Don’t be fooled, Treasurer Jim Chalmers will be spending big in this year’s Budget

Treasurer Jim Chalmers’ upcoming Budget will be a big spending affair which will tie us into commitments which last for decades.

Treasurer Jim Chalmers addresses the media at Parliament House, Canberra.

Before all the really intense and widespread noise erupts, let’s get this one utterly irrefutable, absolutely core, fact about next Tuesday’s Budget on the record.

Treasurer’s Jim Chalmers’ second Budget will be a big-spending one, splashing money around not just next year and years into the future, but building in spending programs decades into the future.

Further, this big spending will itself all be built on the, for want of a better word, the foundation of his first Budget last October, which was itself a big-spending splash-the-cash around exercise.

Then marry that fact with the reality that it’s only been ‘possible’ because of the massive inflow of revenue from the soaring exports – both volumes and prices – of iron ore, coal and gas; all spewing out CO2 ‘over there’.

Back in 2019, then Treasurer Josh Frydenberg projected the Commonwealth government would spend $558bn in the 2022-23 financial year that is just drawing to a close.

Remember Frydenberg? He used to be the next Coalition/Liberal prime minister.

Now sure, then along came Covid and spending – most notably and obviously JobKeeper – exploded.

But that was, and to some extent actually was, wound back.

Frydenberg’s last budget, in March 2022, projected a 5 per cent real fall in spending to $626bn in this 2022-23 year.

But note, that was already up a thumping $68bn on what had been projected pre-Covid, for this year. You might say, the fiscal version of ‘Long Covid’.

Then along came an election in May last year; and as they say, elections have consequences, and one of those consequences was a certain Jim Chalmers becoming treasurer.

A little bit of pork-barrelling here. A little bit there. Fiscal free-lunches just proving more expensive that ‘anticipated’….

And the Chalmers budget projected spending of $644bn in 2022-23.

That’s to say, already $18bn up on Frydenberg’s last effort and thus a thumping $86bn higher than had originally been projected back in 2019 when the world was still half-sane.

OK, so one might assume that the deficit, to be revealed next Tuesday will have exploded.

No, as we know, because revenue has exploded to keep pace.

Back in 2019, Frydenberg had projected revenue of $567bn in 2022-23. Last March he cut that back to $548bn.

But Chalmers had upped it a thumping near-$60bn to $607bn last October; and next Tuesday he’s going to up it again by at least a further $20bn.

It’s almost all coming from those wicked exports, but also with a little bit of help from surging income tax thanks to inflation bracket creep, along with the massive surge in migration pushing up the number of taxable incomes.

The absolutely core point about all this is that we are right now reaping a golden revenue harvest – and locking in future spending on it.

But what about tomorrow and reality?

Will both the high prices for commodities and the demand be sustained?

That’s unanswerable, but what is crystal clear is that we are going to have to pay for the huge population increase.

Right now, in fiscal terms, it’s all a plus. But tomorrow, it’s costs – healthcare, infrastructure, and all the rest.

Deficits and exploding debt await.

Originally published as Don’t be fooled, Treasurer Jim Chalmers will be spending big in this year’s Budget