Australian PM reveals budget surplus

Australian PM John Howard

SYDNEY - Prime Minister John Howard has pre-empted Treasurer Peter Costello's delivery of the budget, revealing the government will unveil a bigger-than-expected surplus, surprising the markets and taking pressure off the Reserve Bank to lift interest rates.

In an interview with The Australian newspaper, Mr Howard signalled that he expects the budget to receive praise from the markets for the surplus.

The paper says the forecast comes on top of strong tax revenues for the present financial year that are expected to boost the forecast A$6.2 billion ($6.7 billion) surplus, potentially to as much as A$10 billion.

"There will be a surplus and it will be a strong surplus," Mr Howard told The Australian.

"I think it will probably attract attention, yes."

The paper says Mr Howard's upbeat message comes as the Reserve Bank board prepares to meet tomorrow for its monthly review of interest rates, with most market economists predicting home-owners will be spared a further rise.

"There will be nothing as far as I am concerned in this budget that will exert upward pressure on interest rates," Mr Howard said.

- AAP