Scott Morrison has seen the future. And it's unsettling enough to have prompted a radical overhaul in Coalition thinking.

It's a future where the government will drive economic growth, austerity has been replaced by spending, and taxpayers and banks will be press-ganged into helping foot the bill.

In the process, the Treasurer has jettisoned decades of conservative fiscal orthodoxy around deficits and, particularly, debt.

This latter-day conversion hasn't occurred entirely through choice. The unwinding of the mining boom continues to drag on economic growth and the housing construction boom that replaced it is past its peak.

In fact, as has occurred elsewhere around the world, the property boom that spawned it could come to a messy end.

Wages growth is at record lows, Australian households are hugely indebted, employment trends have weakened and commodity prices are in retreat.

As the Treasurer was unveiling his budget, iron ore prices dropped sharply, to $US60 a tonne, well below the average $US66 factored into the first half of the new financial year.

That leaves government spending, or national stimulus, about the only bullet left in the locker. If it can be deployed wisely, on worthwhile, productivity-enhancing projects, it may help Australia through the next few years. But there are no certainties.

The Turnbull Government isn't alone on this. Similar measures are being adopted or considered across the developed world as the limitations of low interest rates have become apparent.

To help pay for it, Australia's biggest banks will be required to foot a significant portion of the bill via a levy on their transactions the Government hopes will deliver an annual $1.5 billion windfall.

For the past few years, the finance sector has fought what it believed to be a successful rear-guard action to ward off any hint of a "banking tax", arguing it sailed through the Global Financial Crisis because of its solid finances. Any impost would undermine its strength, it argued.

That's always been a furphy. As the financial crisis took hold, taxpayers were forced to underwrite $120 billion of bank debt, a desperate action that saved them from collapse and elevated them to status of protected species, unlike any other commercial operations. It seems that favour is being called in.

The other big tax hike comes through a lift in the Medicare Levy. It doesn't kick in for two years but by 2020-21 it will contribute more than $4 billion a year.

Optimism underpins 2021 return to surplus

Despite all the talk of a "reset", one thing that hasn't changed is the unbridled optimism that underpins the magical return to surplus in 2021. That's despite a serious deterioration in the projected deficits for the next two years.

Once we're through that tough period, there's a sudden and unexplained surge in wages growth — from current levels of about 2 per cent to 3.75 per cent — while real annual economic growth lifts to about 3 per cent, way above this year's 1.75 per cent.

Wage earners provide about half of the tax base. Higher wages that catapult salary earners into higher tax brackets are crucial to saving the budget. Despite all the confected concern from politicians about "bracket creep", it remains a treasurer's secret weapon in restoring the national finances.

Still, that's a heroic assumption. Given the overarching trend in employment during the past 18 months has been towards part-time work and a casualisation of the workforce, it's difficult to fathom how wages growth will suddenly accelerate.

Then there's consumer spending, which the Treasurer believes will be a fundamental driver of economic growth.

It's forecast to rise off its current modest levels, to 3 per cent in 2018-19, which is faster than income growth. Apart from running down savings, there's no explanation of how or why that would occur. Even more importantly, there is absolutely no mention of the exorbitant levels of Australian household debt which are more likely to put a ceiling on spending.

Australian dollar the secret weapon

Despite the challenges, Australia possesses a potent weapon.

The Australian dollar, one of the world's most volatile currencies, inevitably would slide if a serious global shock, such as a China downturn, occurred.

In 2008, our currency slid from $US1.10 to $US0.65 in the space of six weeks as the global economy melted down. It was a decisive factor that helped us sail through the crisis.

In the lead-up to this year's budget, the Treasurer's landmark speech on good and bad debt foreshadowed the dramatic rethink on government spending and debt.

Central banks globally, and the Reserve Bank of Australia in particular, have long urged governments to lend a hand in stimulating growth by loosening the purse strings to invest in assets rather than relying solely on ultra-low interest rates.

The budget papers reveal "capital spending", funded by what Mr Morrison would consider good debt, will rise to 12 per cent of all spending in the financial year ahead.

That's the kind of level it hit during the Rudd and Gillard years before dropping back to single digits during the Abbott years.

An extra $16 billion in infrastructure spending has been allocated over the next few years. In addition, another $14 billion will be allocated to Sydney's second airport and the Melbourne-to-Brisbane rail link.

This won't be done through debt. Instead, the Government will take equity in the schemes, becoming temporary owners during construction and selling the assets once completed.

Again, that's a strategy that harks back to the Rudd years. The National Broadband Network was taken "off-balance sheet".

Because it was classed an asset, the money spent on building it was not classified as expenditure although the interest paid on the debt is.

The sudden philosophical shift in the Turnbull Government in recent months was on full display last month when it directly intervened in the gas market, in an effort to shore up supplies for east coast domestic users.

When it comes to housing and the vexed issue of capital city affordability, there has been no radical overhaul.

The measures to deliver tax relief to first home buyers saving for a deposit are likely to be ineffectual and possibly even self-defeating.

Any scheme that adds to demand simply adds fuel to an overheated market, as Reserve Bank governor Phil Lowe argued last Thursday.

Instead, the overarching policy is to encourage further supply in the hope prices will moderate. To that end, there are greater tax incentives on offer for investors in affordable housing.

But there has been no corresponding offset to limit investors generally, particularly on those competing in the market for existing dwellings.

Negative gearing stays. So do the discounts on capital gains tax.