Anthony Albanese and Jim Chalmers talk a big game about their fiscal discipline. Yes, they delivered two surpluses in a row for the first time in two decades, off the back of massive revenue upgrades. And their decision to take the budget into deficit last year was justified by the state of the economy, clobbered by the Reserve Bank’s bloody-minded, ideological war on households.

But they’ve ended their first term with the budget in a disastrous state, with deficits over 1% of GDP every year of the Forward Estimates and deficits across the entire medium-term projection of the budget. Interest payments on soaring government debt will soon be heading toward $30 billion a year. And they’ve locked in spending at 26-27% of GDP, a level utterly unsustainable for a budget built on tax revenue of well below 24% of GDP. Labor’s inordinate campaign promises will ostensibly be paid for by what is effectively yet another efficiency dividend on the public service, and by apeing Peter Dutton’s plan to punitively tax foreign students.

Any questions about how this gulf will be addressed are brushed off with references to the two surpluses, as if they’ll somehow magically multiply to erase hundreds of billions of dollars in accumulating debt.

Labor supporters can whinge that the Coalition is no better — and that’s true — but the Coalition isn’t in government. And, worse, the state of the budget confirms that Chalmers has utterly trashed the fiscal legacy of his old boss, Wayne Swan, who was treasurer for the six most difficult economic years in living memory and still delivered an impressive fiscal record as well as a prosperous economy.

Swan is the only treasurer in living memory who actually delivered on fiscal policy over the course of his treasurership. Peter Costello’s reputation for fiscal prudence was based on inflicting punitively high tax rates on Australians: the so-called tax “guardrail” of 23.9% of GDP, much touted by the Coalition (based on the average tax level during the last few years of the Howard government), is a joke. Tax averaged less than 21% of GDP while Swan was treasurer, showing Costello up for the tax-addicted glutton he was. And Swan didn’t have revenue upgrades to produce magic surpluses — only revenue downgrades as Treasury’s Panglossian tax forecasts proved time and again to be wrong.

If Costello had an Asian financial crisis and the tech wreck, and Josh Frydenberg had a pandemic, Wayne Swan had the global financial crisis and a severe recession in major Western economies and then a mining investment boom that drove the Aussie dollar over parity with the US dollar and smashed our exports. Throughout, he stuck to the task of first using fiscal policy to stimulate an economy facing hurricane-level headwinds, then pulling spending back in as the economy recovered — rather than leave it permanently higher as Frydenberg and then Chalmers did. Spending peaked at 25.8% of GDP in 2009-10, but Swan hacked it back below 24% by 2013 — less than the average level of Howard-Costello spending.

Beyond the financial crisis, global recessions and an overvalued currency, the RBA lifted interest rates seven times between 2009 and 2010 — only to reverse itself as the economy slowed in late 2011 and run six cuts through into 2012, with another one in May 2013 for good measure. Worried about pushing up unemployment, Swan backed off further spending cuts after declaring the budget back in balance in 2012, and watched as revenue downgrades sent it deep into the red — a humiliating moment he has termed “eating shit”, but which was the right macroeconomic call at the time. Despite letting the budget go back into the red, his final deficit was 1.2% of GDP — a level the Coalition wouldn’t get down to until 2018, and below the average level of the Coalition from 2013 to the eve of the pandemic.

The reason for the history lesson is to show that treasurers can be fiscally disciplined despite intense economic pressures, and while engineering an economy that delivers for households. Unemployment never rose above 5.6% — a level it reached in March 2013 — while Swan was cutting spending (it would hit 6.4% under Abbott). From 2010-13, wages growth averaged a healthy 3.5%, while inflation averaged 2.6%, maxing out at 3.5% in mid-2011.

But maybe the other lesson is that fiscal discipline, ultimately, gets you little political credit — especially if you’re a Labor treasurer, for whom every decision to cut or fail to increase spending is a betrayal of the light on the hill. Swan spent his entire time in Treasury being bagged not just by Murdoch’s goons, but by the Financial Review and economic commentators for being some sort of fiscal profligate, while walking the fiscal walk in ways no other treasurer had, in circumstances no other had faced.

Jim Chalmers knows all this. He was there in the thick of it, first as Swan’s deputy chief of staff and then his chief of staff. He knows it can be done. But it seems a very long way from those days to the coming fiscal year, when spending will hit 27% of GDP and there are deficits as far as the eye can see.

How do you rate Jim Chalmers among treasurers so far?

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