Government pushing Australia into more debt, and the business and investment outlook looks grim

Curtis Island natural gas and LNG plant operated by ConocoPhillips.

I have been covering budgets for the past 51 years. I have never seen anything remotely like the future landscape ushered in by the 2025 budget.

The creation of $70bn annual cash deficits extending into the foreseeable future where both major parties believe that high deficit spending is essential to gain votes completely changes the Australian business and investment outlook.

The new era is going to be a lot tougher, starting with interest rates higher than they would otherwise need to be and a currency that will periodically be trashed by global traders.

That might come when the traders realise that the actual cash deficits are set to go beyond $100bn when we spend the US required 3 per cent of GDP on defence or risk the ANZUS alliance.

Without the ANZUS alliance, defence expenditure would need to be much higher.

And corporate tax revenue is obviously vulnerable to the repercussions of the new Trump tariff rules and levies on Chinese shipping which are set create chaos for our agricultural and other exports.

The new era for business also includes legislated lower productivity and higher power costs that are unsustainably subsidised.

The current energy policies lock in higher power costs requiring higher and higher subsidies.

And to make life even tougher for smaller enterprises, they will see their customers switch to competitors now that employees are able to take business goodwill “out the door” in exchange for higher wages.

It’s now a lot safer to be a one-person or a family “band”.

Hiring is dangerous. Clearly no one told the government this when they decided to ban non-compete clauses in smaller enterprises.

For enterprises to prosper in this new era business, executives and owners will need to be top ­operators unless they are part of government gravy trains or have worked out how to tap into those benefiting from government spending.

Appointing key staff or directors on any basis other than merit is high risk. And for those with US equity or receiving US grants, non-merit employment policies are unlikely to be sustainable.

Australian corporate tax revenue is vulnerable to the fallout from Trump’s new tariffs and levies on Chinese shipping. Picture: Valeriu Campan

Businesses know that endless yearly stimulation via unsustainable cash deficits will eventually come to a bad end.

With costs rising and margins tight, the big government deficits will underline the need to lower corporate cost bases.

At the moment that means culling or not replacing executives who are being paid more than $200,000. My friends in the employment agency business say the number of unemployed executives who were previously earning $200,000-plus is unprecedented. And they are regarded as over-qualified for $100,000 jobs.

They now really welcome the government handouts.

The higher interest rates created by the deficits will be a burden to the 18-30 age group looking to buy dwellings. But it is that younger group plus females who look likely to sweep Anthony Albanese back into power because Opposition Leader Peter Dutton is seen by young people and females as an Australian version of the person they dislike most in public life – Donald Trump.

It looks too late for the ­Coalition to wake up to what has happened.

That’s why the opinion polls are saying that the next government will be Labor/Greens or Labor/teals. That will be very bad for business, and miners will looking to accept Trump’s invitation to mine and treat minerals in low-energy-cost America.

The Greens will have a series of policies they will want funded by the government’s previous ­signature policy – the tax on unrealised gains. This is a vicious tax that will snuff out entrepreneurship in Australia.

Indeed, for investors, arguably the most significant event in the budget was the absence of any mention of the unrealised capital gains tax. The proposed tax was confined by the government to superannuation balances over an unindexed $3m – but the Greens wanted the trigger created by super balances over $2m.

It would soon cover the bulk of superannuation. From there the obvious next step was to fund deficits by applying the tax to all investment assets.

The budget deficits when boosted by defence spending rises are unsustainable, so the tax will return to the ALP agenda.

In terms of investor strategies, both parties look to boost housing. Developers with zoned land will do well despite the interest rate threat. But the local and state government bodies will still work hard to frustrate housing by boosting costs. Many people in their late 20s and 30s have given up on ­owning a house.

Nevertheless, one of the best initiatives in the budget is to boost housing technology.

Clothing retailers are having a terrible time because young people are not buying expensive clothes. But Bunnings and builder suppliers will tap demand.

The key to winning in any industry is to gain a dominant position. Coles and Woolworths are fine if the ALP stays in power.

Geelong's Civic Car Park site at 21 Gheringhap St is identified as a key strategic development site within the CBD retail precinct.

In my next commentary, I plan to set out what I believe Dutton must do to break the cycle we are headed into.

Readers can then compare what he needs to do for the nation and what he actually promises.

At some time in the future, a prime minister of the calibre of Bob Hawke, John Howard or Robert Menzies will emerge to lead us out of the high-spending deficit quagmire being created in the current and likely future parliaments.