Should Taxpayers' Be Subsidising Transport To Tasmania

Andrew Baker, from the Centre for Independent Studies, has an interesting op-ed in today's Online Opinion on how mainland Australian taxpayers are subsidising transporting goods over Bass Strait:
Should Australian taxpayers pay other Australians for choosing to live in hard to reach places? Should those who choose to live on a mountaintop, in the middle of the desert, or the heart of the bush receive subsidies for having food and other necessities shipped to their doorstep?

I think most Australians would say no, but the Gillard government has answered these questions with a resounding ‘yes’ for those who have chosen to live in the not so hard to reach Tasmania.

The Tasmanian Freight Equalisation Scheme (TFES) subsidises trade between Tasmania and the Australian mainland (and also between the main island of Tasmania and King Island and the Furneaux Group) to cover the additional cost imposed by transporting goods by sea over Bass Strait.

Goods that travel by sea, from, for example, Melbourne to Perth or Brisbane to Adelaide, do not get similar subsidies. The subsidies through TFES are in addition to the very generous allowances Tasmania receives through the redistribution of GST revenues.

Since the Fraser Liberal Government started the scheme in 1976, governments have doled out nearly $3 billion in subsidies to Tasmania; the program currently costs the taxpayer about $100 million every year.


A recent review of TFES by the National Infrastructure Coordinator, Michael Deegan, found that the program was “reactive, disjointed, fragmented and costly” and subject to numerous allegations of fraud. More importantly, the review pointed to a more fundamental problem with Tasmania’s economy because “the TFES acts as a barrier to Tasmania understanding the virtues of economic self-sufficiency. If Tasmania is to be a productive member of the Australian Commonwealth then it must take risks, and provide the opportunities that will give it a productivity boom.”

Andrew Baker concludes that "Abolishing the TFES program would save the Commonwealth $100 million every year, provide incentives for the Tasmanian Government to make their economy more efficient, and most importantly, Tasmanians will not be given favorable treatment over all other Australians because of where they have chosen to live." Click here to read the full thing.

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