One trillion reasons to demolish Jim’s ‘facts’ and fiction

‘Jim Chalmers and Anthony Albanese think we should accept the budget figures as indisputable’. Artwork: Emilia Tortorella.

I always take a novel into the budget lock-up. There is usually some free time between filing my column and the time we are released into the night.

There is a lot in common between the budget and fiction; apart from the figures in the locker and the ones for the coming year, the mass of material presented in the inordinately lengthy budget ­papers is essentially made up.

Yet Jim Chalmers apparently thinks we should simply accept the contents of the tables and graphs as indisputable.

Take this howler: real payments will grow by a mere 1.7 per cent a year over the seven years to 2028-29. If you think that is credible, you probably believe in the Easter Bunny.

And what about this one? The budget has been repaired to the tune of $2.1bn in savings.

When total payments are expected to be $732bn this financial year, these “savings” are not even a rounding error.

One of the most annoying features of this year’s budget is the ridiculous comparisons drawn with the Pre-election Fiscal and Economic Outlook statement released in 2022.

For starters – who cares? But more to the point, these sorts of statements are strongly influenced by the context in which they are written, and things change.

The idea that the Treasurer should give himself some sort of pat on the back because, on some measures, the economic and fiscal parameters show some slight improvement relative to PEFO is ­ridiculous and, some might say, desperate.

The big picture of this budget is ongoing overspending, ongoing deficits and ballooning debt.

Over the forward estimates, government payments go from $777bn to $878bn, with cumulative underlying deficits over the four years coming in at $152bn.

Government spending by 2028-29 is expected to be a full two percentage points of GDP higher than in 2022-23.

This outcome alone should be a source of embarrassment to the government. After all, there is a lot of bragging in the budget speech about the economy having turned the corner, unemployment remaining low and inflation coming down.

This raises the question of why the government can’t see its way clear to balance the budget over the next four years, at the least.

The estimates on gross debt are alarming. Recall the days when Chalmers would tease then treasurer Josh Frydenberg about reaching $1 trillion in debt. This year’s budget predicts this figure will now be reached under Chalmers’s watch, with gross government debt expected to reach $1.022 trillion next financial year.

By the end of the forward estimates, gross debt will have reached $1.22 trillion, or 36.8 per cent of GDP.

There is of course the entirely predictable boast about Australia’s debt position being low by inter­national standards. What is overlooked is the extremely rapid deterioration in our debt position and the fact that net interest payments are now the fastest growing line item in the budget.

Next financial year, interest payments will reach nearly $28bn. At the end of the forward estimates in 2028-29, the figure is above $38bn, 1.2 per cent of GDP.

This raises the very important distinction between the underlying cash position and the headline cash position, the latter taking into account the massive ramp-up in off-budget spending. The Treasurer would rather us think about the first of these measures.

The true state of the budget is really reflected in the bottom line, including off-budget spending. In each case, the headline deficit is significantly greater than the underlying deficit, with the cumulative difference over the forward estimates more than $100bn.

Another area of ongoing concern is Treasury’s inability to estimate future changes in net overseas migration, which is the largest component of population growth. Recall that in last year’s budget, the expected NOM was 260,000. The anticipation is that it will be 335,000, a gap of nearly 30 per cent.

We are also expected to believe that the NOM for the coming fin­ancial year will be 260,000 and in the year after that 225,000.

These assumptions are important because immigration feeds into demand for housing and the need for infrastructure and government services.

It also boosts nominal GDP, which makes the prospect of a recession less likely but does nothing to lift per capita incomes.

Apart from the slight surprise about the cut to the lowest income tax rate, virtually the rest of the budget had been pre-announced, aka leaked.

This contrivance does not add to the allure of the document – quite the reverse.

The real conclusion is we have a government addicted to spending other people’s money and we should expect this to continue if Labor stays in power.

The last treasurer who took the task of balancing the nation’s books seriously was Peter ­Costello.

It’s worth recalling what he said on this issue: “Running a deficit and racking up debt is sending the bill to the next generation.”

To his mind, government debt is not just an economic issue, it’s also a moral one, something Chalmers should take seriously.