Yesterday at the Australian Business Economists lunch, Jim Chalmers was handed a microphone. He spoke for 40 minutes, and if you like budgets dressed as sober bedtime reading, you were in heaven.

Quick version... the world’s been handed another shock. Oil’s spiking, supply chains creak, fertiliser and LNG are wobbling and Treasury’s models now have a nasty backup plan if this goes on.

One scenario: oil at $100+ for a few months, then calm. Nicer. Other scenario: $120 and a three-year hangover. Not nicer. Both lift inflation and shave growth. Charming.

Here’s the part I didn’t expect him to say out loud... Treasury now thinks the output gap has closed. Translation, we’re running closer to the economy’s speed limit than we realised. That means when the private sector sneezes, inflation coughs. Which is why the Budget in eight weeks isn’t going to be about flash headlines. It’s going to be about making room.

Charmers, charmingly previewed three linked packages... a savings package (yes, cuts and reprioritisations), a productivity & investment push (faster approvals, housing, AI, net-zero stuff), and tax reform aimed at getting investment flowing and the books sustainable, some tweaks to negative gearing and CGT. All sensible, all dull at the surface, all quite necessary if we don’t want the next shock to kick us while we're down.

He was also at pains to remind the room that we start from a decent position... low unemployment, decent growth, and a better balance sheet than most of the planet. But it feels like the paradox of “We’re the worst we've ever been but better than anywhere else.” The policy tilt is clearly supply-side... lift capacity, cut red tape, attract investment, and try not to add fuel to the inflation bonfire.

Two other bits worth bookmarking... one, the productivity rebound isn’t a miracle, Treasury still assumes 1.2% long-run productivity, but the return to trend takes longer (think five years, not two). Two, fuel security is now a Friday-night project... reserves, ACCC watching prices, and contingency plans for farming, transport and mining. Practical stuff, not headlines.

So yes... Chalmers’ May Budget is being framed as “build the road under the car while it’s still driving.” Not sexy, not populist, but if you want an economy that can actually carry decent wages without breaking glass, it’s exactly the conversation to be having.

The Gherk take... if you like fireworks, you’ll be disappointed. If you prefer steady repairs so the car keeps running, this is the one to back. Either way, bring popcorn as there will be those who benifit and those who won't. 🥒