Treasurer Jim Chalmers is getting us ready for some scary times ahead, describing our immediate future as “confronting”. This is ahead of his G20 meeting of money men and women for the world’s top economies in Washington.

Of course, he’s not telling economists (like yours truly) anything that we’d call new but he’s getting our nation of voters prepared that he could be linked to some tough times ahead, with his Budget due out on 9 May. Interestingly, Dr Jim could be a bearer of bad news at 7:30 pm on that day as he juggles his big budget deficit, with a world economy set to be in a massive production slowdown. And he could be a big contributor to this likely economic slowdown, if the SMH’s Shayne Wright is right. Only three days ago he told us that “…more than 10 million middle-income Australians will face one of the largest tax increases in history after the May federal budget as households deal with rapid increases in interest rates and cost-of-living surges”.

We knew that was likely for anyone shifting off low interest fixed rate loans to higher variable rate loans, but most Aussies didn’t have a clue that a former Turnbull/Morrison Governments’ tax break was to be dumped!

“People earning under $126,000 a year will have up to $1,500 less in their pockets because of the end of the $11 billion super-sized low- and middle-income tax offset that was put in place in the dying days of the Morrison government,” Wright wrote.

“A person earning $50,000 a year will suffer a 3.4 per cent or $29 a week cut in their after-tax income when the offset ends while someone on the average wage of $90,000 will take a 2.1 per cent hit. A person on $100,000 will be $1,200 worse off with the end of the offset.”

In case you forgot about this little tax gift, Wright explained it this way: “Originally set at $530 and delivered to people earning between $37,000 and $126,000, it was increased to $1,080 just ahead of the 2019 election. The offset is paid when people complete their annual tax returns, with most cash flowing to households between July and October.”

It was a generous tax break and maybe should go but Dr Jim must think about the timing of it given:

1. His own warning about the global economic slowdown.
2. 10 interest rate rises in a row that will eventually smash local consumers and businesses.
3. The so-called mortgage cliff set to hit 880,000 families with fixed rate home loans that will end this year.
4. The elevated price of petrol, power bills and imports we buy with a relatively low dollar.
5. The world still has the worry about the banking system.
6. The Russian war is not helping global demand and the economic future of the combined European economy.
7. CNBC today ran with this headline: “Bank of America gives its best investing plays for the start of a recession!”

On top of the above challenges that will either hit us directly or indirectly, the US is heading into recession as well. Given all the above, Dr Jim should not be producing a “horror budget” but should be stimulating the economy.

He even showed how much he understands, as the AFR reported today: “Recent tremors in global financial markets have increased uncertainty and downside risks, and the IMF is now forecasting the weakest five-year period for global growth in more than three decades”.

However, the Treasurer must deal with all the above about the economy and his role in taking money off us and then warning us about how our economy will slow down, causing job losses.

This highlights his political problem as well because Treasurers like to have a tough budget or two to get bad news out of the way so they can be generous in the year before the election in 2025.

Dr Jim should also know that playing scrooge for responsible money-managing reasons when an economy is slowing down can throw an economy into a recession. This is because a recession reduces tax collections as the unemployment rate rises and then the Treasurer must pay out more for those thrown on to the dole!

That low- and middle-income earners tax break (or LMITO, which was nicknamed the Lamington tax break) should go but with all this predicted bad economic news, 2023 is not the year to do it, Dr Jim. That’s what an economic adviser should say and it would contrast with what a political adviser would be telling his Treasurer boss.

It's OK for Dr Jim to scare us now but he shouldn’t be screwing us until the economy is on the up.