No one is seriously telling us that we’re heading into recession, even though the world economy and the US are looking more likely to slip into negative economic growth for two or more quarters. Europe looks like a certainty to go into recession, the US is a good chance but we might dodge it, as we did in the GFC.

And Dr Jim Chalmers might end up getting the award as the world’s best finance minister, as Wayne Swan did after the GFC and Paul Keating in 1984, when he and Bob Hawke brought on the floating of the dollar, financial deregulation and got the unions to link pay rises to productivity.

Deloitte says Chalmers’ October 25 Budget will be helped by $114 billion worth of windfall revenue, which might mean his fiscal efforts won’t add to the economic negatives out there that could cause a recession. These include higher energy prices, inflation remaining too high, central bank interest rate rises, the Ukraine war, the UK in an economic mess and all the negativity this has pushed on to stock markets as well as business and consumer confidence.

With all this on board, this from the SMH’s Shane Wright is worth noting: “Treasurer Jim Chalmers says he is prepared to make last-minute changes to this month’s budget to avoid inflicting financial pain on the country as the International Monetary Fund warns the global economy is on the cusp of a recession.”

Like me, Dr Jim thinks we can dodge a recession, and it means his first Budget can’t be a horror budget.

The IMF thinks our growth will fall to 1.9% in 2023 with inflation around 4.8%, but earlier this year its guesses were 2.5% for growth and 2.7% for inflation, so they’re expecting our economic life to be a lot harder next year.

But the IMF crystal ball isn’t seeing a recession looming for us, and Dr Jim’s talk before he headed to Washington for the G20 finance ministers meeting, suggests we shouldn’t expect hard-to-swallow economic ‘medicine’ from the good doctor on October 25. Given the threatening international winds out there that could wreak havoc on the economy, a sensible Budget is needed.

If there was no Ukraine war and China hadn’t embarked on a silly zero Covid policy, the world could be in a better inflation and interest rate place. Then a Treasurer could have played a harder budget game, which would have taken pressure off the Reserve Bank to use interest rates to slow down inflation.

Once the economy is growing nicely, that’s when Dr Jim will have to play hardball but he will have to hit us fiscally some time. The budget deficit is falling faster than expected but it’s still set to be around $60.7 billion — but that’s a lot lower than the $78 billion tipped only in March, though it’s still way too high.

By next financial year, Deloitte calculates it should be down to $42.5 billion, but that’s a long way from the preferred balanced budget most Treasurers would be proud of. But we did dodge a Great Depression bullet via big government spending and record low interest rates.

We’re now in payback territory and the Treasurer can’t go too soft.

Interestingly, Deloitte backs the stage three tax cuts.

“In the firm’s flagship pre-budget report, Mr Smith [of Deloitte] also backed the stage three tax cuts,” Patrick Commins reported. “He said the three-step personal income tax reforms legislated with Labor’s reluctant backing under the former government had always been “decent policy”, but that the benefits had been lost in the recent public debate about whether they should be scrapped.”

If we go into a slowdown in 2023, tax cuts could be what the doctor ordered!

By the way, if recessions do happen in 2023, inflation and interest rates will fall, and that will be good for stocks. The world of stock markets is a weird world.