We hate to burst everyone’s bubble. We know it’s nearly Christmas and actual news is becoming thin on the ground. But we should calm down about the government’s “probable” abandonment of its commitment to surplus this financial year. One reason: perspective.

In this graph from the most recent Mid-Year Economic and Fiscal Outlook, you could flip each of those black bars for Australia around the other way and we’d still be well short of the debt levels of many of the world’s major economies. The only consequence might be — might be — that we’d lose that coveted triple-A credit rating and send central banks and foreign investors elsewhere in the search for a safe haven currency, thereby sending the Australian dollar back below parity.

Which might, if you’re an Aussie exporter or you compete with imports, not be such a bad thing.

The more serious point is this: the government is engaged in a massive fiscal contraction this financial year. Moreover, a number of state governments are also engaged in similar fiscal retrenchment. The public sector is sucking a huge slice of demand out of the economy. Yet growth remains steady, albeit a little below trend, and unemployment remains low and steady. On current evidence, we can handle the fiscal contraction going on across different levels of government.

Whether the Commonwealth budget yields a deficit of $5 billion or a surplus of $0.5 billion doesn’t matter a great deal in terms of economic stimulus. The government remains committed to its medium-term fiscal rules and to keeping a tight rein on spending. That remains appropriate given the current state of the economy. But in ditching his commitment to surplus, Wayne Swan has indicated he is willing to adjust fiscal policy to reflect the circumstances of the real economy. That’s no more than sensible, provided the government adheres to its own fiscal rules.