Christmas is meant to be a celebration of the birth of Christ. We give and get gifts, just as the baby Messiah received gold, mir and frankincense from the three wisemen. Ahead of December 25 the Treasurer gives us the ‘gift’ of an insight into how our national budget bottom line is going. This year looks like Dr Jim Chalmers has delivered us a dud present that we’d love to send back.

The ‘gift’ is called MYEFO or Mid-Year Economic and Fiscal Outlook.

Listening to the Treasurer, he really tried to convince us that this was a pretty good present outlining rising real wages, falling inflation, the avoidance of rising unemployment and better economic outcomes for those with a disability, which is all true. However, it ignored that the number crunchers who specialise in assessing public finances are seeing these gifts from the Treasurer and the Albanese Government as too expensive.

And what will be owed suggests that Australians down the track are bound to cop a Treasurer after the next election who’ll say: “It’s time for a horror budget so we can avoid higher taxes and interest rates for a long period of time. And we will have to cut government spending as well. But it’s not our fault, we’re just doing the responsible thing.

Dr Jim didn’t have to do this when he took the reins of our finances because luck was running his way. How come? Well, the Russian invasion of Ukraine led to a commodity price boom that gave his government a big windfall in taxes from miners and other commodity producers. Inflation was high so as wages rose, bracket creep gave the government more of our taxes. And while we were expecting about 400,000 immigrants, we ended up with close to 1 million!

This is how ipa.org.au reported the huge number: “In the 2023-24 financial year, a total of 1.1 million new migrants entered Australia, which is the highest in recorded history, and is the second year in a row where more than one million migrants have entered the country.”

These numbers could be disputed but even the ABS says over 2022-23 and then 2023-24 there were close to a million arrivals from overseas, with the trend totals on the slide.

This surge of new people adds to demand and income, as well as inflation, and then taxes roll into Canberra.

Now inflation is falling, commodity prices have had a shocker of a year and immigration is falling, which the Government imposed as a way to bring inflation down and hose down public concerns about excessively high immigration rates.

Luck created the huge surpluses both Jim Chalmers and Josh Frydenberg were happy to announce. However, bad luck and some generous policy decisions under the former Treasurer, such as big wage rises, generous tax cuts and NDIS spending that defied good sense, have now left the Budget in pretty bad shape.

The AFR’s editorial was damning saying that “Labor is effectively doubling down on the bigger spending on bigger government that has crowded out private investment. It adds up to deeper deficits and continued sluggish economic growth”.

What is argued is that when the government sector overspends, it helps interest rates rise and/or stay high and the private sector, which borrows money to grow, gets crowded out in competing for money so it grows more slowly.

Our economy grew by 0.8% in the year to September. That’s weak. Economists keep telling us we are in a per capita recession, which means if you measure what we produce, which is equal to the income we produce, and divide it by the number of people who live here, then income per Aussie is falling, not growing!

So, let’s look at these worrying budget numbers, as explained by the AFR:

1. On the good news front, there was a reported a $1.3 billion improvement in this year’s deficit.
2. Bad news wise, the cumulative deficit for the next four years is $143.9 billion, up $22 billion compared to the $122.1 billion forecast in the May budget. Whoops!
3. Overspending on off-budget items such as theClean Energy Finance Corporation, Snowy Hydro 2.0, and the National Reconstruction Fund, actually make the real budget deficit even more scary as it pushes the real cumulative deficit to $233 billion.
4. Company tax receipts have been written down by $8.5 billion.
5. Indexation of welfare payments added to the big deficit, but that’s linked to inflation the Treasurer didn’t help sufficiently to lower.
6. The billion dollar increase of spending on what’s now called the “care economy” also boosted the deficit.
7. “Stashed away in the MYEFO is $5.5 billion in unannounced pre-election spending decisions, including the extra cost of living relief already flagged by Chalmers,” the AFR team explained.

The bottom line for the Budget’s disastrous deficit deterioration is that the Albanese Government’s caring decisions to look after many of the people who vote for them i.e. unionists and lower income Australians, combined with bad luck and some bad decisions on say immigration and overspending on well-intentioned environmental goals, has delivered a real pickle for future Treasurers and Governments.