The 2024/25 budget, delivered on Thursday by Treasurer Michael Ferguson, forecasts net debt will rise from $3.5 billion in 2023/24 to $8.6 billion in 2027/28.
The Liberals, who inherited zero net debt when first elected in 2014, have a $5.1 billion infrastructure plan despite warnings from a leading economist the spend should be cut back.
Mr Ferguson said the government planned to return the budget to surplus in 2029/30, a period beyond forecasts, from a deficit of $793 million in 2024/25.
The 2023/24 budget had tipped a return to a slim surplus in 2025/26.
Mr Ferguson defended the level of borrowing, pointing to $460 million across four years for cost-of-living relief and the impact of a $2 billion COVID-19 response.
The $5.1 billion infrastructure spend across four years includes $1.9 billion for roads and bridges and $650 million for health facilities.
"We could have balanced and thrown surpluses much sooner but the (potential) disruption to services and the wider economy, we felt the price would not be worth it," he said.
The state's coffers have also been hit by a $571 million rise in current and estimated redress payments for survivors of child sexual abuse.
There is also $423 million across four years to implement 191 recommendations from an inquiry into institutionalised abuse which found decades of government failings.
Including 2023/24 funding, more than $1.1 billion will be spent on child safety reforms.
"Like the impact of the (COVID-19) pandemic, this will further challenge the state's finances but it is necessary and it is right," Mr Ferguson said.
"We need to meet these responsibilities."
Treasurer Michael Ferguson says the government plans to return the budget to surplus in 2029/30. (Rob Blakers/AAP PHOTOS)
Mr Ferguson indicated the government would aim to ease back on borrowings once a surplus was achieved.
The Liberals plan to find $450 million in savings across government departments across four years, an increase from a previous $300 million target.
Unions had already pledged to fight the savings measure, fearing jobs would be lost.
Labor opposition MP Josh Willie said the budget was the worst in the state's history.
"There is no pathway to surplus, no plan to pay down debt and no plan to improve our essential services," he said.
"After 10 years in office, the Liberals have mortgaged Tasmania's future."
Mr Ferguson said the levels of net debt were manageable, adding it remained low compared to other states and territories.
"(It is) the third lowest as a percentage of gross state product, the key measure of the productive value of our economy," he said.
The Liberals are dealing with a writedown in GST revenue - $390 million less than expected across forward estimates.
The budget also allocates $355 million of the state's $375 million contribution to a new 23,000-seat waterfront AFL stadium in Hobart.
The budget includes $355 million towards the construction of a new AFL stadium in Hobart. (Ethan James/AAP PHOTOS)
TASMANIA'S BUDGET 2024/25
* Deficit: $793 million
* Revenue: $8.95 billion
* Expenditure: $9.7 billion
* Net debt: $5.4 billion
* GST revenue: $3.52 billion
* Unemployment: 4.25 per cent
* Economic growth (2023/24): Two per cent
* Five biggest spending areas: health (32 per cent), education (24), public order and safety (nine), social protection (seven), economic affairs (six).
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