If there’s one thing John Howard learnt from Jeff Kennett’s shock defeat in 1999, it’s not to leave an incoming Labor Government with a pile of cash. And with the Federal budget heading for another staggering surplus of more than $15 billion, the Government can’t possibly spend the money quickly enough before this year’s federal election.

That leaves just one option for the May budget – big tax cuts. The Future Fund is already unravelling as a political strategy now that Kevin Rudd has won plaudits for his $2.7 billion broadband raid and the $140 billion unfunded superannuation black hole is on track to be filled many years ahead of the original 2020 target.

Finance Minister Nick Minchin has told The AFR this morning that Future Fund injections might be stopped as early as 2009 due to the surging surpluses.

Costello’s red-faced ranting in Parliament last week has been slapped down by most commentators. Terry McCrann skewered him in The Weekend Australian, pointing out that the Treasurer has actually burgled $9 billion from the Future Fund himself by not injecting all budget surpluses and delaying some of the contributions.

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Indeed, if you accept the policy that every dollar of budget surplus should go to the Future Fund, any wasteful spending commitment can be characterised as money stolen from super. John Howard’s crazy $2.8 billion commitment on a bypass in southern Brisbane and the much-derided $6 billion investment in an interim fleet of Super Hornets falls into that category.

The Future Fund should be abandoned as a strategy and the $50 billion deployed in a far more politically potent way. The first step would be to actually inject billions into the various unfunded schemes.

Secondly, the government should actually pay down more of its $54 billion debt. The 2006-07 borrowing program was $5.3 billion and there are two forthcoming bond issues that could be cancelled: $400 million on 17 April and $300 million on 22 May.

There would be calls to retain a Federal bond market and this would be easy – start lending surplus cash to the debt-addicted state governments and explode the myth that they are financially strong.

The AFR today claimed on the back page that NSW has net debt of $4 billion and will only suffer a $500 million deficit this financial year. What bollocks. The NSW T-Corp website clearly shows that NSW Labor is borrowing $7.4 billion in 2006-07 and only $1.4 billion is old debt being rolled over. This will lift overall debt to $27.7 billion. So where’s the $23.3 billion in cash on deposit that leaves a net debt of $4 billion? It’s a fiction that Costello could easily expose by “bailing out” reckless Labor state governments.