Stand by for the mother of all spending sprees from John Howard and Kevin Rudd over the next two months as Australia fights its first federal election campaign at a time of unprecedented government surpluses.

The ABC’s Difference of Opinion, hosted by Jeff McMullen, is debating this very topic for an hour on Thursday night from 9.25pm and the four panellists are Dr John Hewson, left wing feminist Eva Cox, RMIT tax cut proponent Professor Sinclair Davidson and yours truly, who has been pencilled in as a fiscal conservative.

The first point to make is that Peter Costello’s surpluses are actually massively overstated and that the Federal Government is still saddled with more liabilities than assets, including $50 billion in debt.

For instance, why did Costello boost the 2006-07 surplus by pilfering a $1 billion dividend for the budget from the Reserve Bank when our central bank actually posted an accounting loss for the year?

If anything the Government should be making big capital injections into the Reserve Bank given that our foreign reserves are paultry compared with most other countries and we’re running a huge foreign debt and current account deficit.

When John Howard starts spending like a drunken sailor, Peter Costello will no doubt claim that an accounting surplus equivalent to 1% of GDP is responsible economic management.

It should be remembered that at the peaks of the last two cycles in 1988-90 and 1973-74 (the last commodities boom), Labor Governments ran underlying surpluses of 1.7-1.8% of GDP. This wasn’t enough to forestall recession-inducing hikes in interest rates.

The Government’s surpluses have not been the result of tight control of expenditures – as Costello pointed out in the Howard biography – but rather have been due to the extraordinary buoyancy of revenues, especially from company taxes which is driven by the resources boom.

The Government is fond of saying what a bonanza for the States the GST has been. Four years ago, GST and company tax both raised about $35 billion. The latest budget projections show that by the end of this decade GST revenues will have risen to about $45 billion but company tax collections will have ballooned to over $70bn – all of which goes to the Feds.

This government has also been massively redistributing income from companies (who don’t vote) to householders (who do vote) on a scale which would have brought tears of joy to the most ardent Marxist. All this is putting upward pressure on interest rates and the four rate rises since May last year will cost households $7 billion in 2007.

All suggestions on arguments that should be run on Difference of Opinion to smayne@crikey.com.au