Chalmers has reached for steadiness in unsteady times. One man could unravel all of his plans – SMH.com.au
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A man cannot live on Treasury briefings alone, and in preparing his fifth budget, Treasurer Jim Chalmers took up lap-swimming for its meditative calm. He went running to expend the nervous energy that defines his character, and he read, to broaden his perspective.
Two of the books that Chalmers read are strikingly relevant to the moment.
The first was Chokepoints, by Edward Fishman, a former US State Department and Treasury official in the Obama administration.
It examines the choke points at which trade can be squeezed, like a boot on the neck of global prosperity.
One choke point – the small body of water called the Strait of Hormuz – has a chokehold on this budget.
The economic forecasts that underlie Chalmers’ budget are a pick-a-path, depending on the whims of the man in the White House and his fearsome Iranian adversaries.
In one scenario, inflation peaks at a painful 5 per cent. In another scenario, oil prices reach $200 a barrel and inflation rises above 7 per cent.
As Budget Paper 1 puts it: “There are significant risks surrounding the economic forecasts, particularly in relation to the duration of the conflict and disruption in the Middle East.”
In other words, the earnest forecasts and estimates in this document could be proven wrong tomorrow. Trying to predict anything in this environment is like tap-dancing on jelly.
The other book on Chalmers’ night-stand was Peak Human, by Johan Norberg.
It is an examination of seven golden ages of history – from Ancient Greece and the Roman Empire, to the Abbasid Caliphate and the Anglosphere (the latter’s seat of empire is looking decidedly unhealthy this week).
Peak Human examines how societies flourish when they are open to ideas and people. But progress and enlightenment are not self-sustaining.
Golden ages end when elites defend their interests, when economies are mismanaged, societies close to new people, and when marauding armies invade.
Chalmers is exquisitely aware that his government’s own golden age could end at any moment.
China’s Song Dynasty expired when the Mongols invaded, as did the Abbasid Caliphate (which encompassed the contemporary civilisation that US President Donald Trump recently threatened to wipe out).
Last weekend’s byelection in Farrer heralded an outsider disruption of another sort, with the firm assertion of One Nation into the mainstream of federal politics.
The Mongol armies are mostly troubling the Coalition for now. But they’re coming for Labor next.
With this budget, Chalmers knows his window of opportunity is small, but his task is enormous: to defend Australia’s golden age of prosperity – the incredible economic boom we have enjoyed since the recession of the 1990s, which has lifted living standards and brought wealth to ordinary working people.
But prosperity does not automatically endure. Things fall apart. Which is another way of saying that younger generations are not experiencing anything near a golden age.
Chalmers is gambling on a growing awareness among Australians, young and old, that the light is fading.
He is gambling against self-interest; betting on the fact that enough older Australians acknowledge the generational inequity, and will support his property tax reforms.
Changes to negative gearing and capital gains tax breaks have been discussed by Treasury wonks and certain less-timid politicians for decades. This treasurer is the one to institute them.
But in other respects, Chalmers has been less than bold.
He did not want to attract the ire of Reserve Bank Governor Michele Bullock, who last week pointedly warned governments not to put money in the pockets of voters and thereby put upwards pressure on inflation.
So he hasn’t splashed cash, but he has quietly slipped wage earners a few bob – notably with his WATO (working Australians tax offset), a $250 treat we will get from the 2027-28 financial year onwards (surely all this global uncertainty will be sorted out by then?).
He has also given all workers an instant tax deduction of $1000, and he has quietly increased the Medicare levy low-income threshold, which provides cost-of-living relief to the country’s poorest.
But the budget deficit for the coming financial year is $31.5 billion. This is an improvement of $2.8 billion compared with the Mid-Year Fiscal and Economic Update, but it’s still a pretty big number.
Gross debt is projected to be a trillion dollars at the end of the 2027 financial year.
We will reach a surplus of 0.8 per cent of GDP in 2036-37. That’s when the budget will start reaping the full benefit of Chalmers’ tax changes, and the planned cuts to the National Disability Insurance Scheme.
It’s also so far away as to be more or less fictional.
In his innermost heart of hearts, Chalmers must be hoping that in 10 years’ time, he will be in or approaching The Lodge, the next generation of an Albanese golden age.
Will this budget be enough to steer him there? It is an earnest attempt at realignment, from old to young, from the wealthy to the wage earners. It is a reach for steadiness in unsteady times.
Now it’s on Chalmers to sell it to a cynical public, and then defend it from the lobbyists, the disgruntled and the critics. They are all amassing at the city walls, ready to storm in.
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