Jim Chalmers creates a little wriggle room for future

Treasurer Jim Chalmers in Canberra on Wednesday. Picture: NCA NewsWire / Andrew Taylor

Jim Chalmers appears to have engaged in a deliberate political strategy to talk down the Australian economy.

This shouldn’t be a surprise.

All new incoming governments do it to a point. Even returning governments have done it.

Newly minted chief executives are renowned for it. It’s about resetting the bar for their own future achievements.

The Treasurer’s gambit for the short term is managing expectations around what he can do and what he knows he needs to do.

And on this Chalmers isn’t necessarily being disingenuous. Despite the charter of budget honesty making it difficult to cook the books before an election, there may well be pressures on the budget that haven’t been written in.

The problem is that his assessment jars with the bigger picture of the national economy. Some economists believe that the national accounts show it was off to a bright start in the first quarter of this year despite the dampening effect of Omicron.

With the Reserve Bank having last year set employment as the measure of strength over growth, and indeed Chalmers himself having set the same marker, an unemployment rate of 3.9 per cent would suggest “mission accomplished”.

In terms of the post-pandemic recovery, Australia’s economic success is still world leading.

By attempting to weave a narrative that the starting point is worse, Chalmers is lowering the expectations of what success under his stewardship will look like. The Treasurer is looking for as much wriggle room as he can find to bend the levers available to him in the direction he needs to go.

Chalmers knows there are hard decisions he will have to make, hence the recasting of the new government’s starting position. The National Disability Insurance Scheme spending trajectory is a glaring example.

But there are even greater challenges ahead which will require fiscal and political hard-headedness.

One of those is what Chalmers rightly suggests was a perfect storm on energy prices.

But the greatest pain felt in middle Australian will be from rising interest rates, considering Australians already hold the largest level of household debt in history.

While Chalmers is being politically consistent with his approach to managing expectations, he won’t be able to avoid the inevitable – that all this will eventually become the Albanese government’s responsibility.