Tasmania is forecast to plunge into a record $4.4 billion of net debt as it embarks on a landmark infrastructure spend to rebuild its coronavirus-hit economy.
Premier and Treasurer Peter Gutwein on Thursday unveiled the island state's 2020/21 budget, which has been forced into the red by the pandemic.
It is headlined by $5 billion for infrastructure over four years, with about half of that set aside for roads and bridges.
To help facilitate the spending, the state's net debt is predicted to grow from $1.9 billion this financial year to almost $4.4 billion in 2023/24.
Mr Gutwein said the debt level is manageable and the smallest of any state or territory but refused to say when it will be paid off.
"Now is not the time to step down, it's a time to step up. This is the budget for our times," he said, describing it as the most important he has delivered.
The infrastructure program, $1 billion of which will be spent over the next two years, includes money for previously announced projects such as the Bridgewater Bridge north of Hobart.
"This is the largest and most significant infrastructure spend in state history," Mr Gutwein said, adding it will support 25,000 jobs over four years.
Tasmania was net debt free in 2019/20.
The state's Labor opposition was somewhat forgiving about increasing debt levels but believes the massive infrastructure spend is misguided.
"We know all governments around the world are looking at significant debt, but the test will be, what have we got to show for that debt," MP David O'Byrne said.
"Heading into covid, we already had the worst health and hospital systems in the nation
"This investment barely keeps up with inflation."
The state's economy will shrink by 1.5 per cent in 2020/21 on the back of virus restrictions and a hard border closure with mainland Australia for seven months, but is expected to grow by 3.75 per cent in 2021/22.
At the peak of the pandemic, 19,200 Tasmanians lost their jobs but about two-thirds have since returned to work.
Tasmania's GST receipts are expected to be $347 million lower this year, as a result of a contraction in the national pool.
Last financial year's budget was tipped to deliver a $57 million surplus, but that slid to a $338 million deficit under figures revised after the pandemic struck.
The 2020/21 deficit will be $1.1 billion.
The budget papers forecast an improved $281 million deficit in 2022/23, with a thin $15 million surplus the financial year following.
Almost $400 million will be spent over four years on health upgrades, including almost $90 million for developments to the Royal Hobart Hospital.
The state government is helping hospitality businesses with their energy bills to the cost of $10 million and is waiving liquor licensing fees for 2021.
To help entice tourists back to the state, $68 million is going towards Cradle Mountain facilities and $19.4 million for the next "iconic walk" in the Tyndall Ranges.
The government is also getting greener, with its vehicle fleet to transition to all electric by 2030.
TAS BUDGET 2020/21:
Deficit: $1.1 billion
Revenue: $6.4 billion
Expenditure: $7.5 billion
Net debt (2020/21): $1.9 billion
GST revenue: $2.2 billion
Unemployment: 8.5 per cent
Growth: -1.5 per cent