Federal Budget 2022: Wild ride ahead in global downturn

As the world braces for a potential third downturn in a decade and a half, there are more difficult decisions to be made, writes Matthew Killoran.

Strap in, because the next few years are going to be turbulent.

There are cuts in this budget and no tax offsets to soften the blow, and Treasurer Jim Chalmers is making no secret of the fact that there is more to come.

As the world braces for a potential third downturn in a decade and a half, the global financial crisis, Covid-19 and now the uncertain post-Covid world, there are difficult decisions to be made.

But this budget was just tinkering around the edges.

The $22 billion in highly publicised savings, cuts and “reprioritisations” just scratch the surface when the nation’s gross debt is set to hit $1 trillion in the next financial year.

Mr Chalmers didn’t shy away from the theatrics when warning of the very real difficulties facing the economy and was blunt in saying what it means.

Treasurer Jim Chalmers prior to his handing down the October 2022 Federal Budget. Picture: NCA NewsWire / Gary Ramage

He spelled out that this is not a single budget task, but there will be tough calls to make and there will be losers out of it.

The realities of government are already setting in for the fledgling Albanese Government.

The multinational company tax crackdown is forecast to reap in just $950 million, about half of the $1.8 billion promised at the election, while the pledge to cut electricity prices by $275 has been downgraded in its rhetoric to modelling done before the election.

There have been tough calls made in this budget, but unfortunately it has been regional Queensland’s water projects copping the cuts.

This was not a budget to spook voters so soon after a narrowly won election. It was a budget to set the scene of dark times ahead.

The tougher decisions, both for taxpayers financially and for Labor politically, will start being made from the May budget and beyond.

And changes to the stage 3 tax cuts remain on the cards.

There is some good news. While unemployment is forecast to be higher than thought only in March it will still be below 5 per cent, once considered full employment.

Inflation will be higher for longer, but fall to 3.5 per cent by 2023-24 and but within the Reserve Banks target range the following financial year.

But Mr Chalmers will face great challenges in seeing his budget and the first term in government through to a soft landing.