basis,” he said.
He said the state’s growth is “real economic growth, not propped up by population growth”.
Abetz said the government will keep backing business, including building the Macquarie Point stadium and supporting the Mt Lyell copper mine.
He said Tasmania is the only state with a “genuine budget focused on reducing inflation” and the government is doing so without raising taxes.
Nationally, Deloitte has downgraded its growth forecasts for a second straight quarter and expects the Reserve Bank of Australia (RBA) to lift the cash rate to 4.85% in November.
Deloitte Access Economics partner Stephen Smith said Australia is expected to avoid a recession, but households will feel otherwise.
“While Australia is expected to avoid a recession in the aggregate, households will continue to experience recession-like conditions,” he said.
