HOW do we explain it? Unemployment is less than 5 per cent. Banks and mining companies are reporting record profits, even if High Street is hurting. The global financial crisis ended here long ago. Soaring export prices have made Australia richer than ever.
Yet our federal budget is sick. This year's deficit will be almost as big as last year's. And then, even with a formidable $22 billion of spending cuts and revenue rises announced yesterday, and on optimistic forecasts of economic growth, Treasury estimates that it will still be in deficit next financial year, although less so, and will deliver only small surpluses in the following three years.
The Liberals want us to think it's because Labor is too weak to cut spending. Sorry, guys, but this budget cuts spending quite a lot. We will see that in coming days because the Liberals and Nationals will be screaming blue murder against the very cuts they say there should have been more of.
It can't have been an easy political decision for Labor's leadership to take $2 billion off middle-class families by freezing family benefit payments and thresholds at the upper levels. It can't have been easy to choose to lose votes by cutting younger Australians' access to a dependent spouse rebate, or to halve the discount for making HECS payments as you go.
This budget has hundreds of savings measures, mostly transparent, and some of them deliberately opaque...
Julia Gillard and her government may be suckers, but they deserve an even break. Every budget contains things to criticise but, overall, this one is good. We were warned it would be tough and it is - especially on the better-off.
It could have been more excruciating - economists are hard to please when it comes to inflicting pain - but it's tougher and more courageous than all but the first of the 12 budgets the now-sainted Peter Costello delivered.
Wayne Swan plans to tighten up on people with company cars, private health insurance and family trusts. He will get at those who pay their university fees up-front, mothers who stay at home and wealthier couples with dependent children and older workers using salary sacrifice to supplement their super.
Not only is this the first budget in nine years not to include a tax cut, it imposes the temporary flood tax levy. Tony Abbott will be righteous in his condemnation - but the man's so relentlessly negative he would have ripped into the budget whichever way Gillard jumped, adjusting his criticism to fit.
So why is a government that is travelling so badly in the polls, and without a majority in either house, proposing so many unpopular measures? Because there's nothing like having your back to the wall to focus the mind.
This government, in both its incarnations, got nowhere trying to be popular and to avoid offending anyone who matters. What it desperately needs is respect. The way to win it is to be seen as willing to make the hard decisions needed to secure our future.
Whatever the voters' immediate reaction, I suspect in time there will be a grudging recognition that Gillard has guts...
The inadequacy of Wayne Swan's fourth budget has left Australia highly vulnerable to the gathering risks in the global economy, punting everything on our China luck continuing to hold.
Australia already has spent more than this China luck has delivered in the form of a 170-year high in our terms of trade and record high mining export prices. This includes the blowout in Swan's current-year budget deficit to just under $50 billion or 3.6 per cent of gross domestic product.
Even assuming our China luck will hold, the budget will only just scrape into the black in 2012-13. And the surplus will remain below 1 per cent of GDP for the following two years.
That is, Labor offers no prospect of building up a solid surplus or "stabilisation" fund that could be kept in reserve to cushion the economy when it next turns down. He's ruled out any fair dinkum tightening of budget policy at the top of the biggest commodity price boom in Australian history. Remember, as a post-election budget this is the one that is supposed to be the tightest in the political cycle...