THE day before Anzac Day, at 11.31am, Peter Costello officially became aware the Howard Government had been given a reprieve and licence to spend money in a way that changes its election strategy.
The Australian Bureau of Statistics had just announced a drop in the inflation rate.
It was still two weeks before Costello's 12th budget day, and Labor was way out in front in the opinion polls.
But low inflation meant the prospect of a pre-election interest rate rise had retreated. And hundreds of millions of extra dollars were pouring into the Government's coffers.
This combination of figures was enough to ultimately turn political strategies on their head: the Coalition was about to conduct its own big-spending education revolution and Labor was about to tighten its fiscal rectitude as never before.
A beaming Treasurer couldn't hide his relief and pleasure an hour later on April 24, when he held a press conference to discuss the fall in the inflation rate.
"Well, today's news is good," he announced to journalists in the Blue Room of Parliament House, originally planned for prime ministerial press conferences.
The inflation figures were the latest in a series of numbers that shaped what would become the budget's final numbers.
The employment rate for three quarters of the year was known, and the third quarterly Business Activity Statement tax receipts were in. The inflation figures gave Costello the confidence to not only calculate inflation-linked welfare payments, but to make broader assumptions about the health of the economy.
It was dry stuff, but in an election year when experience was your trump card, the banality of the calculus was a virtue.
"Budgets are always hard work -- that's the reason I am in Canberra at the moment," Mr Costello said that morning.
"You've got a budget which is about $230billion -- a 1 per cent error is $2 billion or $3 billion.
You've got an economy which is now $1 trillion. You've got tax, superannuation, you've got defence spending, foreign affairs, health, education, social security, you've got the global economy, you've got the state economies, you've got drought.
"When you try to put together a $230 billion statement in the midst of all that, it's difficult. It's hard work, and the margin for error is small. It takes a lot of time and a lot of effort."
It was also a lot of relief, and meant Costello's plan for a $5 billion Higher Education Endowment Plan and income tax cuts for lower-income earners could go ahead.
On May 1, after the Reserve Bank kept rates steady and indicated inflation could go even lower than 2.5 per cent, the Coalition's tax cuts and non-inflationary budget spending got the green light.
At the same time, Labor was realising it had to appear even more economically responsible than the Howard Government.
On budget night, Wayne Swan went on the ABC's 7.30 Report and said Kevin Rudd was a "fiscal conservative" and Labor would limit its election spending to any savings it could make.
Labor finance spokesman Lindsay Tanner identified $3 billion in cuts -- including on government advertising and consultants fees -- that would fund the party's promises.
The budget education spending revelation blindsided Labor. There were also tax cuts for low- to middle-income earners.
Suddenly there was a reversal of 2004, when the Coalition was pledging to be economically responsible to keep interest rates down -- despite four rises in a row since the election -- and Labor was pledging to spend up big oneducation.
This year's budget was deliberately designed to create a solid base from which to fight the Rudd juggernaut. And just days after the budget, there are already signs of cracks in the veneer of confidence in Rudd's office. He stumbled during parliamentary question time on Thursday, and his budget reply speech was widely considered short on vision.
Some senior Labor figures point to the structure in Rudd's office since he became leader in December in identifying potential problems.
Too often over the past few months, Rudd has wanted to micro-manage his Labor frontbenchers on policy matters, while leaving his deputy Julia Gillard to make mistakes as she enjoyed a free rein in the crucial policy area of industrial relations.
Rudd has surrounded himself with a team of aggressive political professionals, hungry for power like him, but unused to the tough grind of opposition and how to play politics on a national scale.
Many of Rudd's key advisers come from the NSW Labor government, with experience under former premier Bob Carr.
Close observers say staffers such as Walt Secord, Tim Gleason, Michael Salmon, Alex Cramb and Troy Bramston have typically used the tactics of "extreme media control" from their NSW experience.
The same goes for Bruce Hawker, an old Carr staffer who runs successful consultancy firm Hawker-Britten and now also works for Rudd..
In a well-resourced state government, the political agenda is highly localised, focusing on basic services such as hospitals, trains and roads. In this smaller world, political professionals could treat the media like feeding chooks and get away with minimal scrutiny.
But suddenly they -- and Rudd -- have discovered that running media spin on a 24-hour news cycle, neatly packaged for slick presentation by a political leader in office, will not necessarily work on the tougher, bigger national scene.
For Costello and his team of advisers and senior Treasury officials, the long-term vision of making education the way to deal with Rudd crystallised with the inflation figures of April 24.
And within days of the budget announcement, Rudd has been left in the uncomfortable position of having to agree with much that Costello has to offer.
