We are only in February, but already we have found a political winner of the year: Step forward Jim Chalmers.

The treasurer is politically stronger than at any stage since the 2022 federal election. His delivery is smooth and authoritative. He is excellent at attracting a positive press and eliciting the support of important voices in the media and the business community. He has grown as a parliamentary performer.

Treasurer Jim Chalmers and Prime Minister Anthony Albanese are enjoying a good start to the year.Credit: Alex Ellinghausen

There is a reason why Chalmers has seized the political high ground: the Australian economy has performed better than most economists predicted a year ago. Wages are rising and unemployment remains near half-century lows. The government may record another budget surplus in May. Even the national debt increase has been much less than was projected at the height of the lockdowns. The good news has also fuelled a stock market rally.

As far as inflation is concerned, some pundits are speculating that the worst is over and that lower interest rates are coming sooner than expected. Barring an unforeseen shock, the economic signs appear reassuring.

However, probe deeper and things look disturbing.

It’s not just that many Australians continue to experience a fall in living standards. Or that inflation remains higher than most of OECD countries and well above the RBA’s 2 to 3 per cent target range (which means interest rates could be slow to fall or may even rise again).

Our dire outlook has more to do with our productivity drought and runaway government spending programs. The consequences are being masked for now by the rebound from the pandemic, high immigration and a federal tax revenue boom. When these pass, we will see a return to budget deficits and stagnation or decline in living standards.

So what can Chalmers do to stop the rot? You might think that when you are in a hole, you stop digging; and if you’re really smart, you look for more than one way out. But neither the treasurer nor the prime minister understands just how bad things could get in coming years. The IMF’s recent outlook for the Australian economy should have persuaded them. It was a warning to the political class to cut spending and move more of the tax burden away from workers’ incomes, which just dampens incentive, enterprise and growth. Without such an agenda, Chalmers will condemn the nation to the low-aspiration and dismal slow-growth future that last year’s Intergenerational Report highlighted.

Instead, Labor’s plans betray an extraordinary faith in the radical power of government to make a success of every project.