After two budgets of sharp cutbacks in outlays, spending increases will see budgets from 1998/99 actually detracting from the no-policy change starting position. With an election expected to be held some time this year, more spending on health and social-welfare programmes will help win back disaffected voters who helped put the conservative parties in office more than two years ago. Costello announced an underlying budget surplus for the year to end-June 1999 of A$2.688 billion -- above the $2.458 billion forecast made in last December's mid-year economic and fiscal outlook (MYEFO) and slightly better than market expectations. "We are back in the black. We are back on track," Costello said of the budget that completed a $13-billion turnaround from a $10.3-billion underlying deficit in 1995/96.

"This is a budgetwhich delivers on a three-year commitment -- in full, plus more," he said.

It also represented a sharp improvement on the forecast in last year's budget, when the surplus was put at $1.597 billion. The underlying budget deficit in 1997/98 was estimated to be $1.155 billion, almost $2.7 billion lower than last year's budget forecast of $3.853 billion.

"This improvement reflects both stronger-than-expected-revenue collections and lower underlying outlays than forecast in last year's budget," the papers said.

The underlying budget position is measured as revenues lessunderlying outlays, excluding one off-items such as asset sales. The starting point underlying surplus for 1998/99 was $3.967 billion, but new policies since last December's review have seen outlays rise by $1.385 billion, only partly offset by a $106 million increase in revenues. "The spending in the budget is designed to attend toimportant needs of the Australian community," Costello said.

The starting points for the 1999/00 and 2000/01fiscal years have also improved since the MYEFO was released, although the government has also announced increases in outlays since then that leave the projected surpluses below their starting points.