Jim Chalmers’s fourth budget will be a plan for the next five weeks, rather than the next five years.
This is the essential political criticism that opposition Treasury spokesman Angus Taylor will make.
Economists are generally in agreement, the caveat being that if Peter Dutton keeps ticking off Labor policy and spending announcements then the Coalition’s plan may not be much better.
The chief concern is there is a dangerous lack of foresight, or fiscal acknowledgment, beyond the rhetorical about what is coming down the pike at Australia in an increasingly volatile world. To put it simply, the future is looking potentially far more expensive than the budget and Labor are geared for.
The fundamental budget equation – spending less than we earn – is one that appears to have been abandoned. And this challenge is only going to escalate.
Economist Chris Richardson says that while Cyclone Alfred may have been the reason we are having a budget, Cyclone Trump is the reason the budget will fail to meet the challenges ahead. While there will be an extensive statement of risks in the budget papers, as there most often is, Donald Trump is unlikely to feature heavily among them.
This will be an omission that could have a bigger impact on the budget than anything else.
“Because it wasn’t the plan, the budget won’t have amazing stuff in it,” says Richardson. “But (Trump) has implications for the budget.
“What he is doing around alliances could make the future rather more expensive for Australia. I’m less concerned around April 2 and what dumb things they do around tariffs, as it will only hurt the US more than anyone else, it’s more what we do with things like defence spending. It won’t be easy. And broadly the future looks more expensive than it would otherwise have been.”
What concerns economists such as Richardson the most is the unknown budget pressures of the broader geopolitical challenge. “We just do not have a budget that is match fit for what looks increasingly likely to lie ahead,” he says.
There are risks and pressure on both sides of the spending/revenue equation which could make Tuesday’s budget and its forecasts quickly redundant.
Chalmers is managing expectations with the claim that there won’t be many big ticket items to announce, presumably in an effort to demonstrate some fiscal responsibility. And that’s because many of them have been announced, with the bill for the post-Christmas election promise splurge already closing in on $20bn. And Labor will want to retain as many as possible for the election campaign itself. Clearly, the Albanese government is using a calculus that nobody cares much anymore about debts and deficits, and are waiting with their hands outstretched.
Despite Chalmers’ efforts to define the budget as a work in progress in addressing inherited debt and deficit, its role as an entirely political project ahead of the election campaign means it is inherently flawed as an economic and fiscal document.
Its message of optimism is likely to be tempered, but its central theme will be that the economy has turned the corner. The problem is that it is unclear what direction it is now heading.
Richardson agrees with Taylor’s assessment that the budget will be a plan for the next five weeks rather than the next five years as a consequence of its timing, noting that this will be the third pre-election budget in a row to be held earlier than its due date in May. “The reply might be that the opposition policies are now so aligned to the government’s that it is a case of ‘right back at you’,” he says.
Richardson has another equation that he uses to assess the budget. Cowards and hypocrites. If the budget and budget in-reply reflect the cowards’ approach, then Richardson says we will need hypocrites after the election. In other words, there will have to be a reckoning of truth versus fiction following the election.
Richardson favours the Seinfeld analogy. “It is an election about nothing, and we are shying away from the things that matter,” he says. Whether it is the problem with spending and taxation, and the structural deterioration of the budget itself, he says the budget has become “fat and lazy”. “We just have to hope that whoever wins the election are hypocrites,” he says. “There are things that need to be done that neither side are even talking about.”
The reason is the electorate hasn’t been in the habit of rewarding the truth-tellers.
The federal budget graph you need to see
From ballooning debt to taxpayers’ share of government receipts, these are the five budget charts that tell the story.
Back-to-back rate cuts unlikely despite inflation drop
The Reserve Bank is unlikely to deliver a second consecutive rate cut when its new board meets next week, keeping the cash rate at 4.1 per cent through the impending election campaign.