The war against Iran is the dark cloud hanging over this entire budget

May 12, 2026 — 7:40pm

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Treasurer Jim Chalmers is not only betting his fifth budget will deliver Millennials and Zoomers a chance at owning a home while delivering a much-needed boost to productivity, but that the war against Iran ends soon.

The war, the response of older investors and the actions of the Reserve Bank are the biggest risks to Chalmers’ outlook, which anticipates a quick rebound in economic activity as it negotiates the next 12 months.

The war against Iran is the dark cloud over this entire budget. Chalmers’ forecasts are predicated on oil gradually falling from $US100 a barrel through the rest of this year.

But if oil spikes to $US200 a barrel – something particularly hawkish analysts believe is possible – then economic trouble ensues. Higher-priced fuel hits the transport of everything, farmers struggle with skyrocketing fertiliser prices while any manufacturer using plastic faces higher costs.

Under that scenario, inflation peaks at 7.25 per cent by year’s end, unemployment reaches 5 per cent next year, while the economy contracts in the September quarter this year.

There’s little the government can do about the war and the actions of Donald Trump and Iran’s Revolutionary Guard Corps.

Are you a winner or a loser in this budget?

What Chalmers does control are his budget settings and what government spending and policy will do to the economy.

“No other budget in the 2000s has set out this much responsible budget repair and this much economic reform,” Chalmers declared.

The budget repair is, outwardly,........

© The Age