In the age of leaked budgets when we get to hear a lot of the good news (while the bad news gets run up the flagpole months or weeks in advance to see what kind of public reaction is likely), we know a lot about this 2023/24 Budget. But what has surprised many is the news that a big budget surplus will be announced by the new Treasurer Dr Jim Chalmers.

And that’s despite the leaks that a lot of spending is going to happen in the financial years going forward. I’ve listed a lot of the ‘nice guy’ spending we’ll hear from Dr Jim tonight. Let me remind you:

1. Higher welfare payments for the unemployed and single parents.
2. $3 billion for the $500 energy bill discounts, which will differ in each state because the price rises haven’t been the same nationally.
3. Cheaper prescription drugs at a cost of $1.2 billion.
4. A package to provide low-income homes.
5. Incentives for businesses to switch from gas to electric appliances.
6. An already announced $5 billion plus allotment of money to reduce childcare fees.

And there’ll be more good news revelations tonight so the newspapers and websites will have great clickbait for eyeballs on Tuesday night and all day Wednesday.

For the normal person, I know the Budget is boring and can’t compete with an episode of Succession or Ted Lasso, but there can often be a Treasurer’s decision that can really be important to you. I think retirees will be keen to get this Budget night over, hoping there are no material changes to franking credits and the cap on what they can have in pension mode. And what about that $3 million super limit, after which tax concessions would be reduced, meaning more tax will be paid.

This went up the flagpole in February, with the AFR reporting that “Treasurer Jim Chalmers has hinted at reining in tax breaks for superannuation balances over $3 million in the May budget, while assuring the vast bulk of savers of no change to concessional tax rates, including for incomes up to $250,000”.

Against this, the AFR has reported: “After raising the spectre of widespread changes to superannuation tax concessions to keep the system ‘sustainable’, the Treasurer moved to ease fears at the same time Prime Minister Anthony Albanese assured there would be no significant change come the May budget”.

No significant change of course doesn’t mean that there’ll be some changes that will affect some people. Very wealthy non-Labor voters could get a shock tonight.

But let’s get back to this leaked $4 billion surplus that we’re expecting tonight, which is the first in 15 years, though Dr Jim will tell us this budget in the black won’t last. And by the way, only seven months ago the Treasurer told us there’d be a Budget deficit of $37 billion!

Understanding why the surplus won’t last is easier to comprehend when you know why it has shown up in the first place. Let me list the reasons, which will also show why it won’t be a long-term thing:

1. The Treasurer will cut some spending in some areas that the Morrison Government had in place to cope with the pandemic and its lockdowns, as well as trying to win an election.
2. Unemployment is at 3.5% and a lot of that came from the previous Government’s spending. (This will rise thanks to 11 interest rate rises and hit the Budget going forward.)
3. Economic growth has been strong and that gives Treasury lots of tax collections and less outlays for the unemployed. (Rate rises will lower growth in coming years.)

Australia economic growth

4. High commodity prices have given the Budget a big windfall and these are likely to fall away over the next year on a comparison basis. (They still might be better than expected but they will be lower than the past couple of years.)
5. Inflation means higher prices and profits and even higher wages that leads to greater tax collections. (Inflation is falling and that won’t help the Budget’s future bottom lines.)
6. The Treasurer says he’s banking the revenue windfalls, such as iron ore prices at $US103 a tonne when the Budget has been tipping $55-60 a tonne. (Iron ore prices will fall but they still might be higher than what Treasury forecasts.)
7. Eleven interest rate rises and the mortgage cliff is coming for the economy and we don’t know how hard it will hit economic growth and then future Budgets’ bottom lines.

I’m guessing what happens to future Budgets and so is the Treasurer and his Treasury team, who do all the hard work calculating what lies out there. But one thing’s clear — the future isn’t clear and as a consequence Treasury isn’t good at guessing our economic future. Why do I say that?

Well, in October only last year they thought this Budget surplus of $4 billion would be a $37 billion deficit!

That’s a big miss and not only suggests these guys can’t count, but more to the point ‘guessing’ what economies do is a damn hard job!

Why? Try:

1. A Putin war and the impact on oil prices.
2. Eleven interest rate rises in less than a year and people still keep spending and house prices resume rising!
3. Guessing what China might do economically and politically.
4. Pandemics!
5. Lockdowns!
6. And despite all this, times are good enough to deliver 3.5% unemployment!

I rest my case.