This might be the most difficult budget in decades, but at the moment, politically, it looks a gimme, because there’s no Opposition worthy of the name to pressure the Government. Wayne Swan could comprehensively botch the budget and the Government would still maintain its political dominance. Malcolm Turnbull would still look negative, or there’d be another round of infighting within Coalition ranks, or Peter Costello would start his semi-regular efforts to attract attention. He can’t let Budgets go past without drawing attention to himself.

Thus we’re relying on the policy smarts of the Gang of Four, assisted by Treasury, to get the Budget right.

Which brings us, inevitably, to Stimulus Package Mark 3.

There’ll be further stimulus in the budget, Wayne Swan said last night (incidentally and perversely, doesn’t Swan seem more and more assured the worse things get?). “The Government now faces questions about its budget stimulus package,” ABC Radio and the ever more peculiar ABC Breakfast consequently reported this morning, as if some crime had been perpetrated. It can’t be too long til the Government is accused of a cover-up because it is waiting until Budget Night to release its Budget.

Still, it’s a bit early to complain about the tone of Budget speculation, given we’re only warming up for another three weeks of it.

What’s the policy case for additional stimulus? There isn’t one at this point. We haven’t had the full effects of the December plasmas’n’pokies handouts yet. The cheques from February’s Stimulus II: Stimulate Harder are only now being mailed and the several thousand hectares of sunshades to be erected in schools across the land are yet to be unfurled. I know the Government loves to keep the media cycle going round and round, but making multi-billion dollar announcements is a very expensive approach to media management.

If the recession is prolonged and/or severe — if, say, it’s a 0.25 on the Steve Keen “Everyone With Debt Is Damned For Eternity” scale of economic destruction — further stimulus would appear to be pointless. As the AFR’s Alan Mitchell correctly notes today, the Government can’t replace the collapse in private demand, only take the edge off it. The better strategy would be to sit tight, ensure our social safety net is effective and to pursue major economic reforms to make sure we emerge from the recession in 2030, or whenever it ends, in better shape.

If, as most of us hope, we start coming out the other side in 2010, further short-term, handout-style stimulus now would come on top of the existing stimulus or, if of the longer-term variety, hit the economy when it was growing again.

There’s also the small problem that, with a budget deficit already, by common consent, over $50b, further major stimulus packages of the magnitude of February’s — the only size that will make a difference — will take the deficit into the sort of territory that will ensure it doesn’t return to surplus for a decade. At some point, foreign investors will begin to wonder if the tradition of Australian governments becoming less and less fiscally disciplined as they age will create a serious deficit problem.

But don’t forget, the Government already has a significant stimulus package programmed into the budget. Like previous packages, it will have two components: there’ll be a $8.7b cash splash in 2009-10, and more after that, and a $10b infrastructure package.

That’s assuming the Government fulfils its commitment to increase the pension rate for the aged and carers — likely to cost around $6b pa; that it retains the income tax cuts currently legislated, which are an additional $2.7b, and at some point gets around to announcing the projects Infrastructure Australia has determined it should invest its Building Australia Fund in.

They’re all pretty much certainties, even if there is an issue about delays occasioned by the poor quality of proposals submitted to Infrastructure Australia (by the NSW Government, of course). They will continue the Government’s strategy to date of raining money on the big-employing retail and construction sectors.

In traditional Labor style, the Government is likely to package these on Budget Night as part of a “$20 billion jobs package” or suchlike. Only the pension increase would be new money, but for once the re-heated nature of the offerings would be welcome ahead of further debt.

If the Government wanted to spend more money shoring up employment, raining even more money on retail and construction might be less beneficial than taking pressure off businesses, either through a temporary cut in payroll tax (which brings in $13b a year for the states, although some have cut rates recently), or through Malcolm Turnbull’s proposal of a temporary tax-loss carry-back scheme for small business, who would not benefit from payroll tax cuts. Either way, the Opposition would support it.

The effect would be diffused across the entire economy, but there must come a point when we can’t build stuff any faster and sectors outside construction and retail will start to wonder what they have to do to get some Government support.