This year's federal budget is tiptoeing around the edge of reality at a pivotal point in history

There's a Clayton's budget, the one you're having when you're not really having a budget.

And then there's this, the budget you're having when you thought you didn't have to deliver one.

Federal budgets over the past few decades have descended into something of a comic farce — full of intrigue, strict high-level security and journalist lock-ups.

Except that around 90 per cent of all the revenue and spending plans usually are strategically leaked to friendly media outlets in the weeks and days before.

Even so, that's still usually left room for a couple of key initiatives and a blueprint for the national finances.

Not this time — Treasurer Jim Chalmers has admitted that there'll be nothing much new.

Almost everything already has been announced, as, until a fortnight ago, it was assumed the upcoming election would derail the need for his fourth budget.

That was until Cyclone Alfred intervened.

The rising sense this will be a fizzer has been bolstered by the opposition's economic policy which, to date, has comprised statements to the effect of, 'whatever he said'.

And yet, this year's financial document outlining the nation's fiscal future will be delivered at one of the most pivotal points in recent history.

Global authoritarianism is on the rise, defence alliances that have stood firmly in place for 80 years are in disarray, globalisation is being unwound and replaced by a sudden shift towards protectionism.

The disruption and unwinding of trade links are almost certain to weaken growth and risk another outbreak of inflation.

Overhanging all this are dark clouds of social discontent, rebellion and war on several continents.

All this, just as the nation that for much of the past century has portrayed itself as the bastion of freedom and democracy, descends into a chaotic up-ending of itself and all who depend upon it.

Standing at the crossroads

Back in 2015, as relations between America and China began to cool, then US president Barack Obama suggested to prime minister Tony Abbott that Australia consider ending the sale of iron ore to China. 

Since the turn of the century, iron ore sales to China have been our biggest single source of income.

But it's a trade that has placed us firmly between the two nations now jousting for dominance.

Both are hugely indebted.

Both already are labouring under the weight of serious domestic economic and social issues.

And now the US is engaged in a chaotic attempt to suddenly wrench itself free of China's manufacturing base and somehow transport itself back in time.

It's not inconceivable the Trump administration could apply similar or even more pressure on Australia as Obama once did, to scale back or even end our trading relationship with its great rival.

It's not just iron ore at stake — large amounts of our energy exports, particularly liquefied natural gas and coal, find their way to China.

And then there are critical minerals, the prices for which have largely collapsed, a situation some regard as partially engineered by Beijing.

Both America and China have become increasingly ruthless in their pursuit of domination.

Having been stung a fortnight ago, it would be naive to think that either superpower will have our interests at heart as trade hostilities between the pair intensify.

A squandered opportunity

Federal budgets do their best to incorporate estimates of what may happen in the future.

While there is no way they could ever be expected to factor in the possibility of a huge loss of national income, or at least a lengthy disruption, what once would have been almost inconceivable has become a distinct possibility.

As predicted here after the presidential inauguration, America's tech giants — livid at having had to endure calls from Australia to pay for content, pay corporate income tax on their earnings and more recently restrict access to children — are seeking retribution.

US pharmaceutical giants have also accused Australia of attempting to restrict their earnings.

Next week, on what Trump has dubbed Liberation Day, all our federal budget plans may be thrown out the window.

We'll then have a better idea of how America views its relationship with Australia, but given the way it has turned on Canada and Europe in recent months, it would be unlikely we would avoid some kind of sanction.

Even if there are no direct sanctions on us, given our dependence on China's economic performance, it would appear that our revenue and growth prospects could be extremely fluid.

Unfortunately, we won't be entering this difficult phase from a position of strength.

While our net debt situation — at around 30 per cent of gross domestic product — is far superior to most other developed nations, our reliance on commodity exports makes us far more vulnerable to the vagaries of the global economy than most others.

Unfortunately, our healthy external trade performance of the past 20 years has not been parlayed into a strong internal situation.

Too often, Australia has used temporary, windfall gains to lock in permanent spending hikes and tax cuts.

The budget deficits following the global financial crisis of 2008 were followed by a decade of deficits under Coalition governments, as they continually cut off revenue streams.

The eradication of the Mineral Resources Rent Tax during 2014 wiped out our ability to generate a long-term income from a depleting natural resource.

That was followed by the elimination of a carbon tax that was reducing emissions and which was replaced by a multi-billion-dollar handout to big business.

Then came the pandemic spending spree, overlaid by huge income tax cuts.

Add in permanent spending programs such as the National Disability Insurance Scheme — where costs have exploded in recent years — and the past two surpluses now look like a statistical aberration with another decade of deficits that will need to be funded by debt.

Rising costs and reduced revenues

If there's one benefit from the Coalition's dismal budget performance during the Abbott, Turnbull and Morrison eras, it is that it finally dispelled the myth that surpluses are always good and deficits are always bad.

Running permanent surpluses can be far worse than ongoing deficits, because it means the government is underinvesting in its people and its infrastructure, thereby limiting growth.

It's also worth remembering that governments aren't businesses — they don't need to make a profit.

In fact, so long as deficits are modest, and the growth in debt that funds those deficits is kept in line with growth in the economy, there is usually no problem.

It is when debt expands at a far greater rate than the economy is growing that alarm bells start ringing.

That has been happening across the developed world since the turn of the century.

Now, the Trump administration believes it can eradicate America's debt problems by rapidly raising trade barriers, deporting people, mass sackings within the public sector and retreating from its allies.

It's more likely the opposite will occur — revenues are likely to decline and spending increase.

Europe has decided to up its defence spending and no longer rely on America.

That's likely to happen here too, although we've just handed over $800 million for a submarine project that some now doubt may ever deliver.

We currently spend a little over 2 per cent on defence, which is predicted to rise to 2.4 per cent in the next few years, well below America's 3.4 per cent.

That's unlikely to make Donald Trump happy.

All that is before you even start to consider the costs of climate change.

Maybe we'll get a better idea in next year's budget.