Australia's only Liberal government is "entirely to blame" for the deterioration of Tasmania's finances, which will become the "worst" in the country within three years.
A report by independent economist Saul Eslake has painted a bleak picture of the state's budget which could have political implications for the minority Liberal government.
Net debt will rise to more than $16 billion in 2034/35, more than 25 per cent of gross state product, unless tax reform is implemented, he estimates.
Tasmania, which was net debt free in 2020, also faces rising cash deficits averaging $1.3 billion per year over the same period.
"The deterioration in the financial position … over the past decade is entirely attributable to 'policy decisions' by government to increase 'operating' or recurrent expenses, and spending on infrastructure projects, and to a lesser extent to reduce taxes," Mr Eslake said.
The Liberals, who have been in power since 2014, were re-elected in minority in March and are propped up by a cross bench including three Jacqui Lambie Network (JLN) members.
Mr Eslake's report was commissioned as part of the JLN's deal to provide supply and confidence to the Liberals.
He says interest payments will rise from about $250 million in 2024/25 to $730 million in 2034/35, about six per cent of total revenue.
"Such an outcome would almost certainly result in Tasmania’s credit rating being downgraded, probably by more than one 'notch'," the report says.
Mr Eslake said warnings provided to the government by the department of treasury and finance since 2016 had gone unheeded.
"Based on ... some metrics ... Tasmania’s financial position will become worse than that of any other state or territory ... over the next three years," he said.
The report made several recommendations to raise more revenue, including getting more payroll tax from businesses, increasing car registration and mining royalties.
Treasurer Michael Ferguson ruled out new or increased taxes and said the government would respond to the review when the budget is delivered on September 12.
The government was committed to providing cost-of-living relief and delivering services, he said.
JLN MP Miriam Beswick said the report should herald a "new chapter" of budget responsibility.
"The ideas ... to raise revenue are all worthy of consideration and the JLN will take the time to consult on each and every one of them," she said.
Mr Eslake also called for infrastructure projects to be financed based on robust estimates of their social and economic benefits, as opposed to the current "bottom-up" process.
Mr Eslake said COVID-19 and compensation payouts to survivors of child sexual abuse had impacted Tasmania's budget trends.
Financial updates for 2023/24 released on Thursday put the state's net debt at $3.5 billion and said liability for abuse claims was $647 million, $571 million more than forecast one year earlier.
