Well, well, well, it looks like ScoMo might’ve had many issues that a lot of voters had problems with but managing a budget deficit within the context of a never-before-endured pandemic with local and global lockdowns wasn’t one of them.

As a consequence, it means the new Treasurer Dr Jim Chalmers has been given a reasonable starting point for his first Budget show-and-tell on October 25.

I wonder if he’ll send Josh Frydenberg a thank you card? Guess not, but most of us who retained our jobs, enjoyed really low interest rates for two years, saw our houses skyrocket in value and now maybe enjoying working from home, might want to remember Josh more kindly in coming years.

The AFR says Dr Chalmers is playing down this better-than-expected budget deficit for the last financial year that ended on June 30. During the election campaign, Treasury had tipped it would be $79.8 billion but it has ended up more like $50 billion lower than that. That’s a big, but good miss! (And it’s why I never place too much confidence in the predictive powers of the Treasury or the Reserve Bank.)

How did this good mistake happen? Try these:

1. Coal and other commodity prices have been high, which brings in taxes.

2. Income taxes collected have been better than expected and the unemployment rate is at 3.5%, which has reduced the outlays on welfare payments.

3. Good company profits have helped.

4. Also, Covid issues and supply chain problems have actually delayed some promised spending.

The AFR’s Phil Coorey says this windfall comes while the Treasurer says there’s no spare cash to sustain the fuel excise price reduction or for better childcare payments, which some families need as interest rates spike.

Dr Chalmers rightfully argues there will be infrastructure spending this year, which has been delayed and there has to be more spending on aged care and vaccine outlays as well as other protective equipment, which could cost $3 billion.

Clearly, it’s great the budget deficit has fallen quicker than expected and the previous Government should get a bit of a pat on the back because they would’ve copped a bagging if it blew out by $50 billion.

That said, Treasurers are helped and hindered by developments that are out of their control, such as commodity prices, international supply chain problems and so on.

Treasury tipped iron ore prices at US$55 a tonne in the previous Budget and they ended up at U$S97 on average.

On the other hand, all that spending to save jobs, businesses and the economy from a potential Great Depression, has turned out to be a gamble that has paid off, considering how quickly the deficit has fallen.

But it’s still going to be about $30 billion and that’s why the Treasurer will play tightwad with the nation’s finances on October 25, and history supports that play. You see, Treasurers play hardball, if they can, with their first Budget that will hopefully set themselves up to be generous in the third year of their reign, just ahead of the next election.

Given his $50 billion windfall, the only idea I think he should consider is to extend the fuel excise reduction until the end of the year, to help bring and keep down our inflation rate. If this spikes in the December quarter (as tipped by the Reserve Bank), then they could increase interest rates too high, which could create a recession next year.

And if something can blow out a budget deficit, it’s a damn recession that blows out the jobless rate, which pumps up welfare payments and reduces tax collections.

That fuel excise play costs about $3 billion over six months, and given the $50 billion surprise, it’s worth the Treasurer considering.

The fuel excise reduction ends next week, so I don’t think he will budge, but it could be a Budget budge he might regret he has taken if inflation spikes and the RBA goes too hard and we end up in a recession next year.