Jim Chalmers starts poll tax-cut war as reality lurks around corner

Jim Chalmers delivering his fourth budget speech on Tuesday night. Picture: Getty Images

Jim Chalmers is convinced the economy is “turning the corner” but the problem is that lurking around that corner is a gang of debt collectors, repo men and Trump tariffs about to mug the Treasurer and voters with a big dose of reality.

Somebody is going to have pay the bill for a decade of deficits, growing debt and unchallenged spending in a world of uncertainty. And whether the public thinks a short-term gain is preferable to long-term economic pain from those thugs waiting around that corner is now the basis of the election campaign that Chalmers has kicked off.

After declaring his budget would put the economy front and centre and would have fewer surprises than the normal political pre-election budget, Chalmers pulled out a big, political surprise and offered little for an economy “front and centre”.

Chalmers’s tightly held “tax cuts for everyone” – a “modest” $5 to start – was a great political ploy aimed at wedging Peter Dutton over tax and spending cuts as the Opposition Leader faces the pressure of responding to the budget within weeks of an election.

Chalmers was presenting Dutton with the choice of opposing the tax cuts, matching the $5 or raising the bid.

The Coalition’s outright rejection of Labor’s tax cut as a “cruel hoax” designed for a five-week campaign and not a five-year outlook immediately put the focus on continuing giveaways or more rigorous economic management.

It’s always a political given that you don’t oppose tax cuts from opposition but Chalmers has forced a showdown over tax at a time when he was promising to be economically responsible.

Of course, opposition Treasury spokesman Angus Taylor in deriding the tax cuts as a hoax left open the possibility of tax cuts from the Coalition that weren’t a “hoax”.

Tax has now joined cost of ­living as the key issues at the 2025 election.

The message from Tuesday’s budget being sent about Australia’s longer term economic outlook is another grim chapter in years of failure to boost productivity, reform tax and encourage investment.

There is also no sign of any change from the Labor government’s position of embracing a ­renewables-only energy plan that is the underlying cause of the “priority” cost-of-living crisis and runs through the hearts and minds of ministers and MPs.

Indeed, there is a doubling down in the budget on spending on green metals and green hydrogen even as the private sector abandons the green dreams and state governments extend the life of coal-fired power stations.

As part of Chalmers’ “passion” in pursuing the aim of net zero emissions and the transition from hydrocarbons to renewables, he announced $3bn in the budget to support the production of green metals and green hydrogen.

“This will help develop new industries in clean energy, green metals and low carbon liquid fuels and unlock private investment,” Chalmers said.

He bases his tax cut promise on optimistic forecasts in the face of his own portrait of an exceptional Australia outperforming our trading partners, allies, peers and competitors, despite his warnings of potential global failings.

“The budget builds on the progress we’ve made together,” Chalmers said as he opened the election tax cut war.

“Our economy is turning the corner,” he said.

“Our $17bn in tax cuts are the biggest part of the responsible cost-of-living package in this budget,” he added.

Yet there is a counterbalance to this deserved cost-of-living relief in the wider economic approach from Labor which includes growing debt, a decade of deficits, $34bn in new spending in the budget and more than $100bn “off-budget”.

When asked about his optimistic forecasts, Chalmers told The Australian that he was an “optimistic fella”.