Jim Chalmers has always been a big spender, but MYEFO is a joke

Jim Chalmers releasing the mid-year budget update at Parliament House in Canberra. Picture: NewsWire / Martin Ollman

I’ve always thought that MYEFO sounds like a disease that some of us contract just before Christmas.

Don’t get me wrong: it’s important the government updates its budget figures – 12 months is too big a gap without the known changes being disclosed. It tends to come too late in the year for sensible folk to take any notice.

In the past, I’ve compared Jim Chalmers to drunken sailors. But many readers regard this as unfair to inebriated seafarers. So perhaps the simpler term of Hey, Big Spender is more appropriate.

Let’s be clear: the MYEFO tells us what we already suspected: spend-and-tax is Labor’s DNA. Government spending will increase by a staggering 5.7 per cent next year, with government payments accounting for 27.2 per cent of GDP, a figure not “achieved” since the late 1980s, if you ignore Covid spending. Sadly, there are no Peter Walshes or Paul Keatings to take an axe to excessive, inefficient or unjustified government spending.

At least I got a bit of chuckle when Chalmers claimed that “what people will see with the mid-year budget update is a really responsible set of books which reflects the substantial progress that we’ve made cleaning up the budget since we came to office”. Can he be serious?

MYEFO now predicts cumulative deficits over the forward ­estimates of $144bn, a $22bn increase over what was forecast in the May budget. To be sure, there is a slightly lower deficit – still a deficit – this financial year, but it’s essentially a rounding error. There will fact be an extra $17.5bn in spending this financial year, it’s just that revenue (income tax and company tax, in particular) has held up better than expected.

But here’s a key point: we now need to watch the headline budget figure rather concentrate entirely on the underlying cash balance. By shifting so much activity off-budget, the real impact of the Chalmers’s spend-a-thon is only revealed by looking at the headline figure. This is where the effect of the ­entirely politically driven decision to write off a portion of student debt shows up. And all those cute-sounding programs – rewiring, housing, future building Australia – are parked there.

The headline budget deficit this year is $47.8bn compared with the underlying cash deficit of $26.9bn. The cumulative headline deficits over the forward estimates are forecast to be a massive $233bn. After all those years of genuine ­attempts to clean up the books by our longest-serving treasurer, Peter Costello, by shutting down artificial off-budget recording, we are back to where we were and worse.

Jim Chalmers and Finance Minister Katy Gallagher release the mid-year budget update at Parliament House in Canberra. Picture: NewsWire / Martin Ollman

Do you remember when Chalmers as opposition Treasury spokesman taunted the Coalition government for predicting that government debt would exceed $1 trillion? Well, next year, government debt will exceed that figure and some more. Net interest payments go from $15bn this financial year to $27.5bn in 2027-28. You can buy a lot for that sort of figure or, alternatively, offer a meaningful tax cut.

If we look around advanced economies, we see many of them dealing with seemingly intractable budget positions, with deficits sometimes making over 6 per cent of GDP. Think France and the US. Far too many political leaders are incapable of restraining the growth of government spending, let alone actually cutting it.

A great deal of spending is embedded in legislation; benefits quickly become entitlements; and spending programs are defended by politically savvy lobbyists. ­Opposition parties calling for more prudent budget management are quickly labelled peddlers of austerity, creating pain for the most disadvantaged in society. This trick is in Chalmers’s playbook, accusing anyone who even contemplates lower spending of “slash and burn”.

While we may be a few years behind these fiscal embarrassments, it is only luck that led us to being able to record two budget surpluses – thanks to high commodity prices and income tax bracket creep. We are now on a clear downhill trajectory, which could end badly for a small open economy.