EDITORIAL: Lack of savings buffer set to haunt Jim Chalmers

It is a catchphrase which has served the managers of household budgets well down the ages. Save for a rainy day.

Now, as war tears apart the Middle East and sends shockwaves in every direction, we can say this. It isn’t just raining. It’s absolutely bucketing down.

Unfortunately for Australians, the Albanese Government doesn’t seem to have paid attention to rain-proofing.

As a reminder, Treasury’s Mid-Year Economic and Fiscal Outlook showed government spending at 26.9 per cent of Gross Domestic Product, the highest level since 1986 outside of COVID.

Budget deficits are forecast to be $36.8 billion this financial year, $34.3b for 2026-27, $36.2b for 2027-28 and $36b for 2028-29. Budget deficits are expected for at least the next decade.

And now the world is in chaos.

No doubt we will hear Treasurer Jim Chalmers use the phrases “volatile and unpredictable” and “uncertain times” in the days ahead.

He’s had plenty of time to rehearse the lines.

Jim Chalmers must read up on history

It’s not as if the last 12 months have been plain sailing for the world economy, dealing with the fallout of US President Donald Trump’s tariff agenda and a Middle East seemingly in constant crisis.

But the notion of saving doesn’t seem to be in the Albanese Government’s vocabulary.

Just witness how they pivot to boasting about spending when challenged about cost of living. Tax cuts. Child-care subsidies. Free TAFE.

But the jig is up. Last month Reserve Bank of Australia governor Michele Bullock shot down Dr Chalmers’ fixation with claiming government spending was not to blame for inflation — and the resulting flow on to interest rate hikes.

At some point our debt will have to be paid back. And it will be younger Australians who will have that burden, even as Dr Chalmers loudly proclaims the need for intergenerational equity.

But back to this rainy day. The war’s impact on petrol prices is already evident. They are up, up, up, amid fears a disruption to gas supplies will hit industrial users with higher prices.

A jump in energy costs, if maintained, could significantly boost inflationary pressures.

A further complication emerged on Wednesday. Australian Bureau of Statistics national accounts data showed Australia’s economy grew at the fastest pace in almost three years in 2025.

Dr Chalmers hailed the “really encouraging numbers”.

But are they actually good news?

Economists regard faster economic growth beyond a certain “speed limit” as inflationary because productivity is still weak.

Productivity in 2025 grew by just 1 per cent and was flat in the December quarter, which means consumers end up paying more as the higher costs of producing goods and services are passed on.

This, in turn, adds to inflation, which at 3.8 per cent is well above the RBA’s 2-3 per cent target.

The government of former prime minister John Howard and treasurer Peter Costello knew about rainy days.

Their fiscal stewardship protected Australia when the global financial crisis hit.

It is to be hoped Dr Chalmers reads up on history.

Responsibility for the editorial comment is taken by Editor-in-Chief Christopher Dore.