Politicians must reckon with Tasmania's slowing economy and shrinking population, experts say

Between 2016 and 2021 Tasmania experienced a rare event — more people came to live on the island than moved interstate.

The population grew by around 47,000 people during that period and the economy was regularly on the top of the leader board.

It was such an unusual situation for the island state, Tasmanians began worrying about just how big the population could become.

But, it wasn't to last.

James Alcock is one of Tasmania's new arrivals and loves the place but he also has some insight into why fewer people are now coming.

He and his family moved from Brisbane to Tasmania two years ago.

"We are either at the beach if it's good weather, or we're walking through the rainforest," he said.

Mr Alcock is the chief executive of the historic Woolmers Estate, a tourism and accommodation business at Longford in the state's north.

"Our experience has been fantastic, both with our employment opportunities and also for the schooling, education for our boys."

But he said while it was an idyllic lifestyle, there are drawbacks to living in Tasmania, including a lack of health services.

While Mr Alcock and his family have no plans to move, lots of other people seem to.

From population boom to bust

Demographer Lisa Denny said that in the past few years, more people are now heading interstate than moving to Tasmania.

There was a net loss of close to 2,600 people in Tasmania last year.

Dr Denny said it was mostly young, working Tasmanians heading interstate causing the state's population to age at a faster rate.

She said factors like cheaper housing, which previously attracted people to Tasmania, have been eroded in recent years.

Dr Denny said an older, slower growing population puts Tasmania on the cusp of a "vicious cycle of low performance" as it heads to a state election.

"It makes for a very volatile situation," she said.

Fears of a return to the downturn of the 1990s

Independent economist Saul Eslake said Tasmania could be heading towards an economic downturn similar to those experienced in the 1990s and between 2010 and 2015.

Budget forecasts have revealed Tasmania's budget deficit — which is how much the government will overspend — has been revised up from $297 million to $521 million.

Tasmania's economy relies heavily on consumption, which is spending on food, housing, retail and construction.

Low population growth and cost of living pressures mean spending reduces and the economy dips.

The businesses keeping the Tasmanian economy ticking

Jess Mackeen and her wife Chiko own a bakery, coffee roaster, and café in Hobart's northern suburbs.

Businesses like theirs — which employs about 35 people — keep the Tasmanian economy going.

But there are challenges. The business's power bills have gone up, as have petrol prices, and Ms Mackeen said payroll tax was also an impost.

On top of that, cost of living pressures mean customers are spending less.

"Normally what happens close to Christmas is everybody gets really excited on the last week and [there is] a lot of impulse purchasing and last minute items," she said.

Despite the pressures, work is underway to expand the business.

Behind the cafe, a new space is being built to house its coffee roasting equipment, training rooms, and space for coffee machine repairs.

"[We are] confident in our staff, confident in the ethos of our business, confident in the community," Ms Mackeen said. 

"Obviously everybody's going through financial strain but I am confident we'll get through this, especially in Tasmania.

No easy fix for the budget

Mr Eslake is not optimistic that Tasmania's economic woes can be resolved easily or quickly.

In January the state recorded the highest unemployment rate in the nation at 4.5 per cent, seasonally adjusted.

"Tasmania is, after several years of doing better than the national economy, now in one of those phases where we do worse," Mr Eslake said.

According to Commsec's State of the States report, Tasmania had been leading the country on economic performance for much of 2020, all of 2021 and most of 2022.

But it fell down the rankings late last year.

He said while he was not questioning Tasmanian Premier Jeremy Rockliff's reasons for calling an election early, Mr Eslake said he "wouldn't be at all surprised if the thought of avoiding having to bring down a vote-losing budget before the next election hadn't also crossed [Mr Rockliff's] mind".

To fix the budget, Mr Eslake said the next government could consider cuts to the public service, which he said "would be unpopular", or it could take more dividends from government business enterprises.

He said he had long advocated for state tax reforms.

"But that won't happen without a mandate from the electorate."

Better job opportunities and education 

In the long term, Dr Denny said the next state government would need to stop the flow of people out of the state if it wanted to lift the economy.

"If we aim to halve the number of people who are leaving Tasmania to live interstate every year … then we could go a long way to stabilising our age structure," she said.

To do that, the next government would need to make Tasmania a more attractive place to live by addressing complex issues like access to health, housing, and meaningful employment, she said.

Both Mr Eslake and Ms Denny believe tackling Tasmania's under performing education system is at the cornerstone of improved economic prosperity for the state.

Australian Bureau of Statistics data shows Tasmania's retention rates from Year 10 to Year 12 dropped to 71.4 per cent, the lowest since 2012 and 8.1 percentage points below the national average.

Mr Eslake said the figures come despite Tasmania having smaller class sizes compared to the national average.

"So, clearly, the solutions to the woeful performance, relative to the rest of Australia, of Tasmania's school education system isn't 'spend more money' or 'employ more teachers'," he said.