This was a budget that was never meant to see the light of day, delivered by a government that is one in name only.
Given the increasingly fraught economic, fiscal and international circumstances we face, a responsible government – had we had one – needed to take urgent action.
This budget fails miserably. It is worse than a Seinfeld budget, as I wrote about last year’s effort. It is a budget of neglect.
Jim Chalmers has doubled down on inflationary spending, with real outlays set to grow by 3 per cent in real terms in 2025-26 – lifting the spending share of GDP to 27 per cent, the highest level since the early 1980s.
During his time as treasurer, outlays have grown at an annual rate of almost 4 per cent, but he expects us to believe this will come down to 1.7 per cent over the next 7 years.
The biggest surprise in the budget is a laughable income tax cut of $268 from mid next year and $536 from July 1, 2027. This is the tax cut you offer when you don’t want to cut taxes.
In any case, it will soon be eaten up by bracket creep by 2031-32, as the budget papers freely admit.
Where Paul Keating lowered the top rate from 60 to 49 per cent in 1985, Jim Chalmers takes two percentage points off the bottom rate – a comparison that points to the gulf in class between the two.
Under this budget, we still face deficits for the foreseeable future – a largely unchanged $179.5bn over the forward estimates.
Even this relies on bracket creep, huge positive parameter variations (including lower costs from the NDIS), Chalmers’ promised spending restraint, and the belief that our underperforming economy will be growing at a rate of 2 .75 per cent in two years.
And far from helping to forestall fiscal crisis or an income tax revolt in the coming decade, this budget has made us more vulnerable to them.
The reality remains that if we eliminate bracket creep today and raise our military spending by 0.7 per cent of GDP by 2034-25, we would have to disband the NDIS to pay for it (absent cuts to pensions, Medicare or other programs).
One day, a real prime minister and treasurer are going to have to come clean on this.
As a former Treasury official, let me offer you some perspectives on the budget – indeed all budgets – that you might not glean from other commentary.
These documents are ‘‘owned’’ by the government, not Treasury. That’s why Jim Chalmers and Katy Gallagher’s names are on the budget papers.
Make no mistake every forecast, projection, assumption, chart and economic description you see has been approved by the Treasurer – or at least his staff.
Treasury will provide early versions of these, but the political red pen strikes out any potentially embarrassing content – whether an obscure footnote or a forecast percentage point.
This is the case for every budget, but particularly so for those, like this one, delivered on the eve of elections.
But the real dishonesty of budgets, including this one, is not to be found in the detailed numbers, charts and descriptions that people focus on.
The mischief is always in the forward estimates. These were introduced as a transparency measure – to shine a light on the future, not just budget year, impact of spending and taxation decisions – but, aided by convenient assumptions and pie-in-the-sky forecasts, they allow governments to paint a false picture of reality.
There is the garden variety deception of our annual revenue upgrades (which do not reflect actual revenue changes, but Treasury’s pessimistic commodity price assumptions dropping out of the numbers), which provide a cover for higher budget year spending.
This ruse will only be exposed when commodity prices one day crash.
But the 2022 PEFO has to take the cake.
Every single claim Jim Chalmers makes about his economic credentials – the improvement in the underlying cash balance under his watch, how much debt has come down, the revenue upgrades he has supposedly banked – is based on comparisons with this document’s Alice In Wonderland forecasts and projections.
The document was put out by Treasury Secretary Steven Kennedy on the eve of the 2022 election, and – in the worst Yes Minister tradition – it has proven highly useful to his political master.
The 2022 PEFO forecast inflation to peak at 4.25 per cent in 2021-22, completely missing the tsunami of bracket creep that flooded into Canberra for Chalmers’ first two budget (undershooting revenue by 1.5 per cent of GDP in 2022-23 and 1.1 per cent in 2023-24).
And it significantly overestimated expected payments (by 2.8 per cent of GDP in 2022-23 and 1.9 per cent in 2023-24).
As a result, the 2022 PEFO predicted that net debt would reach 33.1 per cent of GDP in 2024-25, compared to the 19 per cent estimated for that year.
Yet this document is the straw man Jim Chalmers quotes from burnish his non-existent economic credentials.
If we remove the 2022 PEFO red herring and examine his actual record, each one of his claims falls to the ground. He has not improved the underlying cash balance. Since 2022-23, he has turned a $22bn surplus – caused by bracket creep and booming commodity prices – into a $42bn deficit, a reversal of 2.4 per cent of GDP.
Nor has he paid down a cent of debt, with net debt rising from $491bn in 2022-23 and rising every year on Chalmers’ watch to an expected $620bn in 2025-26.
Jim Chalmers styles himself as a contemporary Paul Keating, but he takes after his mentor Wayne Swan. Like Swan, he prides himself on spending taxpayer money, not saving it, and viscerally resents Keating’s economic rationalism.
But they do differ in one important respect.
Swan famously announced – based on the forecasts – that he had delivered four surpluses, but didn’t deliver one. But Chalmers – determined not set himself a test that he cannot pass – has abandoned any pretence of ever balancing the books.
Not a good thing to be known for as a treasurer.
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