Tasmanian Treasurer Eriz Abetz has defended plans to cut thousands of public sector jobs to help address a forecast $1 billion budget deficit.

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The Liberal government's interim 2025/26 budget, handed down on Thursday, forecast a deficit of $1.01 billion in 2025/26 and predicted state debt would rise from a current $5 billion to more than $10 billion in 2028/29.

Mr Abetz says 2800 public servants must be let go through to 2032 to help rebalance Tasmania's finances and has mandated state agencies find $150 million in annual savings from 2026/27.

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