Budget 2022: The pain most are feeling is only the beginning

Whatever optimism Treasurer Jim Chalmers might like to inject into the ­debate, the hard times are ahead of us, not behind. Picture: AAP

Jim Chalmers’ first budget will offer Australians little more than a readers’ digest of economic doom and an unnecessary regurgitation of Labor’s political resume.

Treasury’s downgrade of economic growth should be alarming enough. It gets the country as close to recession as any official forecaster would dare to be.

It also more pessimistic than the Reserve Bank’s predictions – which is troubling in itself considering the monetary policy mission it has embarked on.

What is more concerning, however, is that Treasury clearly believes that this is where we need to be to tame inflation.

Either Treasury believes that the RBA is being too aggressive with interest rates, or it believes the RBA assessment of the inflationary problem is underestimated.

Nevertheless, all this amounts to no new jobs being created over the next 12 months, and 150,000 current employees losing their jobs.

As economist Chris Richardson says, a few eggs need to be broken along the way.

The downward revision of economic growth is self-evidently disturbing.

And worse than the central bankers are letting us believe.

It also means that persistently high inflation reduces the value of every dollar that people earn.

Real wages will continue to decline and stay down for longer.

The central message from the updated forecasts is that life is not only about to get very difficult for most Australians, it is about to get a lot worse before it gets better.

And so is the budget position, despite the obvious uplift that ­inflation would otherwise provide, because of the structural spending disaster to which the ­Albanese government has only contributed.

For those who care less about the public balance sheet than their own, the simple equation is that cost of living will continue to increase and to persist for longer, living standards will decline, and interest rates will continue to rise over the next 12 months.

In other words, whatever pain most people are feeling now, this is only the beginning.

Whatever optimism Chalmers might like to inject into the ­debate, the hard times are ahead of us, not behind.

The revised updates confirm that, yes, the RBA is inflicting damage to the economy but Treasury accepts that this is necessary.

This is the problem for the Treasurer, who appears to have succeeded in resisting the temptation to deliver cost-of-living sugar hits.

The economic downturn is forecast to begin at the same time the budget position is forecast to deteriorate, and long after the acceptable political window to blame the previous government for its predicament.