Analysis: As all finance ministers know, the economy and the Budget are locked in a condition of mutual dependence. Economic growth increases a finance minister's options. In turn what a finance minister does affects the economy.

The economy has been good to Brian Cowen for a second year. Growth remains not only strong and domestically driven, but also revenue rich. Next year he predicts more of the same, with growth in gross domestic product (GDP) of 4.75 per cent in real terms.

Adding general price increases of up to 3 per cent on top of that, revenue should in theory rise by about 7 per cent.

This is as forecast by the Department of Finance, but growth could be higher next year. The Government plans to raise spending by 11 per cent, faster than the planned growth in revenue. It expects to meet the difference by borrowing about €2.9 billion.

But over half of that isn't really borrowing. It goes into the National Pension Reserve Fund, a Government asset established to fund future pensions liabilities. Subtracting this from the Exchequer deficit gives a general Government deficit - the official EU measure of borrowing - of about €1.2 billion.

But Mr Cowen's revenue take next year will most likely be higher and by a similar magnitude. On the revenue side, SSIAs and a continuing boom in housing and construction will add more bounce to revenue, which may end up growing by about €1 billion more than the department expects.

Mr Cowen could easily end up next year with a general Government balance that is close to balance or in surplus. He will have plenty of resources to shower goodies on the electorate a few months before the Dáil dissolves.

Yes, the economy has been good to Mr Cowen. But has he been good to the economy?

In economic terms, yesterday's Budget needed to address challenges at several levels. Firstly, it needed to examine the overall inefficiency of the €50 billion that will be spent next year on public services and social welfare. It also needed to underpin macroeconomic stability in an economy that is increasingly driven by growth in private debt.

The onset of SSIAs next year will increase the size of the economy, driven by inflationary and unproductive spending.

Last but not least, the Budget also needed to arrest falling cost competitiveness by reducing growing wage pressures.

The first problem is that budgets never "budget" the entire amount of public spending. They are incremental, looking only at spending that will be added in the coming year.

Only about 10 per cent of the €50 billion of taxpayers' money due for spending next year was really scrutinised, and the portion of that going on measures announced on childcare, child benefit, taxation, pensions and welfare increases was a portion of this again. Most of that increase went on increased staff numbers and pay increases.

Some 90 per cent of next year's spending still remains beyond any meaningful scrutiny. The Comptroller and Auditor General does examine the probity of public spending, but not the economic efficiency of its allocation.

With social partnership in crisis and a pre-election year approaching, Brian Cowen has little opportunity to examine the underside of spending.

Taxpayers will continue to pay more than they should for present levels of public service.

Price stability is another important issue. As if SSIAs and a credit boom weren't enough, strong public spending growth will add further impetus to inflation next year. The balance of the tax burden is a further issue. The latest Exchequer data shows that more is now paid in VAT receipts than is paid in income tax.

But yesterday's Budget was good in several respects. Tax credits and the standard tax rate band have both increased. This will help ease the pressures of wage growth, and if the Minister hasn't reduced the burden of indirect taxation, he has at least not increased it.

As far as SSIAs are concerned, economists have noted their inflationary potential from next year. Cowen has hinted that he might turn a vice into a virtue by encouraging SSIA holders to recycle their money into pensions, rather than spend it.

We will have to wait until the publication of the Finance Bill next February to see exactly what he does here.

By then he will have done one further good thing. In January, the Oireachtas will be invited to scrutinise the Government's multi-annual budgetary plans.

And in August the Government will upgrade and update the economic and revenue forecasts in advance of the forthcoming budget.

Although Brian Cowen didn't deliver a perfect Budget yesterday, he has laid an important foundation for improving the quality of future budgets.