Peter Costello’s 12th Budget is good economics and good politics – and if the punters disagree, there’s a $10 billion surplus to blow in six months’ time at the polls.

Cossie’s covered the contingencies – financial and political. The Budget’s not inflationary. It’s not going to damage the economy. If it works politically it could win back the battlers and ease WorkChoices worries.

Every effort has been made to devise a package that looks both responsible and reasonable, that plays on the traditional strengths of the Howard Government.

Cossie began last night with a history lesson:

Australia is different to the way it was 10 years ago.

Our economy is about 1½ times larger than it was back in 1996.

We have another 2 million Australians who have found jobs since then. And average wages have increased 20 per cent in real terms.

In the decade before 1996 inflation averaged 5 per cent a year. Since then inflation has halved, averaging the low and stable rate of 2½ per cent a year.

Ten years ago the Australian Government owed a net debt of $96 billion. The Government was paying an interest bill of $8.5 billion a year. Today we are debt free in net terms. And our net interest payments are zero. This is saving taxpayers $8.5 billion a year.

Back in 1996 the Budget was in deficit. We were living beyond our means. Today we are living within our means. For the 10th time, I am outlining a Budget that will be in surplus.

We have come a long way and made a lot of progress. This year’s Budget has been framed to lock in that progress: to keep people in jobs; to keep our living standards up. We don’t want to lose all that we have achieved over the last 10 years. We want to lock in the gains and move forward…

Then came the goodies. The official spin goes like this:

The Government has put in place a detailed plan to keep our economy growing; give a helping hand to those who are struggling; improve and conserve our natural environment; build the education system to help all young people achieve their full potential and strengthen the national security and defence preparedness we need to protect our country.

Economically, it should work. The tax cuts are designed to win the support of low to middle-income earners who might be worried about WorkChoices. They should, however, also boost workforce participation. The new spending on education and training, health, child-care, transport and water will also help the economy.

All these measures should be able to deliver economic and political dividends without putting pressure on interest rates.

If it fails politically, then there’s always the surplus. The election won’t be until later in the year. If it needs to, the government can go mad during the campaign – and whoever’s prime minister next year can worry about the consequences.

John Howard has faced the threat all year that his core constituencies of middle-income families and older Australians are deserting him.

Many of these people have been talking about issues like education costs, job security and conditions, climate change and housing affordability.

The Budget aims to win these voters back on side by delivering some direct benefits to them, by appearing to tackle their concerns and – even if these fail – by creating the conditions where what won their vote in the first place dominates debate in the lead up to the election: responsible economic management.