Peter Costello is a devout believer, always happy to be photographed getting down with Jesus at the Hillsong Church. So although we’re reluctant to interrupt his Easter meditations with matters temporal, we think he should be in serious contemplation about tax in the quiet time this weekend, before he puts the final touches to the 10 May Budget.

As the treasurer knows, there’s an unwritten clause of the Constitution: the states and the Commonwealth shall fight. The subject of the argument doesn’t matter.

This week they’re arguing about taxes. Two facts. The GST was always supposed to go to the states – it was innocently supposed to stop fights over money between Canberra and the states, in fact. And the GST is raking in bucket loads more than anyone ever expected.

That means that Peter Costello has every right to tell the states to cut their taxes. But he should ask himself: is that the smart thing to do?

A scary report from the Reserve Bank this week shows that hundreds of thousands of low-to-middle income earners are burdened with massive housing debts. You can read AM’s report about it here, but the frightening headline is that for almost one-in-five low-to-middle income families, mortgage repayments gobble up more than half their disposable income.

Many of these people are the ubiquitous Howard battlers who have got themselves into debt because of Howard Government policies encouraging everyone to rush into housing. Now they’re paying even more in interest thanks to the inflationary, unnecessary, economically irresponsible – and virtually impossible to claw back politically – panic spending the Howard Government has indulged its favourite demographics with since the dark days of 2001.

These people could face really tough times – or lose their houses – if labour market shortages or oil prices or any of the other factors that the Reserve Bank has warned about – push rates higher.

The prime minister and the treasurer know how vulnerable these low-to-middle-income households are. That’s why they have been talking down the need for another rates rise. That would be political betrayal on the level of Paul Keating’s trashing of his 1993 election commitments in his 1993 Budget.

That Budget led to the resignation of a treasurer, John Kerin. But Peter Costello doesn’t want to quit, he wants to be prime minister.

So here’s his Easter meditation. How can he be the good guy who puts money back in people’s pockets and cushion the interest rate blow? He’s got just under seven weeks before Budget Day to make up his mind.